<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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 333-29357
PACKAGED ICE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0316492
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8572 KATY FREEWAY, SUITE 101
HOUSTON, TEXAS 77024
(Address of principal executive offices)
(713) 464-9384
(Issuer's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: The total number of shares of
Common Stock, par value $.01 per share, outstanding as of November 10, 1997 was
4,127,750.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
September 30, December 31,
1997 1996
---- ----
Assets
<S> <C> <C>
Current assets:
Cash and equivalents $ 4,682,230 $ 169,535
Accounts receivable:
Trade, net 5,420,370 213,811
Affiliates 79,723 119,476
Inventories 970,079 115,825
Prepaid expenses 370,556 29,309
------------- -------------
Total current assets 11,522,958 647,956
Property, net 33,519,860 9,887,687
Other assets, net:
Goodwill 29,435,346
Debt issuance costs 5,099,933
Other assets 3,246,302 987,145
------------- -------------
Total assets $ 82,824,399 $ 11,522,788
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ $ 703,077
Accounts payable 3,511,561 324,624
Payable to affiliates 123,750 634,585
Accrued expenses 1,078,544 170,750
Accrued interest 2,736,498 39,272
Notes payable 146,041 3,425
------------- -------------
Total current liabilities 7,596,394 1,875,733
Long-term debt, net 50,760,769 2,831,955
Other long-term liabilities 7,596
Commitments and contingencies
Convertible notes 750,000
Preferred stock with put redemption option:
Series A Convertible; 450,000,shares issued and outstanding at
September 30, 1997 and December 31, 1996 2,496,527 2,496,527
Series B Convertible; 124,831 shares issued and outstanding at
September 30, 1997 726,226
Common stock with put redemption option; 420,000 shares issued
and outstanding at September 30, 1997 and December 31, 1996 1,971,851 1,971,851
Shareholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized;
3,878,181 shares issued and 3,579,950 shares outstanding at
September 30, 1997; and 2,406,371 shares issued and
outstanding at December 31, 1996 38,782 24,064
Additional paid-in capital 25,795,836 4,669,301
Less 298,231 shares of treasury stock, at cost (1,491,155)
Retained earnings (deficit) (5,078,427) (3,096,643)
------------- -------------
Total shareholders' equity 19,265,036 1,596,722
------------- -------------
Total liabilities and shareholders' equity $ 82,824,399 $ 11,522,788
============= =============
(The accompanying notes are an integral part of these financial statements)
</TABLE>
<PAGE> 4
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 12,839,427 $ 1,581,080 $ 20,963,363 $ 3,709,005
Cost of sales 7,633,353 691,110 12,336,269 1,601,376
------------ ------------- ------------- -------------
Gross profit 5,206,074 889,970 8,627,094 2,107,629
Selling, general and
administrative expenses 2,383,542 519,618 4,565,962 1,357,600
Depreciation and amortization
expense 1,605,014 386,582 3,443,480 1,062,065
------------ ------------- ------------- -------------
Income (loss) from operations 1,217,518 (16,230) 617,652 (312,036)
Other income 169,569 21,255 577,167 7,954
Interest expense (1,658,055) (49,759) (3,176,603) (83,300)
------------- ------------- ------------- -------------
Loss before income taxes (270,968) (44,734) (1,981,784) (387,382)
Provision for income taxes
------------- ------------- ------------- -------------
Net loss $ (270,968) $ (44,734) $ (1,981,784) $ (387,382)
============= ============ ============ ============
Net loss per share:
Primary $ (.07) $ (.02) $ (.58) $ (.14)
============= =========== ============ ============
Diluted $ (.07) $ (.02) $ (.58) $ (.14)
============= =========== ============ ===========
Weighted average shares of
common stock outstanding 3,822,555 2,826,371 3,431,896 2,826,371
============= =========== ============ ============
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
<PAGE> 5
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
COMMON STOCK
--------------------------
NUMBER OF PAR VALUE PAID-IN
SHARES CAPITAL
---------- --------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996 2,406,371 $ 24,064 $ 4,669,301
Issuance of common stock 1,471,810 14,718 14,391,200
Issuance of detachable
stock purchase warrants 6,735,335
Purchase of treasury stock (298,231)
Net loss
---------- --------- -----------
Balance at September 30, 1997 3,579,950 $ 38,782 $25,795,836
========== ========= ===========
<CAPTION>
TREASURY ACCUMULATED TOTAL
STOCK DEFICIT
---------- ------------ -----------
Balance at December 31, 1996 $(3,096,643) $ 1,596,722
Issuance of common stock 14,405,918
Issuance of detachable
stock purchase warrants 6,735,335
Purchase of treasury stock (1,491,155) (1,491,155)
Net loss (1,981,784) (1,981,784)
----------- ----------- -----------
Balance at September 30, 1997 $(1,491,155) $(5,078,427) $19,265,036
=========== =========== ===========
</TABLE>
(The accompanying notes are an integral part of these financial statements.)
<PAGE> 6
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITY
Net loss $ (1,981,784) $ (387,382)
Adjustments to reconcile net loss to net cash
provided by operating activities (excluding
working capital from acquisitions):
Depreciation and amortization 3,443,480 1,062,065
Gain from disposal of assets (59,158) (4,988)
Changes in assets and liabilities:
Accounts receivable (2,884,731) (283,657)
Inventories (245,641) (18,931)
Prepaid expenses (300,860) (36,950)
Accounts payable 739,133 129,630
Accrued expenses 1,636,885 120,280
------------ -----------
Net cash provided by operating activities 347,324 580,067
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property additions (6,708,069) (3,822,900)
Expenditures for assets acquired (2,676,499) 0
Expenditures for businesses acquired, net (23,054,750) 0
Increase in other assets (255,554) (221,784)
Proceeds from disposition of property 135,874 123,023
------------ -----------
Net cash used in investing activities (32,558,998) (3,921,661)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common and preferred stock 2,956,807 0
Purchase of treasury stock (1,491,155) 0
Proceeds from debt issuance, net 44,954,082 0
Borrowings from lines of credit, net 5,900,000 2,432,102
Debt issuance costs 2,000,000 0
Repayment of debt (17,595,365) 0
------------ -----------
Net cash provided by financing activities 36,724,369 2,432,102
------------ -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 4,512,695 (906,303)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 169,535 1,032,811
------------ -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 4,682,230 $ 126,508
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash payments for interest $ 213,810 $ 31,192
============ ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Note payable incurred to purchase other assets $ 188,862
============
Common stock issued in consideration for business
acquisitions $ 11,449,110
============
Fair value of warrants issued in connection with debt
acquisitions $ 6,735,335
============
Demand notes converted to preferred stock $ 750,000
============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE> 7
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Packaged Ice, Inc., a Texas corporation, and its wholly owned
subsidiaries (collectively the "Company") own and operate traditional ice
manufacturing facilities and stand-alone automated merchandising ice systems
("Packaged Ice Systems") installed primarily in retail grocery locations. The
customers and operations of the Company are located in Texas, Louisiana,
California, Nevada, Arizona, Florida, New Mexico, Arkansas, Tennessee,
Mississippi, Colorado and Oklahoma. All significant intercompany balances and
transactions have been eliminated in consolidation.
The consolidated financial statements presented herein at September 30,
1997 and for the three-month and nine-month periods ended September 30, 1996 and
1997 have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission and are unaudited; however, all adjustments which are,
in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the periods covered
have been made and are of a normal, and recurring nature. Certain information
and footnote disclosure required by generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of the interim periods are not
necessarily indicative of results for the full year.
2. LONG TERM DEBT
On April 17, 1997 the Company completed the sale of $50 million 12%
Series A Senior Notes due 2004 (the "Series A Notes") in connection with a
private placement offering which was prepared in compliance with Rule 144a and
Regulation D under the Securities Act. In connection with the debt issuance,
warrants to purchase 511,885 and 127,972 shares, respectively, of the Company's
common stock were issued to the Series A note holders and the investment
banking firm that marketed the Series A Notes. The exercise price is $.01 per
share. On August 22, 1997 the Company registered notes ("Series B Notes") with
the Securities and Exchange Commission under the Securities Act of 1933. Upon
the terms set forth in the Prospectus, the Company offered to exchange all
outstanding Series A Notes for the Series B Notes which are identical in all
material respects to the form and term of the Series A Notes except for certain
transfer restrictions and registration rights relating to the Series A Notes.
The Series A and Series B Notes (the "Series A/B Notes") bear an interest rate
of 12 percent per annum. The Series A/B Notes contain certain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
pay dividends or make distributions with respect to the Company's capital stock
or make certain other payments, to incur indebtedness, or to create liens. The
Series A/B Notes are fully and unconditionally, on a joint and several basis,
guaranteed by current and future subsidiaries of the Company.
In September 1997, the Company executed a six year Senior Credit
Facility (the "Facility") with two banks that expires September 2003. The
Facility provides for borrowings of up to $20 million, subject to a borrowing
base limitation (as defined). Interest is payable at the Company's option at
either the prime rate plus 1% or the London Interbank Offered Rate, plus a
defined margin. At September 30, 1997 the selected interest rate was 9.5
percent for the $5.9 million of principal outstanding. The Facility is secured
by substantially all the Company's assets. In addition, the Facility also
contains restrictive covenants which, among other things, require the attainment
of certain financial ratios and limits the indebtedness of the Company. All
loans under the Facility are guaranteed by each of the Company's current and
future subsidiaries.
3. ACQUISITIONS
During the nine months ended September 30, 1997, the Company acquired
certain traditional ice businesses and certain assets (the "Acquisitions") to
complement its core business primarily in Texas, Arizona,
<PAGE> 8
California, Arkansas and Oklahoma for purchase prices totaling approximately
$25.7 million cash and 1,144,911 shares of common stock valued at $10 a share
(for the three months ended September 30, 1997 the Company issued 182,911
shares of common stock in such acquisitions). Such cash expenditures were
funded from the proceeds of the sale of the Series A Notes (See Note 2) and
from borrowings from the Facility. The Company has not completed the
assessment of the fair value of the net assets acquired for purposes of
allocating the purchase price. Accordingly, the approximate $29.4 million
aggregate excess of the purchase price over the net book value of the acquired
businesses has been allocated to goodwill at this time, which is being
amortized over fifteen (15) years. The acquired businesses were recorded using
the purchase method of accounting, and therefore, the results of their
operations have been included in the Company's unaudited consolidated financial
statements from the date of their respective purchase.
4. OPERATING LEASES
The Company has leased certain facilities in Texas, Arizona and
California. Under these and other operating leases, minimum annual rentals at
September 30, 1997 aggregate approximately $596,957 for the remainder of 1997,
$889,422 in 1998, $799,103 in 1999, $756,119 in 2000, and $716,463 in 2001 and
$3,102,605 thereafter.
5. CAPITAL STOCK
On July 17, 1997, the Company sold to an unaffiliated entity 300,000
shares of common stock for $10 per share and issued a warrant entitling the new
shareholder the right to purchase 100,000 shares of common stock at an exercise
price of $14. The warrants expire on July 17, 2002. During the first nine
months of 1997, the Company sold 26,899 shares of Common Stock to other
investors not related to any Acquisition at prices from $7.50 to $10.00 per
share. On July 24, 1997, the Company repurchased, at cost, treasury stock for
approximately $1.5 million.
During the nine months ended September 30, 1997, the Company issued
1,144,911 shares of common stock in connection with the Acquisitions (182,911
shares of common stock during the three months ended September 30, 1997 in
connection with the Acquisitions).
The computation of earnings per share is based on the weighted average
number of shares outstanding. Shares of common stock issuable under stock
options and warrants have not been included in the computation of earnings per
share, as their effect is antidilutive.
6. STATEMENT OF CASH FLOWS
Borrowings under the revolving lines of credit in the nine months
ended September 30, 1997 and 1996 totaled $6,415,000 and $ 2,779,403,
respectively, and repayments during the same periods totaled $515,000 and
$347,301, respectively. The Company made cash payments for interest and loan
fees of approximately $419,656, and $238,603 during the nine months ended
September 30, 1997 and 1996.
7. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard No. 128, Earnings Per Share
("SFAS"), which is effective for the periods ending after December 15, 1997,
specifies the computation, presentation and disclosure requirements of earnings
per share ("EPS") and supersedes Accounting Principles Board Opinion No. 15
("APB No. 15"). SFAS 128 requires a dual presentation of basic and diluted
EPS. Basic EPS, which excludes the impact of common stock equivalents,
replaces primary EPS. Diluted EPS, which utilizes the average market price per
share as opposed to the greater of the average market price per share or ending
market price per share when applying the treasury stock method on determining
common stock equivalents, replaces fully diluted EPS. The Company will adopt
SFAS 128 effective December 31, 1997, and, as required, will restate EPS for
all periods presented. The Company anticipates that the amounts to be reported
for basic and diluted EPS for the three month and nine month periods ended
September 30,
<PAGE> 9
1997 and 1996 will not differ significantly from the amounts reported under the
current accounting standards.
In June of 1997, the FASB issued SFAS No, 130 "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". SFAS No. 130 establishes standards for reporting and
displaying of comprehensive income and its components. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments and related information in interim and
annual financial statements. SFAS No. 130 and 131 are effective for periods
beginning after December 15, 1997. These two statements will not have any
effect on the Company's 1997 financial statements, however, management is
evaluating what, if any, additional disclosures may be required when these two
statements are adopted in the first quarter of 1998.
8. SUBSEQUENT EVENTS
On October 6, 1997, all of the Series A Notes were exchanged for the
Series B Notes. On October 16, 1997 the Company completed the sale of $25
million Senior 12% Series C Notes due 2004 (the "Series C Notes") in connection
with a private placement offering which was prepared in compliance with Rule
144a and Regulation D under the Securities Act. In connection with the debt
issuance, warrants to purchase 255,943 shares of the Company's common stock
were issued to the holders of Series C note at an exercise price of $.01 per
share. The Series C Notes were issued under the same terms, interest rate and
covenants as the Series A/B Notes above (See Note 2). The Series C Notes
contain certain covenants that, among other things, limit the ability of the
Company and its subsidiaries to pay dividends or make distributions with
respect to the Company's capital stock or make certain other payments, to incur
indebtedness, or to create liens. The Series C Notes are fully and
unconditionally, on a joint and several basis, guaranteed by current and future
subsidiaries of Packaged Ice. The net proceeds, after payment of fees and
expenses, from the sale of the Series C Notes was used to repay the outstanding
indebtedness under the Facility, and for working capital.
9. GUARANTEES OF NOTES
The Company's Series A/B Notes and the Series C Notes are
guaranteed, fully, jointly and severally, and unconditionally, on a senior
subordinated basis by all of the Company's wholly-owned subsidiaries
(the "Subsidiary Guarantors"). The following table sets forth the "summarized
financial information" of the Subsidiary Guarantors as of September 30, 1997
and for the nine months ended September 30, 1997. Full financial statements of
the Subsidiary Guarantors are not presented because management believes they
are not material to investors.
<TABLE>
<S> <C>
Current assets $ 9,426,601
Noncurrent assets 50,144,441
Current liabilities 10,205,606
Noncurrent liabilities 28,539,189
Net revenues 12,517,156
Gross profit 6,043,143
Net income 3,138,620
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements, and the notes thereto,
included in Item 1. of this form 10-Q.
This form 10-Q contains forward looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward looking statements. Such risks and
uncertainties, many of which are not within the control of the Company, may
cause the actual results to differ materially from the results discussed in the
forward
<PAGE> 10
looking statements, including, but not limited to, the Company's ability to
execute and implement its plans and strategies and/or control the economic
environment in which the Company operates.
OVERVIEW
The Company derives its revenues from the sale of packaged ice through
Packaged Ice Systems, which manufactures, packages and stores ice at the
retail location, and through traditional delivery methods, whereby ice is
manufactured, packaged and stored at a central facility and transported to the
retail location when needed. The Company has historically sold ice primarily
through Packaged Ice Systems, but upon acquiring certain traditional ice
businesses and certain assets pursuant to the Acquisitions, now sells ice
through both distribution methods. Such combination of distribution methods is
expected to provide the Company with (i) higher operating margins, due to
reduced production and distribution costs, (ii) a delivery system designed to
supply high volume locations and capable of cost-effectively servicing a market
in excess of 100 miles from its traditional ice manufacturing facilities, and
(iii) an ability to redistribute production from its traditional ice facilities
to additional customers and satisfy seasonal peak demands at customer locations
with Packaged Ice Systems.
The Company manufactures its ice in crushed, cubed, half-moon and
cylindrical forms and packages its ice primarily in eight to 40 pound bags for
eventual sale to retail customers and sells block ice in 10 and 300 pound sizes
primarily to commercial and agricultural users. Eight pound bags are the most
commonly purchased size in the industry. Packaged ice sold in 20 pound and 40
pound bags is typically purchased by restaurants and other commercial users.
Block ice in 10 pound and 300 pound units is typically sold to customers in the
commercial and agricultural sectors. The Company also provides other services
including cold storage rental.
Prices for packaged ice are generally stable with some price variation
between markets based on geography and customer base. Management believes that
it services more states (twelve) than any other ice manufacturer. Texas is the
Company's largest market and Arizona its next largest market. Other markets
include Arkansas, California, Colorado, Florida, Louisiana, Mississippi,
Nevada, New Mexico, Oklahoma and Tennessee. The Company services the
significant segments of the ice industry, from supermarket and convenience
store retailers, to restaurants, commercial users and the agricultural sector.
Management believes that this market diversity helps insulate the Company from
both price and demand fluctuations caused by geography, weather, customer base
and product segment.
The Company's costs of goods sold include costs associated with both
traditional ice delivery and the Packaged Ice Systems. In the traditional ice
business, plant occupancy, plastic bags, delivery, labor and utility-related
expenses account for the largest costs. Costs vary significantly by region and
fluctuate based upon, among other things, freezer capacity and local utility
rates. With the Packaged Ice System, ice storage costs and general operating
utility costs are eliminated. The Company's costs of goods sold also include
the cost of plastic bags which are incurred by both the traditional ice
manufacturer plants and the Packaged Ice Systems. The cost of the bag used in
the Packaged Ice System is substantially higher than that used in traditional
delivery due to special components and greater thickness. Costs of goods sold
for both systems also includes labor costs associated with manufacturing,
delivery and maintenance. The Packaged Ice System eliminates certain costs
related to production and distribution but does require in-store customer
service representatives and machine technicians. In the aggregate, labor costs
associated with the Packaged Ice System are substantially lower than labor
costs associated with traditional ice manufacturing.
The Company's operating expenses include costs associated with
selling, general and administrative functions. These costs include executive
officers' compensation, office and administrative salaries and costs associated
with leasing office space. Selling, general and administrative functions are
similar at both the traditional facilities operated by the various subsidiaries
and at Packaged Ice, which exclusively handles the Packaged Ice System. These
operating expenses are typically higher when the Company enters new markets, in
which it intends to place Packaged Ice Systems, as new marketing, systems and
office facilities must be established.
<PAGE> 11
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected
operating data and supplemental data for the Company expressed as a percentage
of total revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 59.5 43.7 58.8 43.2
Gross profit 40.5 56.3 41.2 56.8
Selling, general and
administrative
expenses(1) 18.6 32.9 21.8 36.6
Depreciation and
amortization 12.5 24.5 16.4 28.6
Interest expense 12.9 3.1 15.2 2.2
Other income 1.3 1.3 2.8 0.2
Net loss (2.2) (2.9) (9.4) (10.4)
SUPPLEMENTAL DATA:
EBIT(2) 10.4 3.0 5.7 (8.2)
EBITDA(2) 23.3 24.8 22.1 20.4
</TABLE>
(1) Excludes depreciation and amortization.
(2) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBIT represents earnings before interest and income
taxes. The Company has included EBITDA and EBIT data (which are not
measures of financial performance under generally accepted accounting
principles) because it understands such data are used by certain
investors to determine a company's historical ability to service its
indebtedness. EBITDA and EBIT should not be considered by an investor as
alternatives to net income, as indicators of the Company's operating
performance or as alternatives to cash flow as measures of liquidity.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues: Revenues increased $11.2 million from $1.6 million for
the quarter ended September 30, 1996 to $12.8 million for the quarter ended
September 30, 1997. Revenues increased $1.2 million due to the placement of
additional Packaged Ice Systems since the quarter ended September 30, 1996 and
$10.1 million as a result of revenue contributed by the Acquisitions.
Gross Profit: Gross profit increased $4.3 million from $.9 million
for the quarter ended September 30, 1996 to $5.2 million for the quarter ended
September 30, 1997. As a percentage of revenues gross profit decreased 15.8
percentage points from 56.3% at September 30, 1996 to 40.5% at September 30,
1997. Gross margins decreased because of the higher cost of sales reflected in
the traditional ice businesses of the Acquisitions. Traditional ice companies
experience significantly higher costs of goods sold than the lower costs of
on-site manufacturing and delivery associated with the Packaged Ice Systems.
Selling, General and Administrative Expenses: Operating expenses
increased $1.9 million from $.5 million for the quarter ended September 30,
1996 to $2.4 million for the quarter ended September 30, 1997. As a
<PAGE> 12
percentage of revenues, operating expenses decreased 14.3 percentage points
from 32.9% at September 30, 1996 to 18.6% at September 30, 1997. This decrease
was due to greater efficiencies realized by the Company as its general and
administrative expenses were spread over the larger base of sales enjoyed as a
result of the Acquisitions.
Depreciation and Amortization Expense: Depreciation and amortization
increased $1.2 million from $.4 million for the quarter ended September 30,
1996 to $1.6 million for the quarter ended September 30, 1997. As a percentage
of sales, deprecation and amortization decreased 12.0 percentage points from
24.5% to 12.5%. This decrease was due primarily to the lower historical
depreciation and amortization percentages of the businesses acquired pursuant
to the Acquisitions. These percentages reflect the longer estimated useful
lives of traditional ice plant and equipment as compared to Packaged Ice
Systems. This decrease more that offset the increase related to the
amortization of goodwill resulting from the Acquisitions.
Other Income: Other income increased $.15 million from $.02 million
for the quarter ended September 30, 1996 to $.17 million for the quarter ended
September 30, 1997. This increase was due primarily to an increase in interest
income derived from the investment of unexpended proceeds from the issuance of
the Series A/B Notes.
Interest Expense: Interest expense increased $1.6 million from $.05
million for the quarter ended September 30, 1996 to $1.7 million for the
quarter ended September 30, 1997. This increase was a result of higher levels
of debt associated with the Company borrowing $50.0 million from the issuance
of the Series A/B Notes and from $5.9 million borrowings under the Facility.
Net Loss: Net loss increased $.23 million from $.04 million for the
quarter ended September 30, 1996 to $.27 million for the quarter ended
September 30, 1997. The increase in the loss is due to the increase in
interest expense more than offsetting the increased income from operations due
to the Acquisitions.
EBITDA: As a result of the foregoing, EBITDA increased $2.6 million
from $.4 million for the quarter ended September 30, 1996 to $3.0 million for
the quarter ended September 30, 1997. This increase was due in part to
increased sales from new Packaged Ice Systems, but resulted primarily from the
addition of the results of operations from the Acquisitions during the quarter.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenues: Revenues increased $17.3 million from $3.7 million for
the nine months ended September 30, 1996 to $21.0 million for the nine months
ended September 30, 1997. Revenues increased $1.4 million due to the placement
of additional Packaged Ice Systems during the nine months and $15.9 million as
a result of revenue contributed by the Acquisitions.
Gross Profit: Gross profit increased $6.5 million from $2.1 million
for the nine months ended September 30, 1996 to $8.6 million for the nine
months ended September 30, 1997. The Acquisitions contributed $6.0 million of
the increase in gross profit. As a percentage of revenues gross profit
decreased 15.6 percentage points from 56.8% at September 30, 1996 to 41.2% at
September 30, 1997. Gross margins decreased because of the higher cost of
sales reflected in the traditional ice businesses of the Acquisitions.
Traditional ice companies experience significantly higher costs of goods sold
than the lower costs of on-site manufacturing and delivery associated with the
Packaged Ice Systems.
Selling, General and Administrative Expenses: Operating expenses
increased $3.2 million from $1.4 million for the nine months ended September
30, 1996 to $4.6 million for the nine months ended September 30, 1997. As a
percentage of revenues operating expenses decreased 14.8 percentage points from
36.6% at September 30, 1996 to 21.8% at September 30, 1997. This decrease was
due to greater efficiencies realized by the Company as its general and
administrative expenses were spread over the larger base of sales enjoyed as a
result of the Acquisitions.
<PAGE> 13
Depreciation and Amortization Expenses: Depreciation and amortization
increased $2.3 million from $1.1 million for the nine months ended September
30, 1996 to $3.4 million for the nine months ended September 30, 1997. As a
percentage of sales, deprecation and amortization decreased 12.2 percentage
points from 28.6% to 16.4%. This decrease was due primarily to the lower
historical depreciation and amortization percentages at the Acquisitions.
These percentages reflect the longer estimated useful lives of traditional ice
plant and equipment as compared to Packaged Ice Systems. This decrease more
that offset the increase related to the amortization of goodwill resulting from
the Acquisitions.
Other Income: Other income increased $.57 million from $.01 million
for the nine months ended September 30, 1996 to $.58 million for the nine
months ended September 30, 1997. This increase was due primarily to the
receipt of lease and management fee income in the first quarter of 1997, and to
an increase in interest income derived from the investment of unexpended
proceeds from the issuance of the Series A/B Notes.
Interest Expense: Interest expense increased $3.1 million from $.1
million for the nine months ended September 30, 1996 to $3.2 million for the
nine months ended September 30, 1997. This increase was a result of higher
levels of debt associated with the Company borrowing $50.0 million from the
issuance of the Series A/B Notes.
Net Loss: Net loss increased $1.6 million from $.4 million for the
nine months ended September 30, 1996 to $2.0 million for the nine months ended
September 30, 1997. The increase in the loss is due to the increase in
interest expense more than offsetting the increased income from operations due
to the Acquisitions.
EBITDA: As a result of the foregoing, EBITDA increased $3.9 million
from $.7 million for the nine months ended September 30, 1996 to $4.6 million
for the nine months ended September 30, 1997. This increase was due in part to
increased sales from new Packaged Ice Systems but resulted primarily from the
addition of the results of operations from the Acquisitions during the nine
months.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, the Company had net
cash provided by operating activities of $0.3 million net cash used in
investing activities of $32.6 million, consisting primarily of $25.7 million
used to complete the Acquisitions and $6.7 million used to purchase Packaged
Ice Systems; and net cash provided by financing activities of $36.7 million,
consisting of $5.9 million of borrowing from the new Facility, $47.0 million
net from the issuance of the Series A/B Notes, which was offset by $17 million
repayment of debt, and $3.0 million from the issuance of common and preferred
stock, which was offset by $1.5 million purchase of treasury stock; thus,
resulting in a net increase in cash and equivalents of $4.5 million.
During the nine months ended September 30, 1997, the Company acquired
certain traditional ice businesses and certain assets to complement its core
business in primarily Texas, Arizona, California, Arkansas and Oklahoma for
purchase prices totaling approximately $25.7 million cash and 1,144,911 shares
of common stock valued at $10 a share. Such cash expenditures were funded from
the proceeds of the sale of the Series A/B Notes and from borrowings from the
Facility.
At September 30, 1997 the Company had cash on hand of $3.8 million to
meet its short-term liquidity requirements. Additionally, the Company had up
to a potential $14.1 million available to fund acquisitions under the Facility
from Zion Bank N.A. and Frost National Bank subject to meeting certain
borrowing base limitations under the terms of the Facility. Loans under the
Facility will bear interest at a variable maximum rate of prime plus 1% and as
low as prime dependent upon certain ratios of the Company's EBITDA to total
debt service coverage requirements. The Company, at its option, may fix any
portion of the loan at a margin above LIBOR rates, again dependent upon the
same ratios, at any time. Borrowings under the Facility will be repayable
interest only for a period of two years. Thereafter, principal payments equal
to $250,000 per month plus accrued interest on outstanding balances will be due
until six years from original date when any outstanding principal balance
together
<PAGE> 14
with accrued interest will be due and payable. The terms of the Facility
require a pledge of substantially all of the assets of the Company and the
Subsidiary Guarantors. Accordingly, the Series A/B Notes and Series C Notes
(together the "Notes") and Subsidiary Guarantees have effectively been
subordinated to the extent of the collateral used to secure such bank
indebtedness. In the event of a default on the Notes, or a bankruptcy,
liquidation or reorganization of the Company, such assets available to satisfy
obligations with respect to the secured indebtedness under the Facility before
any payment therefrom could be made on the Notes. The Series A/B Notes and
Series C Notes contain certain covenants that, among other things, limit the
ability of the Company and its subsidiaries to pay dividends or make
distributions with respect to the Company capital stock or make certain other
payments, to incur indebtedness, or to create liens. The Series A/B Notes and
Series C Notes are fully and unconditionally, on a joint and several basis,
guaranteed by current and future subsidiaries of the Company.
The Company expects to meet its short-term liquidity requirements and finance
the placement of additional Packaged Ice Systems, the acquisition of additional
traditional ice manufacturing companies, and capital expenditures to maintain
existing operations with cash provided by operations, proceeds of the Series C
Notes, proceeds of the borrowings under the Facility, and the Private issuance
of equity securities.
The Company's Packaged Ice Systems are expected to range in cost from $11,500
to $18,500 per installation and capital expenditures for such systems are
expected to be approximately $6.6 million in fiscal 1997 and $11.6 million per
annum thereafter. During the next two years, the Company expects to continue
acquiring traditional ice companies using a combination of cash and Common
Stock, and has budgeted approximately $42.8 million for acquisitions in fiscal
1997 and $18.0 million in fiscal 1998. There can be no assurance that
acquisitions based upon the Company's criteria can be obtained or that funds
will be available in sufficient amounts to finance such acquisitions. Capital
expenditures to maintain and expand traditional ice facilities are expected to
be approximately $1.9 million in fiscal 1997 and $5.7 million in fiscal 1998.
The Company intends to satisfy its obligations under the Series A/B Notes, the
Series C Notes, the Facility as well as its future capital expenditures and
working capital requirements, primarily with cash flow from operations or
equity capital. The Company may also seek, and is in discussions regarding,
additional debt or equity capital. The availability of such capital will
depend upon prevailing market conditions and other factors over which the
Company has no control, as well as the Company's financial condition and
results of operations. There can be no assurance that sufficient funds will be
available to finance intended acquisitions or capital expenditures for the
placement of Packaged Ice Systems to sustain the Company's recent rate of
growth.
SUBSEQUENT EVENTS
On October 6 the Company completed the exchange of Series A Notes for
Series B Notes. On October 16, 1997, the Company issued the Series C Notes in
the principal amount of $25 million, primarily with the holders of the Series
A/B Notes. The terms of the Series C Notes are substantially the same as those
of the Series A/B notes. The Company used a portion of the proceeds thereof to
retire the $5.9 million outstanding balance of the Facility, and to complete a
portion of the acquisitions budgeted for closing in the final quarter of 1997.
GENERAL ECONOMIC TRENDS AND SEASONALITY
The Company's results of operations are generally affected by economic
trends in its market area but results to date have not been impacted by
inflation. If an extended period of high inflation is encountered, the Company
believes that it will be able to pass on its higher costs to its customers.
The packaged ice industry as a whole is extremely seasonal. In the
warm weather regions where the Company primarily operates, however, this
seasonality is less pronounced. Approximately 66% of the Company's revenues
occur during the second and third fiscal quarters when the weather conditions
are generally warmer and demand is greater. Approximately 15% of the Company's
revenues occur during the first fiscal quarter, and approximately 19% of the
Company's revenues occur during the fourth fiscal quarter when the weather is
generally cooler. These percentages can vary slightly from region to region
within the sunbelt depending upon the degree of volatility of the seasons.
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On October 6, 1997 the Company completed the exchange of Series A
Notes for Series B Notes. On October 16, 1997, the Company and U.S. Trust
Company of Texas, N.A., as Trustee amended the indenture (the "Indenture")
governing the 12% Series A/B Senior Notes due 2004 ("Series A/B Notes"), the
registered securities, as part of a private placement on October 16, 1997 of
25,000 units consisting of $25,000,000 12% Series C Senior Notes due 2004
("Series C Notes")and warrants to purchase 255,943 shares of Common Stock. The
Series C Notes are substantially identical in their terms to the Series A/B
Notes. The amendment to the Indenture allowed the Company to issue the Series
C Notes.
(b) See item 2(a) concerning the issuance of the Series C Notes. The
Series C Notes rank pari passu with the Series A/B Notes and thus increase the
amount of unsecured indebtedness of the Company. The proceeds of the Series C
Notes was partially applied to eliminate the Company's outstanding borrowings
under the Facility and to fund the acquisition of additional assets.
(c) On July 17, 1997, the Company sold 300,000 shares of the
Company's common stock for $10 per share for a total of $3,000,000 to SV
Capital Partners, L.P. In connection with the transaction, the Company also
issued a warrant to the investor to purchase up to an additional 100,000 shares
of the Company's common stock for $1,400,000 or $14 per share. The warrant
expires on July 16, 2002 if not previously exercised. The Company issued the
stock and warrant in reliance upon the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. The investor
represented to the Company that the investor acquired the stock and warrant for
the investor's own account and not with a view to distribution. The investor
had access to all available material information concerning the Company. The
certificates evidencing the stock and warrant bear an appropriate restrictive
legend under the Securities Act of 1933, as amended.
On August 21, 1997, the Company issued 15,411 shares of the Company's
common stock to two investors as partial consideration for substantially all of
the assets of Whitted Ice Service. The stock was valued at $10 per share or
$154,100. The Company issued the stock in reliance upon the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The
investor represented to the Company that the investor acquired the stock for
the investor's own account and not with a view to distribution. The investor
had access to all available material information concerning the Company. The
certificates evidencing the stock bear an appropriate restrictive legend under
the Securities Act of 1933, as amended.
On September 3, 1997, the Company issued 15,000 shares of the
Company's common stock to an investor as partial consideration for all of the
outstanding stock of First Ice Company and Codurus Leasing Company. The stock
was valued at $150,000 or $10 per share. The Company issued the stock in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. The investor represented to the Company
that the investor acquired the stock for the investor's own account and not
with a view to distribution. The investor had access to all available material
information concerning the Company. The certificates evidencing the stock bear
an appropriate restrictive legend under the Securities Act of 1933, as amended.
On September 4, 1997, the Company issued 56,500 shares of the
Company's common stock to an investor as consideration for all of the assets of
A Alaska Ice, Inc. The stock was valued at $565,000 or $10 per share. The
Company issued the stock in reliance upon the exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. The investor
represented to the Company that the investor acquired the stock for the
investor's own account and not with a view to distribution. The investor had
access to all available material information concerning the Company. The
certificates evidencing the stock bear an appropriate restrictive legend under
the Securities Act of 1933, as amended.
<PAGE> 16
On September 11, 1997, the Company issued 15,000 shares of the
Company's common stock to three investors as partial consideration for the
outstanding shares of McGehee-Neutze, Inc. and Gus Neutze Truck Company, Inc.
The stock was valued at $150,000 or $10 per share. The Company issued the stock
in reliance upon the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. The investor represented to the Company
that the investor acquired the stock for the investor's own account and not with
a view to distribution. The investor had access to all available material
information concerning the Company. The certificates evidencing the stock bear
an appropriate restrictive legend under the Securities Act of 1933, as amended.
On September 12, 1997, the Company issued 51,000 shares of the
Company's common stock to two investors as partial consideration for all of the
outstanding shares of Century Ice of Tulsa, Inc. and Ice Cold Enterprises. The
stock was valued at $510,000 or $10 per share. The Company issued the stock in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. The investor represented to the Company
that the investor acquired the stock for the investor's own account and not
with a view to distribution. The investor had access to all available material
information concerning the Company. The certificates evidencing the stock bear
an appropriate restrictive legend under the Securities Act of 1933, as amended.
On September 27, 1997, the Company issued 30,000 shares of the
Company's common stock to two investors as partial consideration for all of the
outstanding shares of A-Arctic Ice Co. The stock was valued at $300,000 or $10
per share. The Company issued the stock in reliance upon the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The
investor represented to the Company that the investor acquired the stock for
the investor's own account and not with a view to distribution. The investor
had access to all available material information concerning the Company. The
certificates evidencing the stock bear an appropriate restrictive legend under
the Securities Act of 1933, as amended.
ITEM 5. OTHER INFORMATION
On October 16, 1997, the Company consummated a private placement of
25,000 units (the "Series C Offering") consisting of $25,000,000 aggregate
principal amount of Series C 12% Senior Notes due 2004 and warrants to purchase
255,943 shares of common stock of the Company. The Series C Notes were issued
on substantially identical terms as its outstanding Series A/B Notes due 2004.
The proceeds of the Series C Offering were applied to reduce a portion of the
Company's outstanding borrowings under its senior credit facility, for
acquisition of assets, capital expenditures and working capital.
Contemporaneously with the Series C Offering, the Company solicited
consents from holders of the Series A/B Notes pursuant to the terms of a
consent solicitation statement (the "Consent Solicitation Statement") to amend
(the "Amendment") the indenture governing the Series A/B Notes (the
"Indenture") to modify the covenant restricting the Company's ability to incur
debt. The completion of the Series C Offering was conditioned upon the
effectiveness of the Amendment.
The consent solicitation with respect to the Amendment expired at 5:00
p.m., New York City time, on October 10, 1997 on or prior to which time the
Company had received consents from holders of at least a majority of the
consents required to give effect to the Amendment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following is a list of exhibits filed as part of this Form 10-Q.
Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference.
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Articles of Incorporation of Packaged Ice, Inc. (the "Company") filed
with the Secretary of State of the State of Texas on August 14, 1990.
(Exhibit 3.1)(1)
3.2 Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Texas on February 5, 1992.
(Exhibit 3.2)(1)
3.3 Certificate of Designation of Series A Convertible Preferred Stock of
the Company filed with the Secretary of State of the State of Texas on
September 19, 1995. (Exhibit 3.3)(1)
3.4 Certificate of Designation of Series B Convertible Preferred Stock of
the Company filed with the Secretary of State of the State of Texas on
January 10, 1997. (Exhibit 3.4)(1)
3.5 Amended and Restated Bylaws of the Company, effective as of January
20, 1997. (Exhibit 3.5)(1)
4.1 Indenture, dated April 17, 1997, among the Company, as Issuer, the
Subsidiary Guarantors identified therein (the "Guarantors"), and U.S.
Trust Company of Texas, N.A. as Trustee. (Exhibit 4.1)(1)
4.2 Registration Rights Agreement, dated as of April 17, 1997, among the
Company, the Subsidiary Guarantors, and the purchasers of the Notes.
(Exhibit 4.2)(1)
4.3 First Supplemental Indenture, dated as of October 16, 1997, among the
Company, the Subsidiary Guarantors, and the Purchasers of the Notes.
4.4 Supplemental Indenture, dated as of October 23, 1997, for Indenture
dated as of April 17, 1997.
10.1 Stock Purchase Agreement, dated as of July 17, 1997, by and between
Packaged Ice, Inc. and SV Capital Partners, L.P. (Exhibit 10.38)(2)
10.2 Common Stock Purchase Warrant No. SV-1, dated July 17, 1997, executed
by Packaged Ice, Inc. for the benefit of SV Capital Partners, L.P.
(Exhibit 10.39)(2)
10.3 Voting Agreement, dated July 17, 1997, by and among Packaged Ice,
Inc., SV Capital Partners, L.P. and substantially all of the
shareholders of Packaged Ice, Inc. (Exhibit 10.40)(1)
10.4 Registration Rights Agreement, dated as of July 17, 1997, by and
between Packaged Ice, Inc. and SV Capital Partners, L.P.
(Exhibit 10.41)(2)
10.5 Parallel Exit Agreement, dated July 17,1997, by and among Packaged
Ice, Inc., SV Capital Partners, L.P., and certain of Packaged Ice,
Inc.'s shareholders (James F. Stuart, A. J. Lewis III, and Steven P.
Rosenberg). (Exhibit 10.42)(2)
10.6 Indemnification Agreement, dated July 17, 1997, by and between Packaged
Ice, Inc. and Rod Sands, indemnifying Mr. Sands as a director of
Packaged Ice, Inc. (Exhibit 10.43)(2)
10.7 Warrant Agreement among the Company and U.S. Trust Company of Texas,
N.A., a national banking association, as Warrant Agent, dated as of
October 16, 1997.
10.8 Credit Agreement by and among the Company, The Frost National Bank
(individually and as Agent for Zions and other Banks)), and Zions
First National Bank (individually), dated as of September 15, 1997.
</TABLE>
<PAGE> 18
<TABLE>
<C> <S>
10.9 First Amendment to Credit Agreement dated as of October 16, 1997.
10.10 Agreement (Patents) (United States) dated as of September 15, 1997,
executed by the Company in favor of Agent.
10.11 Revolving Credit Note dated as of September 15, 1997, in the stated
principal amount of $10,000,000.00, executed by the Company and
payable to the order of The Frost National Bank.
10.12 Revolving Credit Note dated as of September 15, 1997, in the stated
principal amount of $10,000,000.00, executed by the Company and
payable to the order of Zions First National Bank.
10.13 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by SWI in favor of Agent and Banks.
10.14 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by MPI in favor of Agent and Banks.
10.15 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by PILI in favor of Agent and Banks.
10.16 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by SII in favor of Agent and Banks.
10.17 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by STPI in favor of Agent and Banks.
10.18 Security Agreement dated as of September 15, 1997, executed by the
Company as Debtor in favor of Agent.
10.19 Security Agreement dated as of September 15, 1997, executed by STPI
as Debtor in favor of Agent.
10.20 Security Agreement dated as of September 15, 1997, executed by SWI as
Debtor in favor of Agent.
10.21 Security Agreement dated as of September 15, 1997, executed by MPI as
Debtor in favor of Agent.
10.22 Security Agreement dated as of September 15, 1997, executed by PILI as
Debtor in favor of Agent.
10.23 Deed of Trust, Assignment of Rents, Security Agreement, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Maricopa County, Arizona.
10.24 Pledge and Security Agreement (Subsidiary Stock) dated as of September
15, 1997, executed by the Company as Pledgor in favor of Agent.
10.25 Deed of Trust, Assignment of Rents, Security Agreement, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Pima County, Arizona.
10.26 Leasehold Deed of Trust, Assignment of Rents, Security Agreement, and
Fixture Filing dated as of September 15, 1997, executed by SWI, as
filed of record in the Real Property Records of Maricopa County,
Arizona.
</TABLE>
<PAGE> 19
<TABLE>
<C> <S>
10.27 Deed of Trust, Security Agreement, Assignment of Rents, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Imperial and San Diego Counties,
California.
10.28 Leasehold Deed of Trust, Security Agreement, Assignment of Rents, and
Fixture Filing dated as of September 15, 1997, executed by SWI, as
filed of record in the Real Property Records of San Diego County,
California.
10.29 Deed of Trust, Security Agreement, and Fixture Filing dated as of
September 15, 1997, executed by SWI, as filed of record in the Real
Property Records of Shelby County, Tennessee.
10.30 Deed of Trust, Assignment Security Agreement, and Financing Statement
(Refugio County) dated as of September 15, 1997, executed by MPI, as
filed of record in the Real Property Records of Refugio County, Texas.
10.31 Deed of Trust, Assignment Security Agreement, and Financing Statement
(Cameron and Hidalgo Counties) dated as of September 15, 1997,executed
by SWI, as filed of record in the Real Property Records of Cameron and
Hidalgo Counties, Texas.
10.32 Subordination, Attornment and Non-Disturbance Agreement dated as of
September 15, 1997, by and between Mid Valley Industries, as Tenant,
and Agent, covering property located at 101 North 16th Street, McAllen,
Texas 78501.
10.33 Leasehold Deed of Trust, Assignment, Security Agreement, and Financing
Statement (Nueces County) dated as of September 15, 1997, executed by
MPI, as filed of record in the Real Property Records of Nueces County,
Texas.
10.34 Leasehold Deed of Trust, Assignment, Security Agreement, and Financing
Statement (Dallas County) dated as of September 15, 1997, executed by
the Company, as filed of record in the Real Property Records of Dallas
County, Texas.
10.35 Indenture, dated October 16, 1997, among the Company, as Issuer, the
guarantors identified therein (the "Guarantors"), and U.S. Trust
Company of Texas, N.A. as Trustee.
10.36 Registration Rights Agreement, dated as of October 16, 1997, among the
Company, the Subsidiary Guarantors, and the purchasers of the Notes.
10.37 Purchase Agreement, dated October 10, 1997, among the Company, the
Guarantors, and Jefferies & Company , Inc. (the Initial Purchaser of
the Notes).
10.38 Securityholder's and Registration Rights Agreement, dated as of October
16, 1997, among the Company and the Initial Purchaser.
10.39 Supplemental Indenture dated as of October 23, 1997, for Indenture
dated as of October 16, 1997.
10.40 Trademark License Agreement between Culligan International Company and
Packaged ice, Inc. dated as of October 31, 1997.
10.41 Asset Purchase Agreement between Southwestern Ice, Inc. and Pure Flo
Package Water and Ice Co. dated as of June 30, 1997.
</TABLE>
<PAGE> 20
<TABLE>
<C> <S>
10.42 Stock Purchase Agreement among Packaged Ice, Inc., Buyer, and W. Brad
Troutman and James V. White, Jr., Stockholders, holders of all of the
outstanding stock of First Ice Company and Codurus Leasing Company,
dated as of September 4, 1997.
10.43 Asset Purchase Agreement between Southwestern Ice, Inc. and CMC Ice,
Inc., Carlos Shannon, and Linda Shannon dated as of September 4, 1997.
10.44 Asset Purchase Agreement between Southwestern Ice, Inc. and CJC Ice,
Inc. dated as of September 4, 1997.
10.45 Stock Purchase Agreement among Packaged Ice, Inc., Buyer, and Warren
F. Kruger and Julie S. Kruger, stockholders, holders of all of the
outstanding stock of Century Ice of Tulsa, Inc. and Ice Cold
Enterprises, Inc., dated as of September 12, 1997.
11.1 Computation of Earnings Per Common Share and Common Equivalents Share
27.1 Financial data schedule.
</TABLE>
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-4
(File No. 333-29357) filed with the SEC on June 16, 1997.
(2) Filed as an Exhibit to the Amendment No. 1 to the Company's Registration
Statement No. 333-29357 on Form S-4 with the SEC on July 29, 1997.
(b) Report on Form 8-K:
The Company filed a report on Form 8-K on October 31, 1997 regarding the
Trademark License Agreement between the Company and Culligan Water
Technologies, Inc. dated October 31, 1997 and discussions with Culligan and
other investors with respect to a possible investment in the Company.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
Packaged Ice, Inc.
Date: November 13, 1997 By: /s/ A.J. Lewis III
-----------------------------------------
A.J. Lewis III
President
Date: November 13, 1997 By: /s/ James C. Hazlewood
----------------------------------------
James C. Hazlewood
Chief Financial and Accounting Officer
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
3.1 Articles of Incorporation of Packaged Ice, Inc. (the "Company") filed
with the Secretary of State of the State of Texas on August 14, 1990.
(Exhibit 3.1)(1)
3.2 Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Texas on February 5, 1992.
(Exhibit 3.2)(1)
3.3 Certificate of Designation of Series A Convertible Preferred Stock of
the Company filed with the Secretary of State of the State of Texas on
September 19, 1995. (Exhibit 3.3)(1)
3.4 Certificate of Designation of Series B Convertible Preferred Stock of
the Company filed with the Secretary of State of the State of Texas on
January 10, 1997. (Exhibit 3.4)(1)
3.5 Amended and Restated Bylaws of the Company, effective as of January
20, 1997. (Exhibit 3.5)(1)
4.1 Indenture, dated April 17, 1997, among the Company, as Issuer, the
Subsidiary Guarantors identified therein (the "Guarantors"), and U.S.
Trust Company of Texas, N.A. as Trustee. (Exhibit 4.1)(1)
4.2 Registration Rights Agreement, dated as of April 17, 1997, among the
Company, the Subsidiary Guarantors, and the purchasers of the Notes.
(Exhibit 4.2)(1)
4.3 First Supplemental Indenture, dated as of October 16, 1997, among the
Company, the Subsidiary Guarantors, and the Purchasers of the Notes.
4.4 Supplemental Indenture, dated as of October 23, 1997, for Indenture
dated as of April 17, 1997.
10.1 Stock Purchase Agreement, dated as of July 17, 1997, by and between
Packaged Ice, Inc. and SV Capital Partners, L.P. (Exhibit 10.38)(2)
10.2 Common Stock Purchase Warrant No. SV-1, dated July 17, 1997, executed
by Packaged Ice, Inc. for the benefit of SV Capital Partners, L.P.
(Exhibit 10.39)(2)
10.3 Voting Agreement, dated July 17, 1997, by and among Packaged Ice,
Inc., SV Capital Partners, L.P. and substantially all of the
shareholders of Packaged Ice, Inc. (Exhibit 10.40)(1)
10.4 Registration Rights Agreement, dated as of July 17, 1997, by and
between Packaged Ice, Inc. and SV Capital Partners, L.P.
(Exhibit 10.41)(2)
10.5 Parallel Exit Agreement, dated July 17,1997, by and among Packaged
Ice, Inc., SV Capital Partners, L.P., and certain of Packaged Ice,
Inc.'s shareholders (James F. Stuart, A. J. Lewis III, and Steven P.
Rosenberg). (Exhibit 10.42)(2)
10.6 Indemnification Agreement, dated July 17, 1997, by and between Packaged
Ice, Inc. and Rod Sands, indemnifying Mr. Sands as a director of
Packaged Ice, Inc. (Exhibit 10.43)(2)
10.7 Warrant Agreement among the Company and U.S. Trust Company of Texas,
N.A., a national banking association, as Warrant Agent, dated as of
October 16, 1997.
10.8 Credit Agreement by and among the Company, The Frost National Bank
(individually and as Agent for Zions and other Banks)), and Zions
First National Bank (individually), dated as of September 15, 1997.
</TABLE>
<PAGE> 23
<TABLE>
<C> <S>
10.9 First Amendment to Credit Agreement dated as of October 16, 1997.
10.10 Agreement (Patents) (United States) dated as of September 15, 1997,
executed by the Company in favor of Agent.
10.11 Revolving Credit Note dated as of September 15, 1997, in the stated
principal amount of $10,000,000.00, executed by the Company and
payable to the order of The Frost National Bank.
10.12 Revolving Credit Note dated as of September 15, 1997, in the stated
principal amount of $10,000,000.00, executed by the Company and
payable to the order of Zions First National Bank.
10.13 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by SWI in favor of Agent and Banks.
10.14 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by MPI in favor of Agent and Banks.
10.15 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by PILI in favor of Agent and Banks.
10.16 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by SII in favor of Agent and Banks.
10.17 Subsidiary Guaranty Agreement dated as of September 15, 1997, executed
by STPI in favor of Agent and Banks.
10.18 Security Agreement dated as of September 15, 1997, executed by the
Company as Debtor in favor of Agent.
10.19 Security Agreement dated as of September 15, 1997, executed by STPI
as Debtor in favor of Agent.
10.20 Security Agreement dated as of September 15, 1997, executed by SWI as
Debtor in favor of Agent.
10.21 Security Agreement dated as of September 15, 1997, executed by MPI as
Debtor in favor of Agent.
10.22 Security Agreement dated as of September 15, 1997, executed by PILI as
Debtor in favor of Agent.
10.23 Deed of Trust, Assignment of Rents, Security Agreement, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Maricopa County, Arizona.
10.24 Pledge and Security Agreement (Subsidiary Stock) dated as of September
15, 1997, executed by the Company as Pledgor in favor of Agent.
10.25 Deed of Trust, Assignment of Rents, Security Agreement, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Pima County, Arizona.
10.26 Leasehold Deed of Trust, Assignment of Rents, Security Agreement, and
Fixture Filing dated as of September 15, 1997, executed by SWI, as
filed of record in the Real Property Records of Maricopa County,
Arizona.
</TABLE>
<PAGE> 24
<TABLE>
<C> <S>
10.27 Deed of Trust, Security Agreement, Assignment of Rents, and Fixture
Filing dated as of September 15, 1997, executed by SWI, as filed of
record in the Real Property Records of Imperial and San Diego Counties,
California.
10.28 Leasehold Deed of Trust, Security Agreement, Assignment of Rents, and
Fixture Filing dated as of September 15, 1997, executed by SWI, as
filed of record in the Real Property Records of San Diego County,
California.
10.29 Deed of Trust, Security Agreement, and Fixture Filing dated as of
September 15, 1997, executed by SWI, as filed of record in the Real
Property Records of Shelby County, Tennessee.
10.30 Deed of Trust, Assignment Security Agreement, and Financing Statement
(Refugio County) dated as of September 15, 1997, executed by MPI, as
filed of record in the Real Property Records of Refugio County, Texas.
10.31 Deed of Trust, Assignment Security Agreement, and Financing Statement
(Cameron and Hidalgo Counties) dated as of September 15, 1997,executed
by SWI, as filed of record in the Real Property Records of Cameron and
Hidalgo Counties, Texas.
10.32 Subordination, Attornment and Non-Disturbance Agreement dated as of
September 15, 1997, by and between Mid Valley Industries, as Tenant,
and Agent, covering property located at 101 North 16th Street, McAllen,
Texas 78501.
10.33 Leasehold Deed of Trust, Assignment, Security Agreement, and Financing
Statement (Nueces County) dated as of September 15, 1997, executed by
MPI, as filed of record in the Real Property Records of Nueces County,
Texas.
10.34 Leasehold Deed of Trust, Assignment, Security Agreement, and Financing
Statement (Dallas County) dated as of September 15, 1997, executed by
the Company, as filed of record in the Real Property Records of Dallas
County, Texas.
10.35 Indenture, dated October 16, 1997, among the Company, as Issuer, the
guarantors identified therein (the "Guarantors"), and U.S. Trust
Company of Texas, N.A. as Trustee.
10.36 Registration Rights Agreement, dated as of October 16, 1997, among the
Company, the Subsidiary Guarantors, and the purchasers of the Notes.
10.37 Purchase Agreement, dated October 10, 1997, among the Company, the
Guarantors, and Jefferies & Company , Inc. (the Initial Purchaser of
the Notes).
10.38 Securityholder's and Registration Rights Agreement, dated as of October
16, 1997, among the Company and the Initial Purchaser.
10.39 Supplemental Indenture dated as of October 23, 1997, for Indenture
dated as of October 16, 1997.
10.40 Trademark License Agreement between Culligan International Company and
Packaged ice, Inc. dated as of October 31, 1997.
10.41 Asset Purchase Agreement between Southwestern Ice, Inc. and Pure Flo
Package Water and Ice Co. dated as of June 30, 1997.
</TABLE>
<PAGE> 25
<TABLE>
<C> <S>
10.42 Stock Purchase Agreement among Packaged Ice, Inc., Buyer, and W. Brad
Troutman and James V. White, Jr., Stockholders, holders of all of the
outstanding stock of First Ice Company and Codurus Leasing Company,
dated as of September 4, 1997.
10.43 Asset Purchase Agreement between Southwestern Ice, Inc. and CMC Ice,
Inc., Carlos Shannon, and Linda Shannon dated as of September 4, 1997.
10.44 Asset Purchase Agreement between Southwestern Ice, Inc. and CJC Ice,
Inc. dated as of September 4, 1997.
10.45 Stock Purchase Agreement among Packaged Ice, Inc., Buyer, and Warren
F. Kruger and Julie S. Kruger, stockholders, holders of all of the
outstanding stock of Century Ice of Tulsa, Inc. and Ice Cold
Enterprises, Inc., dated as of September 12, 1997.
11.1 Computation of Earnings Per Common Share and Common Equivalents Share
27.1 Financial data schedule.
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-4
(File No. 333-29357) filed with the SEC on June 16, 1997.
(2) Filed as an Exhibit to the Amendment No. 1 to the Company's Registration
Statement No. 333-29357 on Form S-4 with the SEC on July 29, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 4.3
================================================================================
PACKAGED ICE, INC.,
as Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
--------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of October 16, 1997
to
INDENTURE
Dated as of April 17, 1997
--------------------
12% Series A and Series B Senior Notes due 2004
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"),
dated as of October 16, 1997, is by and among Packaged Ice, Inc., a Texas
corporation (the "COMPANY"), the Subsidiary Guarantors listed on the signature
pages hereof, and U.S. Trust Company of Texas, N.A., as trustee (the
"TRUSTEE"). All terms not defined herein shall have the meanings assigned to
them in the Indenture defined below, as such Indenture is amended by this
Supplemental Indenture.
RECITALS
A. The Company, the Subsidiary Guarantors named therein and the
Trustee entered into an indenture, dated as of April 17, 1997 (the
"INDENTURE"), relating to $50,000,000 of the Company's 12% Series A and Series
B Senior Notes due 2004 (the "NOTES").
B. The Company, the Subsidiary Guarantors and the Trustee desire
to enter into a new indenture (the "SERIES C/D INDENTURE"), relating to
$25,000,000 of 12% Series C and Series D Senior Notes due 2004 to be issued by
the Company (the "SERIES C/D NOTES").
C. Pursuant to Section 9.02 of the Indenture, the Company desires
to amend the Indenture to permit the execution and delivery of the Series C/D
Indenture and the issuance of the Series C/D Notes.
D. Pursuant to Section 9.01(1) of the Indenture, the Company
desires to amend the Indenture to correct a defect therein caused by clerical
error.
E. All conditions precedent provided for in the Indenture
relating to this Supplemental Indenture have been complied with.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, the Company,
the Subsidiary Guarantors and the Trustee mutually covenant and agree for the
equal and proportionate benefit of all Holders of the Notes as follows:
ARTICLE ONE
Amendment of Indenture
Section 1.1 Addition of New Definitions to Section 1.01 of the
Indenture. Section 1.01 of the Indenture is hereby amended by inserting in
proper alphabetical order the following new definitions:
"Series C/D Indenture" means that certain Indenture, dated as of
October __, 1997, by and among the Company, the Subsidiary Guarantors
named therein and the Trustee, providing for the issuance of Series
C/D Notes in the aggregate principal amount of $25,000,000, as such
may be amended and supplemented from time to time.
"Series C/D Notes" means the Company's 12% Series C Senior Notes due
2004 and the Company's 12% Series D Senior Notes due 2004, each issued
pursuant to the Series C/D Indenture, as each may be amended and
supplemented from time to time.
Section 1.2 Amendments to Definition of "Permitted Indebtedness"
in Section 1.01 of the Indenture.
-1-
<PAGE> 3
(a) Clause (i) of the definition of the term "Permitted
Indebtedness" in Section 1.01 of the Indenture is hereby amended by deleting
the existing clause (i) and substituting in lieu thereof the following:
(i) Indebtedness under the Securities and the Series C/D
Notes;
(b) Clause (v) of the definition of the term "Permitted
Indebtedness" in Section 1.01 of the Indenture is hereby amended by deleting
the existing clause (v) and substituting in lieu thereof the following:
(v) The Subsidiary Guarantees of the Securities and the
subsidiary guarantees of the Series C/D Notes as provided for in the
Series C/D Indenture;
Section 1.3 Amendment to Section 4.14 of the Indenture. Clause
(2) of Section 4.14 of the Indenture is hereby amended by deleting the existing
clause (2) and substituting in lieu thereof the following:
(2) this Indenture and the Series C/D Indenture;
Section 1.4 Amendment to Section 7.06 of the Indenture. The
second paragraph of Section 7.06 of the Indenture is hereby amended by deleting
the reference therein to the date "May 15" and substituting in lieu thereof the
date "April 15."
ARTICLE TWO
Miscellaneous Provisions
Section 2.1 Counterparts. This Supplemental Indenture may be signed in
counterparts and by the different parties hereto in separate counterparts, each
of which shall constitute an original and all of which together shall
constitute one and the same instrument.
Section 2.2 Severability. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 2.3 Headings. The headings of the Articles and Sections of
this Supplemental Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Supplemental Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
Section 2.4 Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Supplemental Indenture by or on behalf of the
Company and the Subsidiary Guarantors shall bind their respective successors
and assigns, whether so expressed or not.
Section 2.5 Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
-2-
<PAGE> 4
Section 2.6 Effect of Supplemental Indenture. Except as amended by
this Supplemental Indenture, the terms and provisions of the Indenture shall
remain in full force and effect.
Section 2.7 Trustee. The Trustee accepts the modifications of trusts
referenced in the Indenture and effected by this Supplemental Indenture.
Without limiting the generality of the foregoing, the Trustee assumes no
responsibility for the correctness of the recitals herein contained, which
shall be taken as the statements of the Company and the Subsidiary Guarantors,
and the Trustee shall not be responsible or accountable in any way whatsoever
for or with respect to the validity or execution or sufficiency of this
Supplemental Indenture, and the Trustee makes no representation with respect
thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Supplemental
Indenture as of the date first above written.
PACKAGED ICE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
U.S. TRUST COMPANY OF
TEXAS, N.A., as Trustee
By:
------------------------------------
Bill Barber, Vice President
SUBSIDIARY GUARANTORS:
SOUTHWESTERN ICE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MISSION PARTY ICE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PACKAGED ICE LEASING, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-3-
<PAGE> 5
SOUTHCO ICE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SOUTHWEST TEXAS PACKAGED ICE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-4-
<PAGE> 1
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
October 23, 1997, among Central Arkansas Cold Storage-Texas, Inc. and Golden
Eagle Ice-Texas, Inc. (the "New Subsidiary Guarantors"), subsidiaries of
Packaged Ice, Inc. (or its successor), a Texas corporation (the "Company"),
Packaged Ice Leasing, Inc., Southco Ice, Inc., Mission Party Ice, Inc.,
Southwest Texas Packaged Ice, Inc. and Southwestern Ice, Inc., the Subsidiary
Guarantors (the "Existing Subsidiary Guarantors") and the Company under the
Indenture referred to below, and United States Trust Company of Texas, N.A., as
trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of April 17, 1997, providing for the issuance of an
aggregate principal amount of $50,000,000 of 12% Series A Senior Notes and
Series B Senior Notes due April 15, 2004 (the "Securities"); and
WHEREAS, Section 4.21 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantors to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantors shall unconditionally guarantee all of the
Company's obligations under the Securities pursuant to a Subsidiary Guaranty on
the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 10.07 of the Indenture, the Trustee, the
Company and Existing Subsidiary Guarantors are authorized to execute and
deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
New Subsidiary Guarantors, the Company, the Existing Subsidiary Guarantors and
the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Securities as follows:
1.Definitions.
(a) Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
<PAGE> 2
2. Agreement to Guarantee. The New Subsidiary Guarantors hereby
agree, jointly and severally with all other Subsidiary Guarantors, to guarantee
the Company's obligations under the Securities on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all
other applicable provisions of the Indenture. From and after the date hereof,
the New Subsidiary Guarantors shall be Subsidiary Guarantors for all purposes
under the Indenture and the Securities.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction thereof.
[Signature page follows]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
THE COMPANY
PACKAGED ICE, INC.
By:
---------------------------------
A. J. Lewis III, President
NEW SUBSIDIARY GUARANTORS:
CENTRAL ARKANSAS COLD GOLDEN EAGLE ICE-TEXAS, INC.
STORAGE-TEXAS, INC.
By: By:
-------------------------------- -----------------------------
A. J. Lewis III, President A. J. Lewis III, President
EXISTING SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC. SOUTHCO ICE, INC.
By: By:
-------------------------------- -----------------------------
A. J. Lewis III, President A. J. Lewis III, President
MISSION PARTY ICE, INC. SOUTHWEST TEXAS
PACKAGED ICE, INC.
By: By:
-------------------------------- -----------------------------
A. J. Lewis III, President A. J. Lewis III, President
SOUTHWEST TEXAS SOUTHWESTERN ICE, INC.
PACKAGED ICE, INC.
By: By:
-------------------------------- -----------------------------
A. J. Lewis III, President A. J. Lewis III, President
TRUSTEE: UNITED STATES TRUST COMPANY
OF TEXAS, N.A., as Trustee:
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Signature Page to Trust Indenture
S-1
<PAGE> 1
EXHIBIT 10.7
================================================================================
WARRANT AGREEMENT
Dated as of October 16, 1997
Between
PACKAGED ICE, INC.
and
U.S. TRUST COMPANY OF TEXAS, N.A.
as Warrant Agent
-----------------------
Warrants to Purchase Shares of Common Stock
Par Value $.01 Per Share
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Form of Warrant Certificates . . . . . . . . . . . . . . . . . 1
SECTION 1.03. Execution of Warrant Certificates . . . . . . . . . . . . . . . 2
SECTION 1.04. Authentication and Delivery . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Temporary Warrant Certificates . . . . . . . . . . . . . . . . 3
SECTION 1.06. Separation of Warrants and Notes . . . . . . . . . . . . . . . 3
SECTION 1.07. Registration . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.08. Registration of Transfers and Exchanges . . . . . . . . . . . . 4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated
Warrant Certificates . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.10. Offices for Exercise, etc. . . . . . . . . . . . . . . . . . . 11
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.02. Exercise, Exercise Price, Settlement and
Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.03. Cancellation of Warrant Certificates . . . . . . . . . . . . . 13
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of
Shares Issuable . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.02. Fractional Interest . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.03. When Adjustment Not Required . . . . . . . . . . . . . . . . . 18
SECTION 5.04. Challenge to Good Faith Determination . . . . . . . . . . . . . 18
SECTION 5.05. Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.06. Notices to Warrant Holders . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.02. Conditions of Warrant Agent's Obligations . . . . . . . . . . . 20
SECTION 6.03. Resignation and Appointment of Successor . . . . . . . . . . . 23
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.02. Notices and Demands to the Company and Warrant
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.03. Addresses for Notices to Parties and for
Transfer of Documents . . . . . . . . . . . . . . . . . . . 25
SECTION 7.04. Notices to Holders . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.05. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7.06. Obtaining of Governmental Approvals . . . . . . . . . . . . . . 26
SECTION 7.07. Persons Having Rights Under Agreement . . . . . . . . . . . . . 26
SECTION 7.08. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.10. Inspection of Agreement . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate To Be Delivered upon Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
</TABLE>
-ii-
<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
Agreement . . . . . . . . . . . . . . . . . . . . . . Recitals
Business Day . . . . . . . . . . . . . . . . . . . . . 2.01
Common Stock . . . . . . . . . . . . . . . . . . . . . 1.01
Company . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Convertible Securities . . . . . . . . . . . . . . . . 5.01(c)
Definitive Warrants . . . . . . . . . . . . . . . . . . 1.02
Distribution . . . . . . . . . . . . . . . . . . . . . 5.02(c)
Effective Date . . . . . . . . . . . . . . . . . . . . Recitals
Election to Exercise . . . . . . . . . . . . . . . . . 2.02(b)
Exercisability Date . . . . . . . . . . . . . . . . . . 2.02(a)
Exercise Date . . . . . . . . . . . . . . . . . . . . 2.02(d)
Expiration Date . . . . . . . . . . . . . . . . . . . . 2.01
Global Warrants . . . . . . . . . . . . . . . . . . . . 1.02
Indenture . . . . . . . . . . . . . . . . . . . . . . . Recitals
Initial Purchasers . . . . . . . . . . . . . . . . . . Recitals
Majority Holders . . . . . . . . . . . . . . . . . . . 5.04
Notes . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Prospectus . . . . . . . . . . . . . . . . . . . . . . 4.02
Purchase Shares . . . . . . . . . . . . . . . . . . . . 5.01(e)
Registrar . . . . . . . . . . . . . . . . . . . . . . . 1.07
Related Parties . . . . . . . . . . . . . . . . . . . . 6.02(e)
Resale Restriction Termination Date . . . . . . . . . . 1.08
Securities Act . . . . . . . . . . . . . . . . . . . . 1.06
Shares . . . . . . . . . . . . . . . . . . . . . . . . 1.01
Time of Determination . . . . . . . . . . . . . . . . . 5.01(g)
Trustee . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Units . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Warrant Agent . . . . . . . . . . . . . . . . . . . . . 6.01
Warrant Agent Office . . . . . . . . . . . . . . . . . 1.10
Warrant Certificates . . . . . . . . . . . . . . . . . Recitals
Warrant Exercise Office . . . . . . . . . . . . . . . . 2.02(b)
Warrant Register . . . . . . . . . . . . . . . . . . . 1.07
Warrants . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
-iii-
<PAGE> 5
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of October 16, 1997 (the
"Effective Date") by Packaged Ice, Inc., a Texas corporation (together with any
successor thereto, the "Company"), and U.S. Trust Company of Texas, N.A., a
national banking association, as warrant agent (with any successor Warrant
Agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement dated
October 16, 1997 with Jefferies & Company, Inc. (the "Initial Purchaser") in
which the Company has agreed, among other things, to sell to the Initial
Purchaser (A) 25,000 units (the "Units") consisting in the aggregate of (i)
$25,000,000 aggregate principal amount of 12% Series C Senior Notes due April
15, 2004 (the "Notes") of the Company to be issued under an indenture dated as
of October 16, 1997 (the "Indenture"), among the Company, the Subsidiary
Guarantors named therein and U.S. Trust Company of Texas, N.A., as trustee (the
"Trustee"), and (ii) 25,000 Warrants to purchase an aggregate of 255,943 of
shares of common stock, $.01 par value per share (the "Common Stock"), of the
Company (the "Warrants"), and the certificates evidencing the Warrants being
hereinafter referred to as "Warrant Certificates"), in each case subject to
adjustment in accordance with the terms hereof; and
WHEREAS, the Warrants and the Notes comprising part of the Units shall
be separately transferable immediately; and
WHEREAS, the Company desires the Warrant Agent as warrant agent to
assist the Company in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, and in this Agreement wishes to set
forth, among other things, the terms and conditions on which the Warrants may
be issued, exchanged, canceled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant Certificate shall
evidence the number of Warrants specified therein, each Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Warrant) 10.2377 fully paid and non-assessable shares of
the Company's Common Stock (the shares of Common Stock purchasable upon
exercise of a Warrant being hereinafter referred to as the "Shares" and, where
appropriate, such term shall also mean the other securities or property
purchasable and deliverable upon exercise of a Warrant as provided in Article
V) at the price specified herein and therein, in each case subject to
adjustment as provided herein and therein.
SECTION 1.02. Form of Warrant Certificates. Warrant Certificates
representing Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Warrants (the "Global
Warrants"), substantially in the form of Exhibit A hereto (including footnote 1
thereto). Warrants offered and sold in reliance on any other exemption from
<PAGE> 6
registration under the Securities Act other than as described in the preceding
sentence shall be issued in the form of definitive Warrant Certificates (the
"Definitive Warrants"). The Warrant Certificates evidencing the Global Warrants
or the Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with instructions given by the holder thereof.
The Depository Trust Company shall act as the Depositary with respect to the
Global Warrants until a successor shall be appointed by the Company. Upon
written request, a Warrant holder may receive from the Warrant Agent Definitive
Warrants as set forth in Section 1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the chairman of its Board of Directors,
its president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated,
whether the Warrants are to be Global Warrants or Definitive Warrants, the date
of such Warrants and such other information as the Warrant Agent may reasonably
request, without any further action by the Company, the Warrant Agent is
authorized, upon receipt from the Company at any time and
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<PAGE> 7
from time to time of the Warrant Certificates, duly executed as provided in
Section 1.03 hereof, to authenticate the Warrant Certificates and deliver them.
Such authentication shall be by a duly authorized signatory of the Warrant
Agent (although it shall not be necessary for the same signatory to sign all
Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending the preparation
of definitive Warrant Certificates, the Company may execute, and, upon receipt
of an authentication order in accordance with Section 1.04 hereof, the Warrant
Agent shall authenticate and deliver, temporary Warrant Certificates, which are
printed, lithographed, typewritten or otherwise produced, substantially of the
tenor of the definitive Warrant Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Warrant Certificates may determine,
as evidenced by their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be
without charge to the holder. Upon surrender for cancellation of any one or
more temporary Warrant Certificates, the Company shall execute, and, upon
receipt of an authentication order in accordance with Section 1.04 hereof, the
Warrant Agent shall authenticate and deliver in exchange therefor, one or more
definitive Warrant Certificates representing in the aggregate a like number of
Warrants. Until so exchanged, the holder of a temporary Warrant Certificate
shall in all respects be entitled to the same benefits under this Agreement as
a holder of a definitive Warrant Certificate.
SECTION 1.06. Separation of Warrants and Notes. The Notes and Warrants
will be separately transferable immediately.
SECTION 1.07. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration
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<PAGE> 8
of transfer and exchange of, Warrants as provided in this Article. Each person
designated by the Company from time to time as a person authorized to register
the transfer and exchange of the Warrants is hereinafter called, individually
and collectively, the "Registrar". The Company hereby initially appoints the
Warrant Agent as Registrar. Upon written notice to the Warrant Agent and any
acting Registrar, the Company may appoint a successor Registrar for such
purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register"). The
Warrant Agent will act as such repository unless and until some other person
is, by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information
as to all registrations of transfer and exchanges effected by such Registrar,
as may be necessary to enable such repository to maintain the Warrant Register
on as current a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants;
or
(ii) to exchange such Definitive Warrants for an equal
number of Definitive Warrants,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.08 hereof for such transactions are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
holder thereof or by his attorney, duly authorized in
writing; and
(y) in the case of Warrants the offer and sale of which
have not been registered under the Securities Act and
are presented for transfer or exchange prior to (x)
the date which is three years after the later of the
date of original issue and the last date on which the
Company or any affiliate of the Company was the owner
of such Warrant, or any predecessor thereto and (y)
such later date, if any, as may be required by any
subsequent change in applicable law (the "Resale
Restriction Termination Date"), such Warrants shall
be accompanied, in the sole discretion of the
Company, by the following additional information and
documents, as applicable:
(A) if such Warrant is being delivered to the
Warrant Agent by a holder for registration in
the name of such holder, without transfer, a
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<PAGE> 9
certification from such holder to that effect
(in substantially the form of Exhibit B
hereto); or
(B) if such Warrant is being transferred to a
qualified institutional buyer (as defined in
Rule 144A under the Securities Act) in
accordance with Rule 144A under the
Securities Act or pursuant to an exemption
from registration in accordance with Rule 144
or Regulation S under the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B hereto);
or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within
the meaning of subparagraphs (a)(l), (a)(2),
(a)(3) or (a)(7) of Rule 501 under the
Securities Act, delivery of a Certificate of
Transfer in the form of Exhibit C hereto and
an opinion of counsel and/or other
information satisfactory to the Company to
the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Warrant is being transferred in
reliance on another exemption from the
registration requirements of the Securities
Act, a certification to that effect (in
substantially the form of Exhibit B hereto)
and an opinion of counsel reasonably
acceptable to the Company to the effect that
such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a
Beneficial Interest in a Global Warrant. A Definitive Warrant may not be
transferred for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:
(A) certification, substantially in the form of Exhibit B hereto,
that such Definitive Warrant is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the Global
Warrant to reflect an increase in the aggregate amount of the
Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause,
or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the number of Warrants represented by the Global
Warrant to be increased accordingly. If no Global Warrant is then
outstanding, the Company shall issue and the Warrant Agent shall
authenticate a new Global Warrant in the appropriate amount.
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<PAGE> 10
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08 and the procedures
of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any person having a beneficial interest in a Global
Warrant may upon request transfer such beneficial
interest for a Definitive Warrant. Upon receipt by
the Warrant Agent of written instructions or such
other form of instructions as is customary for the
Depositary from the Depositary or its nominee on
behalf of any person having a beneficial interest in
a Global Warrant and upon receipt by the Warrant
Agent of a written order or such other form of
instructions as is customary for the Depositary or
the person designated by the Depositary as having
such a beneficial interest containing registration
instructions and, in the case of any such transfer or
exchange prior to the Resale Restriction Termination
Date, the following additional information and
documents:
(A) if such beneficial interest is being
transferred to the person designated by the
Depositary as being the beneficial owner, a
certification from such person to that effect
(in substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance
with Rule 144 or Regulation S under the
Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit B hereto);
or
(C) if such beneficial interest is being
transferred to an institutional "accredited
investor" within the meaning of subparagraphs
(a)(l), (a)(2), (a)(3) or (a)(7) of Rule 501
under the Securities Act, delivery of a
Certificate of Transfer in the form of
Exhibit C hereto and an opinion of counsel
and/or other information satisfactory to the
Company to the effect that such transfer is
in compliance with the Securities Act; or
(D) if such beneficial interest is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act, a certification to that
effect (in substantially the form of Exhibit
B hereto) and an opinion of counsel
reasonably acceptable to the Company to the
effect that such transfer is in compliance
with the Securities Act,
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<PAGE> 11
then the Warrant Agent will cause, in accordance with
the standing instructions and procedures existing
between the Depositary and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced
and, following such reduction, the Company will
execute and, upon receipt of an authentication order
in the form of an Officers' Certificate (as defined),
the Warrant Agent will authenticate and deliver to
the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a
beneficial interest in a Global Warrant pursuant to
this Section 1.08(d) shall be registered in such
names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct
the Warrant Agent in writing. The Warrant Agent shall
deliver such Definitive Warrants to the persons in
whose names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Warrants notifies the Company
that the Depositary is unwilling or unable to
continue as Depositary for the Global Warrant and a
successor Depositary for the Global Warrant is not
appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the
Warrant Agent in writing that it elects to cause the
issuance of Definitive Warrants under this Warrant
Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must
be the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the following
paragraph (ii), each Warrant Certificate evidencing
the Global Warrants and the Definitive Warrants (and
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<PAGE> 12
all Warrants issued in exchange therefor or
substitution thereof) shall bear a legend
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501 (A)(l), (2), (3) OR (7)
PROMULGATED UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
PACKAGED ICE, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE WARRANT AGENT AND THE
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<PAGE> 13
COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS
OF OCTOBER 16, 1997 AMONG JEFFERIES & COMPANY, INC. AND THE
COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
To the extent a Warrant Certificate evidences a
Global Warrant, such Warrant Certificate shall also
bear the legend with respect thereto substantially in
the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant pursuant to
Rule 144 under the Securities Act in accordance with
Section 1.08 hereof or an effective registration
statement under the Securities Act:
(A) in the case of any Warrant that is a
Definitive Warrant, the Warrant Agent shall
permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does
not bear the first paragraph of the legend
set forth above and rescind any related
restriction on the transfer of such Warrant;
and
(B) any such Warrant represented by a Global
Warrant shall not be subject to the
provisions set forth in (i) above (such sales
or transfers being subject only to the
provisions of Section 1.08(c) hereof)
provided, however, that with respect to any
request for an exchange of a Warrant that is
represented by a Global Warrant for a
Definitive Warrant that does not bear the
first paragraph of the legend set forth
above, which request is made in reliance upon
Rule 144 under the Securities Act, the holder
thereof shall certify in writing to the
Warrant Agent that such request is being made
pursuant to Rule 144 under the Securities Act
(such certification to be substantially in
the form of Exhibit B hereto).
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<PAGE> 14
(h) Cancellation and/or Adjustment of a Global Warrant. At such
time as all beneficial interests in a Global Warrant have either been exchanged
for Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Definitive Warrants.
(i) To permit registrations of transfers and exchanges,
the Company shall execute, at the Warrant Agent's
request, and the Warrant Agent shall, upon receipt of
an authentication order in accordance with Section
1.04 hereof, authenticate Definitive Warrants and
Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued
upon any registration, transfer or exchange of
Definitive Warrants or Global Warrants shall be the
valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the
Definitive Warrants or Global Warrants surrendered
upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer
of any Warrant, the Warrant Agent and the Company may
deem and treat the person in whose name any Warrant
is registered as the absolute owner of such Warrant,
and neither the Warrant Agent nor the Company shall
be affected by notice to the contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of the Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for the Shares in a name
other than that of the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably satisfactory to them
and, in the case of mutilation or defacement, upon surrender thereof to the
Warrant Agent for cancellation, then, in the absence of notice to the Company
or the Warrant Agent that such Warrant Certificate has been acquired by a bona
fide purchaser or holder in due course, the Company shall execute, and, upon
receipt of an authentication order in accordance with Section 1.04 hereof, an
authorized signatory of the Warrant Agent shall manually authenticate and
deliver, in exchange for
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<PAGE> 15
or in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number of Warrants,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled
to the benefits of (but shall be subject to all the limitations of rights set
forth in) this Agreement equally and proportionately with any and all other
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 1.09 are exclusive with respect to the replacement of lost,
stolen, destroyed, defaced or mutilated Warrant Certificates and shall preclude
(to the extent lawful) any and all other rights or remedies notwithstanding any
law or statute existing or hereafter enacted to the contrary with respect to
the replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer
and for exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent written notice of the location of any such
office or agency and of any change of location thereof. The Company hereby
designates the office of United States Trust Company, an affiliate of the
Warrant Agent, in the Borough of Manhattan, the City of New York (the "Warrant
Agent Office"), as the initial agency maintained for each such purpose.
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ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., Dallas,
Texas time, on April 15, 2004 (the "Expiration Date"). Each Warrant may be
exercised on any Business Day (as defined below) on or after the Exercisability
Date (as defined below) and on or prior to the Expiration Date.
Any Warrant not exercised on or prior to the Expiration Date relating
to such Warrant shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease.
"Business Day" shall mean any day on which (i) banks in Dallas, Texas,
(ii) the principal national securities exchange or market on which the Common
Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, (i) a holder of Warrants shall
have the right to purchase from the Company on or after the Effective Date (the
"Exercisability Date") and on or prior to the Expiration Date 10.2377 fully
paid, registered and non-assessable Shares, subject to adjustment in accordance
with Article V hereof, at the purchase price of $.102377 for each Warrant
exercised (the "Exercise Price").
(b) Warrants may be exercised on or after the Exercisability Date
by (i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.10 (each a "Warrant Exercise Office") the Warrant
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "Election
to Exercise") duly completed and signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and (ii) paying in full the Exercise Price for each such
Warrant exercised and any other amounts required to be paid pursuant to Section
1.08(j) hereof. Each Warrant may be exercised only in whole.
(c) Simultaneously with the exercise of each Warrant, payment in
full of the Exercise Price shall be made in cash or by certified or official
bank check to be delivered to the office or agency where the Warrant
Certificate is being surrendered. No payment or adjustment shall be made on
account of any dividends on the Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "Exercise Date" for a Warrant shall be the date when all of the
items referred to in the first sentence
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of paragraphs (b) and (c) of this Section 2.02 are received by the Warrant
Agent at or prior to 2:00 p.m., Dallas, Texas time, on a Business Day and the
exercise of the Warrants will be effective as of such Exercise Date. If any
items referred to in the first sentence of paragraphs (b) and (c) are received
after 2:00 p.m., Dallas, Texas time, on a Business Day, the exercise of the
Warrants to which such item relates will be effective on the next succeeding
Business Day. Notwithstanding the foregoing, in the case of an exercise of
Warrants on the Expiration Date (as defined in Section 2.01), if all of the
items referred to in the first sentence of paragraphs (b) and (c) are received
by the Warrant Agent at or prior to 5:00 p.m., Dallas, Texas time, on such
Expiration Date, the exercise of the Warrants to which such items relate will
be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company immediately by telephone of the amount so deposited to the Company's
account and promptly confirm such telephonic advice in writing and (iii) as
soon as practicable, advise the Company in writing of the number of Warrants
(giving effect to Section 5.01(i) below) exercised in accordance with the terms
and conditions of this Agreement and the Warrant Certificates, the instructions
of each exercising holder of the Warrant Certificates with respect to delivery
of the Shares to which such holder is entitled upon such exercise, and such
other information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable after
the exercise of any Warrant or Warrants in accordance with the terms hereof,
the Company shall issue or cause to be issued to or upon the written order of
the registered holder of the Warrant Certificate evidencing such exercised
Warrant or Warrants, a certificate or certificates evidencing the Shares to
which such holder is entitled, in fully registered form, registered in such
name or names as may be directed by such holder pursuant to the Election to
Exercise, as set forth on the reverse of the Warrant Certificate. The Warrant
Agent shall have no obligation to ascertain the number of Shares to be issued
with respect to the exercised Warrant or Warrants. Such certificate or
certificates evidencing the Shares shall be deemed to have been issued and any
persons who are designated to be named therein shall be deemed to have become
the holder of record of such Shares as of the close of business on the Exercise
Date. After such exercise of any Warrant or Warrants, the Company shall also
issue or cause to be issued to or upon the written order of the registered
holder of such Warrant Certificate, a new Warrant Certificate, countersigned by
the Warrant Agent pursuant to the Company's written instruction, evidencing the
number of Warrants, if any, remaining unexercised unless such Warrants shall
have expired.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and
if so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for exchange,
substitution, transfer or exercise. The Warrant Agent shall destroy canceled
Warrant Certificates held by it and deliver a certificate of destruction to the
Company. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received
by the Warrant Agent for the purchase of Warrant Shares through the exercise of
such Warrants.
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ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Warrant Certificate, without
the consent of the Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle
the holders thereof to any of the rights of a holder of Shares, including,
without limitation, the right to vote or to receive any dividends or other
payments or to consent or to receive notice as stockholders in respect of the
meetings of stockholders or for the election of directors of the Company or to
share in the assets of the Company in the event of the liquidation, dissolution
or winding up of the Company's affairs or any other matter, or any rights
whatsoever as stockholders of the Company.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Warrants and Notes as
described in Section 4.01; provided, however, that the Company shall not be
required to pay any tax or other governmental charge which may be payable in
respect of any transfer or exchange of any Warrant Certificates or any
certificates for Shares in a name other than the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant. In any such case, no
transfer or exchange shall be made unless or until the person or persons
requesting issuance thereof shall have paid to the Company the amount of such
tax or other governmental charge or shall have established to the satisfaction
of the Company that such tax or other governmental charge has been paid or an
exemption is available therefrom.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares
Issuable. The number and kind of Shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to
time as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (B) subdivide its outstanding shares of Common Stock or
(C) combine its outstanding shares of Common Stock into a smaller number of
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<PAGE> 19
shares, the number of Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the holder of any Warrant
thereafter exercised shall be entitled to receive the number of Shares which
such holder would have owned immediately following such action had such Warrant
been exercised immediately prior thereto. An adjustment made pursuant to this
paragraph shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification. If, as a result
of an adjustment made pursuant to this paragraph, the holder of any Warrant
thereafter exercised shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors of the Company
(whose determination shall be conclusive) shall determine the allocation of the
adjusted Exercise Price between or among shares of such classes of capital
stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock (other than as
set forth in Section 5.01(a) above and other than a change in par value, or
from par value to no par value, or from no par value to par value, or in case
of any consolidation or merger of the Company with or into another corporation
(other than a merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock of the Company (other than a
change in par value, or from par value to no par value, or from par value to
par value or as a result of a subdivision or combination)) or in case of any
sale or conveyance to another corporation of all or substantially all of the
assets of the Company, then, as a condition of such reclassification, change,
consolidation, merger, sale or conveyance, the Company or such a successor or
purchasing corporation, as the case may be, shall forthwith make lawful and
adequate provision whereby the holder of such Warrant then outstanding shall
have the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance and enter into a supplemental warrant agreement so
providing. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Article V. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental warrant agreement is an affiliate of the
formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this paragraph (b)
shall similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In case of any such reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant Agreement
to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Article V. The foregoing
provisions of this Section 5.01(b) shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
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<PAGE> 20
(c) Issuance of Common Stock, Options or Convertible Securities.
For the purposes of this Warrant Agreement, "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued or deemed to be issued by the
Company after the Effective Date, other than Excluded Shares (as defined
below).
In the event the Company shall, at any time or from time to time after
the Effective Date, issue, sell, distribute or otherwise grant in any manner
(including by assumption) shares of Common Stock or any rights to subscribe for
or to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (any
such rights, warrants or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") or any Convertible Securities (other than upon
exercise of any Option), whether or not such Options or the rights to convert
or exchange such Convertible Securities are immediately exercisable, then the
maximum number of shares of Common Stock (as set forth int he instrument
relating thereto without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise and/or
conversion of such Options or Convertible Securities, shall be deemed to be
Additional Shares of Common Stock.
For purposes of this Warrant Agreement, the term "Issuance Date" shall
mean (i) with respect to Additional Shares of Common Stock deemed to have been
issued in connection with the issuance of an Option or Convertible Security,
the date such Option or Convertible Security is issued and (ii) in all other
cases, the actual date Additional Shares of Common Stock are issued.
For the purposes of this Warrant Agreement, "Excluded Shares" shall
mean: (i) shares for which the consideration per share as determined pursuant
to paragraph (d) below would be equal to or more than the Current Market Value
determined on the day prior to the Issuance Date; (ii) shares of Common Stock
issuable upon the exercise of Options or conversion of Convertible Securities
existing as of the Effective Date; and (iii) shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes) issued pursuant to any
stock options granted or obtained after the Effective Date pursuant to the
Company's Stock Option Plan adopted July 26, 1994, as may be amended from time
to time by the Company's Board of Directors. The issuance of Excluded Shares
shall not be an issuance of Additional Shares of Common Stock, and shall not
give rise to a right to purchase the securities pursuant to paragraph (d)
below.
In any such case in which the Additional Shares of Common Stock are
deemed to be issued, no right to purchase securities under Section 5.01(d)
below will accrue upon the subsequent issue of shares of Common Stock upon the
exercise and/or conversion or exchange of such Option or Convertible Security
unless such Option or Convertible Security shall have been amended or modified
prior to exercise or conversion or exchange so as to increase the number of
Additional Shares of Common Stock deemed to have been issued thereunder or
decrease the exercise and/or conversion or exchange price payable thereunder to
an amount less than Current Market Value as of the Issuance Date thereof.
(d) If the price per share at which Common Stock is issued or
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities
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<PAGE> 21
(determined by dividing (i) the aggregate amount, if any, received or
receivable by the Company as consideration for the issuance, sale, distribution
or granting of such Common Stock or Options or any such Convertible Security,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the issuance of Common Stock or the exercise of all such
Options or upon conversion or exchange of all such Convertible Securities,
plus, in the case of Options to acquire Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
conversion or exchange of all such Convertible Securities, by (ii) the total
maximum number of shares of Common Stock to be issued or issuable upon the
exercise of all such Options or upon the conversion or exchange of all such
Convertible Securities or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all Options) shall be less than the
Current Market Value per share of Common Stock (determined pursuant to Section
5.01(e)) on the record date for the issuance, sale, distribution or granting of
such Options (any such event being herein called a "Distribution") then, the
Company shall offer to sell to each holder of Warrants, at the same price and
on the same terms offered to all other prospective buyers (provided that the
holders of Warrants shall not be required to buy any other securities in order
to buy such Common Stock or Convertible Securities), a portion of such Common
Stock or Convertible Securities that is equal to such holder's portion of the
Common Stock then outstanding if immediately prior thereto all the Warrants had
been exercised. Each such holder may elect to buy all or any portion of the
Common Stock or Convertible Securities offered or may decline to purchase any
such securities.
(e) Current Market Value. As used herein, the term "Current Market
Value" per share of Common Stock or any other security at any date means, on
any date of determination (a) the average of the daily closing sale prices for
each of 15 business days immediately preceding such date (or such shorter
number of days during which such security has been listed or traded), if the
security has been listed on the New York Stock Exchange, the American Stock
Exchange or other national securities exchanges or the NASDAQ National Market
for at least 10 business days prior to such date, (b) if such security is not
so listed or traded, the average of the daily closing bid prices for each of
the 15 business days immediately preceding such date (or such shorter number of
days during which such security had been quoted), if the security has been
quoted on a national over-the-counter market for at least 10 business days, and
(c) otherwise, the value of the security most recently determined as of a date
within the six months preceding such day by the Company's Board of Directors.
(f) Consideration Received. If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board of
Directors of the Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have been
issued without consideration; provided, however, that if such Options have an
exercise price equal to or greater than the Current Market Value of the Common
Stock on the date of issuance of such Options, then such Options shall be
deemed to have been issued for consideration equal to such exercise price.
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<PAGE> 22
(g) Changes in Options and Convertible Securities. If the exercise
price provided for in any Options referred to in Section 5.01(d) above, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 5.01(d) above, or the rate at
which any Convertible Securities referred to in Section 5.01(d) above are
convertible into or exchangeable for Common Stock shall change at any time to a
price which is less than the Current Market Value thereof as of the Issuance
Date, then the Company shall make the offer to holders of the Warrants as
required by Section 5.01(d) above.
(h) Other Action Affecting Common Stock. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Article V, then the number of
Shares for which this Warrant is exercisable shall be adjusted in such manner
as may be equitable in the circumstances. If the Company shall at any time and
from time to time issue or sell (i) any shares of any class of common stock
other than Common Stock, (ii) any evidences of its indebtedness, shares of
stock or other securities which are convertible into or exchangeable for such
shares of common stock, with or without the payment of additional consideration
in cash or property or (iii) any warrants or other rights to subscribe for or
purchase any such shares of common stock or any such evidences, shares of stock
or other securities, then in each such case such issuance shall be deemed to be
of, or in respect of, Common Stock for purposes of this Article V; provided,
however, that, without limiting the generality of the foregoing, if the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
common stock other than Common Stock, including shares of non-voting common
stock, then the number of Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the aggregate number of shares of such common stock and of Common Stock which a
record holder of the same number of Shares for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event.
(i) Statement of Warrants. Irrespective of any adjustment in the
number or kind of Shares issuable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued shall continue to express the same number and
kind of shares as are stated in the Warrants initially issuable pursuant to
this Agreement.
SECTION 5.02. Fractional Interest. The Company shall not be required
to issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by
the same holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall direct the transfer agent for the
Common Stock to pay an amount in cash calculated by the Company to equal the
then Current Market Value per share (determined pursuant to Section 5.01(e))
multiplied by such fraction computed to the nearest whole cent. Holders of
Warrants, by their acceptances of the Warrant Certificates, expressly waive any
and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
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<PAGE> 23
SECTION 5.03. When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof, legally
abandon its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of
the taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
SECTION 5.04. Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Article V, such
determination may be challenged in good faith by holders holding a majority of
the outstanding Warrants (the "Majority Holders"), and any dispute shall be
resolved by an investment banking firm of national standing selected by the
Company. The fee of such investment banking firm shall be paid by the Company,
unless such fair market value as determined by the investment banking firm is
more than 95% of the fair market value determined by the Board of Directors of
the Company, in which case the challenging holders shall be jointly and
severally liable for such fee.
SECTION 5.05. Treasury Stock. The sale or other disposition of any
issued shares of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof and a repurchase thereof and
designation of such shares as treasury stock shall be deemed to be a redemption
thereof for the purposes of this Agreement.
SECTION 5.06. Notices to Warrant Holders. In connection with any
adjustment pursuant to this Article V, the Company shall (i) promptly after
such adjustment or, if earlier, at least five (5) days prior to the date on
which notice of such adjustment is required to be given, if at all, to The
Depository Trust Company cause to be filed with the Warrant Agent a certificate
of an officer of the Company setting forth the number of shares (or portion
thereof) issuable after such adjustment, upon exercise of a Warrant, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) promptly after such adjustment cause to be given to
each of the registered holders of the Warrant Certificates at his address
appearing on the Warrant Register written notice of such adjustments by
first-class mail, postage prepaid. The Warrant Agent shall be entitled to
conclusively rely on the above-referenced officer's certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time to any holder desiring an inspection thereof
during normal business hours upon reasonable notice. The Warrant Agent shall
not at any time be under any duty or responsibility to any holder to determine
whether any facts exist that may require any adjustment of the number of Shares
issuable on exercise of the Warrants or the Exercise Price, or with respect to
the nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment or the validity or value (or the kind
or amount) of any Shares which may be issuable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other common stock or property upon the exercise of any
Warrant.
The Company shall, in addition, promptly notify the holders of the
Warrants of any determination of its Board of Directors pursuant to Section
5.01(i) that any actions affecting its Common Stock will not require an
adjustment to the number of Shares for which a Warrant is
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<PAGE> 24
exercisable, and shall specify in such notice the reasons for such
determination. In the event that the Majority holders shall challenge any of
the calculations set forth in such notice within 20 days after the Company's
delivery thereof, the Company shall retain a firm of independent certified
public accountants or law firm of national standing selected by the Company to
prepare and execute a certificate verifying that no adjustment is required. The
Company shall promptly cause a signed copy of any certificate prepared pursuant
to this Section 5.06 to be delivered to each holder at his address appearing in
the Warrant Register. The Company shall keep at its office or agency designated
pursuant to Section 1.10 copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours upon
reasonable notice by any holder or any prospective purchaser of a Warrant
designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. The Company hereby appoints U.S. Trust
Company of Texas, N.A. as warrant agent (and in all capacities in this
Agreement, the "Warrant Agent") of the Company in respect of the Warrants and
the Warrant Certificates upon the terms and subject to the conditions herein
and in the Warrant Certificates set forth; and U.S. Trust Company of Texas,
N.A. hereby accepts such appointment. The Warrant Agent shall have the powers
and authority specifically granted to and conferred upon it in the Warrant
Certificates and hereby and such further powers and authority to act on behalf
of the Company as the Company may hereafter grant to or confer upon it and it
shall accept in writing. All of the terms and provisions with respect to such
powers and authority contained in the Warrant Certificates are subject to and
governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of
which the Company agrees and to all of which the rights hereunder of the
holders from time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be
agreed upon with the Company in writing for all services rendered by it and the
Company agrees promptly to pay such compensation and to reimburse the Warrant
Agent for its reasonable out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred without gross negligence or willful misconduct on
its part in connection with the services rendered by it hereunder. The Company
also agrees to indemnify the Warrant Agent, each predecessor Warrant Agent, and
their respective directors, officers, affiliates, agents and employees for, and
to hold it and its directors, officers, affiliates, agents and employees
harmless against, any loss, liability or expense of any nature whatsoever
(including, without limitation, fees and expenses of counsel) incurred without
gross negligence or willful misconduct on the part of the Warrant Agent or
predecessor Warrant Agent, arising out of or in connection with its acting as
such Warrant Agent hereunder and its exercise or failure to exercise of its
rights and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the expiration
of the Warrant Certificates and the resignation and removal of the Warrant
Agent.
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(b) In acting under this Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent of the
Company and does not assume any obligation or relationship of agency or trust
for or with any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and any advice or
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it, in the absence of bad faith,
to be genuine and to have been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any
interest in, Warrant Certificates, shares or other obligations of the Company
with the same rights that it or they would have it if were not the Warrant
Agent hereunder and, to the extent permitted by applicable law, it or they may
engage or be interested in any financial or other transaction with the Company
and may act on, or as depositary, trustee or agent for, any committee or body
of holders of shares or other obligations of the Company as freely as if it
were not the Warrant Agent hereunder. Nothing in this Agreement shall be deemed
to prevent the Warrant Agent or such Related Parties from acting in any other
capacity for the Company.
(f) The Warrant Agent shall not be under any liability for
interest on, and shall not be required to invest, any monies at any time
received by it pursuant to any of the provisions of this Agreement or of the
Warrant Certificates.
(g) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement (or any term or provision hereof) or
the execution and delivery hereof (except the due execution and delivery hereof
by the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes
no responsibility for the correctness of the same. The Warrant Agent does not
make any representation as to the validity or sufficiency of this Agreement or
the Warrant Certificates, except for its due execution and delivery of this
Agreement; provided, however, that the Warrant Agent shall not be relieved of
its duty to authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require:
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<PAGE> 26
(1) an Officers' Certificate (as defined in the
Indenture) stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Warrant Agreement relating to
the proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the
Warrant Agent, an opinion of counsel for the Company stating that, in
the opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
or she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as
are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and
delivered by it to the Company pursuant to this Agreement. The Warrant Agent
shall have no duty or responsibility in case of any default by the Company in
the performance of its covenants or agreements contained in the Warrant
Certificates or in the case of the receipt of any written demand from a holder
of a Warrant Certificate with respect to such default, including, without
limiting the generality of the foregoing, any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise or, except
as provided in Section 7.02 hereof, to make any demand upon the Company. The
Warrant Agent shall not be obligated to perform any duty to the extent
prohibited by law.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its secretary or any assistant
secretary.
(1) The Warrant Agent shall have no responsibility in respect of
any adjustment pursuant to Article V hereof.
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<PAGE> 27
(m) The Company agrees that it will perform, execute, acknowledge
and deliver, or cause to be performed, executed, acknowledged and delivered,
all such further and other acts, instruments and assurances as may reasonably
be required by the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company
or any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any action taken
or omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the Company consents to
a shorter period), provided that (i) such application includes a statement to
the effect that it is being made pursuant to this paragraph (n) and that unless
objected to prior to such date specified in the application, the Warrant Agent
will not be liable for any such action or omission to the extent set forth in
such application and (ii) prior to taking or omitting any such action, the
Warrant Agent has not received written instructions objecting to such proposed
action or omission.
(o) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the secretary of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its
own funds in the performance of its obligations and duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the Warrant
Certificates, that there shall at all times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such
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<PAGE> 28
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy of which
shall be delivered to the resigning Warrant Agent and one copy to the successor
Warrant Agent. As provided in Section 6.03(d) hereof, such resignation shall
become effective upon the earlier of (x) the acceptance of the appointment by
the successor Warrant Agent or (y) 30 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason,
and shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor Warrant Agent by written instrument in
duplicate, specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of which shall be
delivered to the Warrant Agent being removed and one copy to the successor
Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change
in the Warrant Agent to be given to each of the registered holders of the
Warrants in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the
Company shall fail to appoint a successor Warrant Agent within a period of 30
days after receipt of such notice of resignation or removal, then the holder of
any Warrant Certificate or the Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company
or by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such
successor Warrant Agent, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Warrant Agent
hereunder, and such predecessor shall thereupon become obligated to (i)
transfer and deliver, and such successor Warrant Agent shall be entitled to
receive, all securities, records or other property on deposit with or held by
such predecessor as Warrant Agent hereunder and (ii) upon payment of the
amounts then due it pursuant to Section 6.02(a) hereof, pay over, and such
successor Warrant Agent shall be entitled to receive, all monies deposited with
or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder
may be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any
merger, conversion or consolidation to which the Warrant Agent shall be a
party, or any corporation or bank to which the Warrant Agent shall sell or
otherwise
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<PAGE> 29
transfer all or substantially all of its corporate trust business, shall be the
successor to the Warrant Agent under this Agreement (provided that such
corporation or bank shall be qualified as aforesaid) without the execution or
filing of any document or any further act on the part of any of the parties
hereto.
(f) No Warrant Agent under this Warrant Agreement shall be
personally liable for any action or omission of any successor Warrant Agent or
of the Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein or in any other manner which the Company may deem
necessary or desirable and which shall not adversely affect in any material
respect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the
terms of the Warrants with the consent of not less than a majority in number of
the then outstanding Warrants for the purpose of adding any provision to or
changing in any manner or eliminating any of the provisions of this Agreement
or modifying in any manner the rights of the holders of the outstanding
Warrants; provided, however, that no such modification that decreases the
Exercise Rate, reduces the period of time during which the Warrants are
exercisable hereunder, otherwise materially and adversely affects the exercise
rights of the holders of the Warrants, reduces the percentage required for
modification, or effects any change to this Section 7.01 may be made with
respect to an outstanding Warrant without the consent of the holder of such
Warrant.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent. If
the Warrant Agent shall receive any notice or demand addressed to the Company
by the holder of a Warrant Certificate pursuant to the provisions hereof or of
the Warrant Certificates, the Warrant Agent shall promptly forward such notice
or demand to the Company.
SECTION 7.03. Addresses for Notices to Parties and for Transmission of
Documents. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
telex or telecopy, confirmed by first class mail, postage prepaid, addressed to
any party hereto as follows:
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<PAGE> 30
To the Company:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Attention: Chief Executive Officer
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
Suite 1500
San Antonio, Texas 78205
Attention: Alan Schoenbaum
Facsimile: (210) 224-2035
Telephone: (210) 270-0800
To the Warrant Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust Department
or at any other address of which either of the foregoing shall have notified
the other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in
the Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and State laws, and the rules and regulations of
all stock exchanges on which the Warrants are listed which may be or become
requisite in connection with
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<PAGE> 31
the issuance, sale, transfer, and delivery of the Warrant Certificates, the
exercise of the Warrants or the issuance, sale, transfer and delivery of the
shares issued upon exercise of the Warrants.
SECTION 7.07. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders of the Warrant Certificates.
SECTION 7.08. Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.10. Inspection of Agreement. A copy of this Agreement shall
be available at all reasonable times at the principal corporate trust office of
the Warrant Agent, for inspection by the holder of any Warrant Certificate. The
Warrant Agent may require such holder to submit his Warrant Certificate for
inspection by it.
SECTION 7.11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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<PAGE> 32
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
PACKAGED ICE, INC.
By: /s/ A.J. LEWIS III
-------------------------------------------
Name: A. J. Lewis III
Title: President
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By: /s/ BILL BARBER
------------------------------------------
Name: Bill Barber
-----------------------------------------
Title: Vice President
----------------------------------------
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<PAGE> 33
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" ( AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (
AS DEFINED IN RULE 501 (A)(l), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO PACKAGED ICE, INC. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
- ----------------------------------
(1) This paragraph is to be included only if the Warrant is in global form.
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<PAGE> 34
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND THE
COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 16, 1997
AMONG JEFFERIES & COMPANY, INC. AND THE COMPANY, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
PACKAGED ICE, INC.
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ] Warrants (the "Warrants")
to purchase shares of Common Stock, par value $.01 per share (the "Common
Stock"), of PACKAGED ICE, INC., a Texas corporation (the "Company"). Each
Warrant entitles the holder to purchase from the Company at any time on or
after October 16, 1997 until 5:00 p.m., Dallas, Texas time, on April 15, 2004
(the "Expiration Date"), 10.2377 fully paid and non-assessable shares of Common
Stock (a "Share", or, if adjusted, the "Shares", which may also include any
other securities or property purchasable upon exercise of a Warrant, such
adjustment and inclusion each as provided in the Warrant Agreement) at the
exercise price (the "Exercise Price") of $.102377 per Warrant upon surrender of
this Warrant Certificate and payment of the Exercise Price at any office or
agency maintained for that purpose by the Company (the "Warrant Agent Office"),
subject to the conditions set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable by cash, certified check or
official bank check or by such other means as is acceptable to the Company in
the lawful currency of the United States of America which as of the time of
payment is legal tender for payment of public or private debts. The Company has
initially designated the office of United States Trust Company, an affiliate of
the Warrant Agent, at its agent's office in the Borough of Manhattan, the City
of New York, as the initial Warrant Agent Office. The number of Shares issuable
upon exercise of the Warrants ("Exercise Rate") is subject to adjustment upon
the occurrence of certain events set forth in the Warrant Agreement.
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<PAGE> 35
Any Warrants not exercised on or prior to 5:00 p.m., Dallas, Texas
time, on April 15, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place. Capitalized terms used in this Warrant
Certificate but not defined herein shall have the meanings ascribed thereto in
the Warrant Agreement.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
PACKAGED ICE, INC.
[Seal] By:
------------------------------------------
Name:
Title:
Attest:
By:
--------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
U.S. TRUST COMPANY OF TEXAS, N.A.
as Warrant Agent
By:
--------------------------------
Authorized Signatory
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<PAGE> 36
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PACKAGED ICE, INC.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after October 16, 1997, until 5:00 p.m., Dallas, Texas time, on
April 15, 2004, one share of Common Stock of the Company, subject to adjustment
as set forth in the Warrant Agreement. The Warrants are issued pursuant to a
Warrant Agreement dated as of October 16, 1997 (the "Warrant Agreement"), duly
executed and delivered by the Company to U.S. Trust Company of Texas, N.A., as
Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Warrant Certificate with the form
of Election to Exercise set forth hereon duly completed and executed and (ii)
paying in full the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., Dallas,
Texas time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 2:00 p.m., Dallas,
Texas time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
Dallas, Texas time, on such Expiration Date, the exercise of the Warrants to
which such items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable
after the exercise of any Warrant or Warrants, the Company shall issue or cause
to be issued to or upon the written order of the registered holder of this
Warrant Certificate, a certificate or certificates evidencing the Share or such
holder pursuant to the Election to Exercise, as set forth on the reverse of
this warrant Certificate. Such certificate or certificates evidencing the Share
or Shares shall be deemed to have been issued and any persons who are
designated to be named therein shall be deemed to have become the holder of
record of such Share or Shares as of the close of business on the date upon
which the exercise of this Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, there shall be paid to the registered holder of this Warrant
Certificate at the time such Warrant Certificate is exercised an amount in cash
equal to the
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<PAGE> 37
same fraction of the Current Market Value per share as determined in accordance
with the Warrant Agreement.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may
be exchanged for a new Warrant Certificate or new Warrant Certificates
evidencing in the aggregate a like number of Warrants, in the manner and
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for the purpose of any exercise hereof and for all other purposes, and
neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
The term "Business Day" shall mean any day on which (i) banks in
Dallas, Texas, (ii) the principal national securities exchange or market on
which the Common Stock is listed or admitted to trading and (iii) the principal
national securities exchange or market on which the Warrants are listed or
admitted to trading are open for business.
-33-
<PAGE> 38
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise ______ of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $_________ in cash or by certified or
official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered in the name
of ___________________________ whose address is
_____________________________________ and that such certificate be delivered to
___________________________ whose address is
__________________________________. Any cash payments to be paid in lieu of a
fractional Share should be made to ______________________________________ whose
address is ________________________________ and the check representing payment
thereof should be delivered to ____________________________ whose address is
___________________________.
Dated ,
----------------- ---
Name of holder of
Warrant Certificate:
-------------------------------------------
(Please Print)
Tax Identification or
Social Security Number:
----------------------------------------
Address:
-------------------------------------------------------
-------------------------------------------------------
Signature:
-----------------------------------------------------
Note: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Dated ,
-------------------- ---
-34-
<PAGE> 39
[FORM OF ASSIGNMENT]
For value received ________________________ hereby sells, assigns and
transfers unto _________________________the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _________________________________ attorney,
to transfer said Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated ,
-------------------- ---
Signature:
-----------------------------------------------------
Note: The above signature must correspond with
the name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
-35-
<PAGE> 40
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS(2)
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of Warrants of
Amount of decrease in Amount of increase in this Global Warrant
Date of Number of Warrants of Number of Warrants of following such decrease Signature of authorized
Exchange this Global Warrant this Global Warrant (or increase) officer of Warrant Agent
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------------
(2) This is to be included only if the Warrant is in global form.
-36-
<PAGE> 41
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Packaged Ice,
Inc.
This Certificate relates to ________ Warrants held in* book-entry or*
__________ certificated form by __________________ (the "Transferor" ).
The Transferor:*
[ ] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
[ ] has requested the Warrant Agent by written order to exchange
or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that the Transferor is familiar
with the Warrant Agreement relating to the above captioned Warrants and the
restrictions on transfers thereof as provided in Section 1.08 of such Warrant
Agreement, and that the transfer of this Warrant does not require registration
under the Securities Act of 1933, as amended (the "Act") because[*]:
[ ] Such Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 1.08(a)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement.
[ ] Such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Warrant is being transferred in accordance with Rule 144
under the Act.
[ ] Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act,
other than Rule 144A or Rule 144 or Regulation S under the Act. An opinion of
counsel to the effect that such transfer does not require registration under
the Act accompanies this Certificate.
-------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:
----------------------------
*Check applicable box.
B-1
<PAGE> 42
EXHIBIT C
Transferee Letter of Representation
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase
Common Stock, par value $.01 per share, (the "Securities") of Packaged Ice,
Inc. (the "Company") we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company
was the owner of such Securities, or any predecessor thereto (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter
to the warrant agent under the Warrant Agreement pursuant to which the
Securities were issued (the "Warrant Agent") which shall provide, among other
things, that the transferee is an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act and that it is acquiring such Securities for investment purposes
and not for distribution in violation of the Securities Act. The Warrant Agent
and the Company reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities pursuant to
clause (e) or (f) above to require the delivery of a written opinion of
counsel, certifications, and or other information satisfactory to the Company
and the Warrant Agent.
C-1
<PAGE> 43
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment for
an indefinite period.
3. We are acquiring the Securities purchased by us for our own account
or for one or more accounts as to each of which we exercise sole investment
discretion.
4. You, the Warrant Agent and your respective counsel are entitled to
rely upon this letter and you are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
-------------------------------------
(Name of Purchaser)
By:
---------------------------------
Date:
-------------------------------
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
------------------------------
Address:
---------------------------
Taxpayer ID Number:
----------------
C-2
<PAGE> 1
EXHIBIT 10.8
CREDIT AGREEMENT
AMONG
PACKAGED ICE, INC.
AS BORROWER
AND
THE FROST NATIONAL BANK
INDIVIDUALLY AND AS THE AGENT
AND
ZIONS FIRST NATIONAL BANK
INDIVIDUALLY
$20,000,000 REVOLVING CREDIT FACILITY
SEPTEMBER 15, 1997
CREDIT AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 General Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 2 THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1 Revolving Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Interest Rates and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.5 Continuations/Conversions, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 25
2.6 Commitment and Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.7 Reduction and Termination of Commitment . . . . . . . . . . . . . . . . . . . . 27
2.8 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.9 Principal Payments on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.10 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.11 General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . 29
2.12 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.13 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.16 Proceeds of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 3 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1 Initial Loans on the Closing Date . . . . . . . . . . . . . . . . . . . . . . . 32
3.2 All Loans, Conversions/Continuations . . . . . . . . . . . . . . . . . . . . . . 32
3.3 Acquisition Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Entity Status; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . 36
4.2 Authorization; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.4 Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.6 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8 No Default or Adverse Condition . . . . . . . . . . . . . . . . . . . . . . . . 39
4.9 Material Agreements; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.10 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.11 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.12 No Financing of Regulated Corporate Takeovers . . . . . . . . . . . . . . . . . 40
4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.14 Principal Office; Names; Primary Business . . . . . . . . . . . . . . . . . . . 40
4.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.17 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.18 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
CREDIT AGREEMENT
i
<PAGE> 3
<TABLE>
<S> <C> <C>
4.19 Insider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.20 Certain Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.21 Insurance; Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.22 Compliance with Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 5 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . . . 43
5.2 Payment of Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . . 46
5.3 Maintenance of Existence and Rights; Conduct of Business . . . . . . . . . . . . 46
5.4 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.6 Compliance with Loan Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Access; Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.9 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.11 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.13 Maintenance of Corporate Identity . . . . . . . . . . . . . . . . . . . . . . . 49
5.14 Primary Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.15 Subordination of Affiliate Obligations . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.1 Certain Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.5 Limitation on Investments, Loans and Advances . . . . . . . . . . . . . . . . . 52
6.6 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.7 Limitation on Sale of Property . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.8 Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.9 Internal Governance Documents; Name and Principal Place of Business . . . . . . 53
6.10 Certain Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.11 Mergers, Acquisitions and Dissolutions . . . . . . . . . . . . . . . . . . . . . 54
6.12 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.13 Sale of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.14 Sale of Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.15 Compliance with Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 7 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.2 Remedies Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 8 THE AGENT AND BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.1 Appointment of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.2 Exculpation: Agent's Reliance . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.4 Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
CREDIT AGREEMENT
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.6 Bank's Credit Decision and Non-Reliance . . . . . . . . . . . . . . . . . . . . 61
8.7 Deferral of Distributions; Investments . . . . . . . . . . . . . . . . . . . . . 62
8.8 Nature of Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.9 Resignation and Removal by Agent . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 9 CHANGED CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.1 Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . 63
9.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.3 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . 64
9.4 Substitute Rate for Affected LIBOR Loans . . . . . . . . . . . . . . . . . . . . 65
9.5 Alternate Lending Office Designation . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.2 No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.3 Payment of Costs and Expenses; Professionals and Consultants . . . . . . . . . . 67
10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.5 Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.7 Successors and Assigns; Participations; Assignments . . . . . . . . . . . . . . 70
10.8 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.9 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 74
10.10 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.11 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.14 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.15 No Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.16 Renewals, Extensions, Rearrangements, Termination, Etc. . . . . . . . . . . . . 76
10.17 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.18 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.19 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.20 Limitation of Liability; Commencement of Actions . . . . . . . . . . . . . . . . 77
10.21 Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.22 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.23 Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.24 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.25 Waiver and Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.26 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.27 No Oral Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
CREDIT AGREEMENT
iii
<PAGE> 5
ANNEXES
Annex A Lender Information
Annex B Reserved
Annex C Conditions Precedent: Initial Loan
SCHEDULES
Schedule 3.2(e)[1] Certain Excluded Properties
Schedule 3.2(e)[2] L & J Properties
Schedule 4.1 Qualification
Schedule 4.5 Schedule of Liens and Judgments
Schedule 4.9 Intellectual Property
Schedule 4.10 Litigation
Schedule 4.14(A) Principal Place of Business; Chief Executive Office
Schedule 4.14(B) Trade Names and Mergers, Consolidations, and/or
Acquisitions
Schedule 4.15(A) Subsidiaries and Partnership Interests
Schedule 4.15(B) Warrants and Options
Schedule 4.20 Environmental Matters
Schedule 5.15 Affiliate Obligations
Schedule 6.2 Indebtedness
Schedule 6.5 Investments
Schedule 6.11 Permitted Acquisitions
EXHIBITS
Exhibit A Notice of Borrowing
Exhibit B Continuation/Conversion Notice
Exhibit C Form of Compliance Certificate
Exhibit D Assignment and Acceptance Agreement
CREDIT AGREEMENT
iv
<PAGE> 6
CREDIT AGREEMENT
This Credit Agreement is made and entered into as of the 15th day of
September, 1997, among PACKAGED ICE, INC., a Texas corporation ("BORROWER"),
and (sometimes hereinafter referred to as "PARENT COMPANY" ); and THE FROST
NATIONAL BANK, a national banking association, individually and as agent for
the Banks acting in the manner and to the extent provided in ARTICLE 8 (in such
capacity, the "AGENT"), ZIONS FIRST NATIONAL BANK, a national banking
association, individually, and each of the lenders which becomes a party hereto
as provided in SECTION 10.7 (individually, a "BANK" and collectively, the
"BANKS").
RECITALS:
WHEREAS, Borrower has requested the Banks provide it a revolving
credit facility for the purposes hereinafter provided; and
WHEREAS, the Banks, severally, are willing to commit and to advance to
the extent of their respective commitments the revolving credit to Borrower
upon the terms and subject to the conditions herein provided;
NOW THEREFORE, for and in consideration of the premises and the
promises herein, and for other good and valuable consideration, the receipt,
adequacy and reasonable equivalency of which are hereby acknowledged by each
party hereto, Borrower, each Bank and the Agent agree as follows:
ARTICLE 1
DEFINITION OF TERMS
1.1. DEFINED TERMS. For purposes of this Agreement, unless
otherwise defined herein or the context otherwise requires, capitalized terms
used in this Agreement shall have the respective meanings assigned to them in
this ARTICLE 1 or in the section, recital, or preamble referred to below.
"ACQUISITION" means, as to any Person, the following: (i) the direct
or indirect purchase or acquisition by such Person of all of (A) the capital
stock of a corporation, (B) the membership interests of a limited liability
company or (C) the partnership interests of a general or limited partnership,
provided that each such transaction results in such Person possessing the power
to control the management and policies of such corporation, company or
partnership, or (ii) the direct or indirect purchase or acquisition by any such
Person of the assets of a going concern business (as defined in accordance with
GAAP).
CREDIT AGREEMENT
<PAGE> 7
"ACQUISITION DOCUMENTS" means any agreements, documents, instruments,
employee-related agreements and plans, deeds, bills of sale, assignments,
assumptions, financial statements and information, projections and other
acquisition-related documents received or delivered by any Person as part of
the closing of such Acquisition.
"ACQUISITION BORROWING" means a Borrowing for which the proceeds are
any part of the consideration for the Acquisition by Borrower, or, to the
extent permitted by SECTION 6.11, by Southwestern, Mission or another
Wholly-Owned Subsidiary of Borrower, of an Acquisition Target.
"ACQUISITION TARGET" means the Person or business which is the subject
of an Acquisition by Borrower, or, to the extent permitted by SECTION 6.11,
Southwestern, Mission or another Wholly-Owned Subsidiary of Borrower.
"ADJUSTED LONDON INTERBANK OFFERED RATE" means, with respect to any
Interest Period, a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the LIBOR Reserve
Percentage. The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the LIBOR
Reserve Percentage.
"AFFILIATE" means any Person who, directly or indirectly, controls, is
controlled by or is under common control with the relevant Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with
respect to any Person, means a member of the board of directors, a partner or
an officer of such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, through the ownership (of record, as trustee or by
proxy) of Voting Shares, through a management contract, or otherwise. Any
Person owning or controlling directly or indirectly 10% or more of the Voting
Shares, or other equity interests of another Person shall be deemed to be an
Affiliate of such Person.
"AFFECTED BANK" has the meaning set forth in SECTION 9.2.
"AGENT" has the meaning set forth in the introductory paragraph of
this Agreement and shall include, at all relevant times, each successor
appointed in the manner provided for in ARTICLE 8.
"AGENT INDEMNITEES" has the meaning set forth in SECTION 8.2.
"AGREED MAXIMUM RATE" means a per annum rate of interest equal to 5%
plus the Base Rate, which Agreed Maximum Rate shall apply only during a period
while there is no Maximum Rate applicable to the transactions contemplated
hereby.
"AGREEMENT", "HEREOF", "HERETO", "HEREIN", "HEREUNDER" and words of
similar import means this Agreement as a whole, and not any particular article
or section.
CREDIT AGREEMENT
2
<PAGE> 8
"AGREEMENT" means this Credit Agreement, as the same may be amended,
modified or supplemented from time to time.
"APPLICABLE LAW" means, with respect to each of the Agent and the
Banks the law in effect, from time to time, applicable to this loan transaction
and each Loan Paper which lawfully permits the contracting for, taking,
reserving, receiving, charging and/or collection of the maximum lawful,
non-usurious rate of interest by such Person on each Loan Paper and the
transactions evidenced thereby, and arising in correction therewith (including,
but without limitation, the Notes), including laws of the State of Texas, to
the extent controlling, the laws of the United States of America, and laws of
any jurisdiction whose laws may be mandatorily applicable to such Person,
notwithstanding other provisions of any Loan Paper or laws of the United States
of America applicable to such Person and the transaction contemplated hereby,
which would permit such Person to contract for, take, reserve, receive, charge
or collect a greater amount of interest then under such jurisdiction's law. To
the extent that Applicable Law is determined by reference to Article 1.04,
Title 79, Revised Civil Statutes of Texas, 1925, as amended, and as the same
has been or will be codified in the Finance Code of Texas, the interest ceiling
applicable hereto and in connection herewith shall be the "indicated" (weekly)
rate ceiling as defined in said Article 1.04; provided however, it is agreed
that the terms hereof, including the rate, or index, formula or provision of
law used to compute the rate in connection herewith, will be subject to the
revisions as to current and future balances, from time to time, pursuant to
Applicable Law. IT IS FURTHER AGREED THAT IN NO EVENT SHALL CHAPTER 15 OF
SUBTITLE 3, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, AND AS
THE SAME HAS BEEN OR WILL BE CODIFIED IN THE FINANCE CODE OF TEXAS, APPLY TO
ANY LOAN PAPER OR THE TRANSACTIONS EVIDENCED THEREBY, OR ARISING IN CONNECTION
THEREWITH.
"APPLICABLE MARGIN" means, with respect to any Loan, the following per
annum percentages determined by the Agent as follows:
(a) The Applicable Margin shall be equal to the percentage set
forth below based upon the ratio of Total Funded Debt to Consolidated
EBITDA as of the end of each Fiscal Quarter with respect to the four
fiscal-quarter period ending as of the end of
CREDIT AGREEMENT
3
<PAGE> 9
such Fiscal Quarter, to the extent such ratio or a lesser ratio shall
have been maintained for two consecutive Fiscal Quarters:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
RATIO OF TOTAL FUNDED DEBT TO CONSOLIDATED BASIS POINTS ABOVE BASIS POINTS ABOVE
EBITDA BASE RATE LIBOR RATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equal to or greater than 4.00 to 1. 100 350
- -------------------------------------------------------------------------------------------------------------------
Equal to or greater than 3.50 to 1, but less than 4.00 to 1. 75 325
- -------------------------------------------------------------------------------------------------------------------
Equal to or greater than 3.00 to 1, but less than 3.50 to 1. 50 300
- -------------------------------------------------------------------------------------------------------------------
Equal to or greater than 2.50 to 1, but less than 3.00 to 1. 25 275
- -------------------------------------------------------------------------------------------------------------------
Less than 2.50 to 1. 0 250
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In calculating the Consolidated EBITDA for purposes of this definition of
Applicable Margin, and for such purposes only, EBITDA of an Acquisition Target
shall not be included for any period prior to the closing of such Acquisition.
(b) Each determination of the Applicable Margin
determined pursuant to subsection (a) above shall be determined by the
Agent within ten (10) days after the delivery to it of a certificate
required by SECTION 5.1(f), but shall be effective as of the date such
Compliance Certificate is due hereunder. Promptly upon each such
determination, the Agent shall notify Borrower and each Bank of such
determination. Each change in the Applicable Margin shall remain
effective until the next such determination.
"APPLICABLE QUARTER" has the meaning set forth in SECTION 6.1(e).
"AUTHORIZED OFFICER" means as to any Company, chairman, chief
executive officer, secretary, assistant secretary, chief operating officer, the
president, chief financial officer (acting or appointed), treasurer, controller
or assistant controller of such Company.
"BANK" has the meaning set forth in the introductory paragraph of this
Agreement.
"BASE COMPANIES" means Borrower, Mission and Southwestern.
"BASE COMPANY ADJUSTED EBITDA" means the EBITDA of the Base Companies,
adjusted as provided in SECTION 3.2(f).
CREDIT AGREEMENT
4
<PAGE> 10
"BASE RATE" means, as determined by the Agent on a daily basis, a per
annum rate equal to the lesser of (a) a rate equal to the Wall Street Journal
Prime Rate, with said rate to be adjusted to reflect any change in the Wall
Street Journal Prime Rate at the time of any such change or (b) the highest
rate permitted by Applicable Law, but in no event shall interest contracted
for, charged or received hereunder plus any other charges in connection
herewith which constitute interest exceed the maximum interest permitted by
applicable law. As used herein, the "WALL STREET JOURNAL PRIME RATE" shall mean
the "Prime Rate" quoted in the Wall Street Journal (Southwest Edition) which is
based on the base rate on corporate loans at large U.S. money center commercial
banks. If the Wall Street Journal Prime Rate ceases to be made available by the
publisher, or any successor to the publisher, the interest rate will be
determined by using a comparable index. If more than one Wall Street Journal
Prime Rate is quoted, the higher rate shall apply. The Wall Street Journal
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. Each change in the Base Rate shall
become effective, without prior notice to Borrower, automatically as of the
opening of business on the date of such change in the Base Rate.
"BASE RATE LOAN" means a Loan to be made or continued as or converted
into such a designated Loan pursuant to the applicable Notice of Borrowing or
Continuation/Conversion Notice, as the case may be, which will bear interest at
a rate determined with reference to the Base Rate.
"BORROWING" means a borrowing pursuant to a Notice of Borrowing or a
continuation or a conversion pursuant to SECTION 2.5 consisting, in each case,
of the same Type of Loan having in the case of LIBOR Loans, the same Interest
Period and made previously or being made concurrently by all of the Banks.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in San Antonio, Texas or Salt Lake City, Utah are
authorized or required by law to close.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP.
"CHANGE IN CONTROL" means, (i) James F. Stuart; A.J. Lewis, III;
Steven P. Rosenberg; Robert G. Miller; The Food Fund II Limited Partnership or
the partners thereof; SV Capital Partners, L.P. or the partners thereof; Jack
Stazo and Norwest Equity Partners V, or the partners thereof shall cease to be
the "beneficial owners" (as that term is used in Rules 13d-3 and l3d-5 under
the Exchange Act) of at least 51% of the combined voting power of the then
outstanding voting securities of Borrower normally entitled to vote in
elections of directors; or (ii) during any period of 12 consecutive months,
Continuing Directors of Borrower cease for any reason (other than death or
disability) to constitute a majority of the Board of Directors of Borrower then
in office.
CREDIT AGREEMENT
5
<PAGE> 11
"CLOSING DATE" means September 15, 1997.
"CODE" means the Internal Revenue Code of 1986, as heretofore and
hereafter amended, or any successor statute.
"COLLATERAL" means all Property of each Company, including all capital
stock of each Subsidiary: provided, however, that (i) the capital stock of
Southco is not pledged on the date hereof, but shall be pledged as provided in
SECTION 3.2(e), and (ii) there shall also be excluded from "Collateral" all
assets listed on SCHEDULE 3.2(e)[1].
"COMMITMENT" means a Revolving Commitment.
"COMMITMENT TERMINATION DATE" means the earlier of April 15, 2003, or
(ii) the date upon which the Commitments of all Banks have been terminated
pursuant to the terms of this Agreement.
"COMPANIES" means Borrower, and all its present and future direct and
indirect Subsidiaries, and "COMPANY" means any one of them.
"CONSOLIDATED CURRENT ASSETS" means, as of any date, the current
assets which would be reflected on the consolidated balance sheet of the
Companies prepared as of such date in accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means, as of any date, the current
liabilities that would be reflected on the consolidated balance sheet of the
Companies prepared as of such date in accordance with GAAP.
"CONSOLIDATED CURRENT MATURITIES OF LONG-TERM DEBT" means, as of any
date, the aggregate amount of all regularly scheduled principal payments on
Indebtedness for borrowed money that would be shown on the financial statements
of the Companies (excluding the Loans except with respect to principal payments
due as a result of the $250,000 per month reduction of the Commitments pursuant
to SECTION 2.7 hereof) that are due and payable within twelve (12) months of
such date.
"CONSOLIDATED CURRENT RATIO" has the meaning set forth in SECTION
6.1(a).
"CONSOLIDATED EBITDA" means, for any period, the net income (plus or
minus any extraordinary charges or credits) of the Existing Companies (and any
other Companies with the consent of all Banks) determined on a consolidated
basis, plus (i) the aggregate amount of all income tax expense of the Existing
Companies for such period, plus (ii) interest expense for such period
(including the interest expense with respect to the Loans and the interest
component of payments under Capital Lease Obligations) plus (iii) the aggregate
amount deducted in determining consolidated net income of the Existing
Companies for such period for depreciation and amortization of Property.
CREDIT AGREEMENT
6
<PAGE> 12
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" has the meaning set forth
is SECTION 6.1(c).
"CONTESTED CLAIM" means any Tax, Indebtedness or other claim or
liability, (i) the validity or amount of which is being diligently contested in
good faith by any Company by appropriate proceedings being diligently
prosecuted, (ii) for which adequate reserves, if required by GAAP, have been
established by such Company and (iii) with respect to which any right to
execute upon or sell any Property or assets of such Company has not matured or
has been and continues to be effectively enjoined, superseded or stayed.
"CONTINUATION/CONVERSION NOTICE" has the meaning set forth in SECTION
2.5(a).
"CONTINUING DIRECTORS" means any member of the Board of Directors of
Borrower on the date of this Agreement, any director elected since the date
thereof in any annual meeting of the shareholders upon the recommendation of
the Board of Directors of Borrower or any other member of the Board of
Directors of Borrower who will be recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors who are then members
of the Board of Directors of Borrower.
"CREDIT EVENT" means the making or continuation of, or conversion
into, any Loan.
"DEBTOR LAW" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar Laws, or general equitable principles, from time to time in
effect, affecting the Rights of creditors generally or providing for relief
to debtors.
"DEFAULT" means any of the events specified in SECTION 7.1, regardless
of whether there shall have occurred any passage of time or giving of notice or
both that would be necessary in order to constitute such event an Event of
Default.
"DEFAULT RATE" means, at the time in question, the lesser of (i) the
Base Rate, as in effect for each day during such time, plus 5 % and (ii) the
Maximum Rate.
"DIVIDENDS" means, in respect of any corporation, limited liability
company or similar Person, cash distributions or any other distributions
(whether in cash, Property or obligations) on, or in respect of, any class of
capital stock of such entity, except for distribution made solely in shares
of common stock.
"DOJ" means the United States Department of Justice.
"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name on
ANNEX A attached hereto and made a part hereof or such other office of such
Bank as such Bank may from time to time specify to Borrower and the Agent.
CREDIT AGREEMENT
7
<PAGE> 13
"EBITDA" of a particular Company, of a group or Companies or of an
Acquisition Target shall have the same meaning as "Consolidated EBITDA", except
with respect to that one Company, group of Companies or Acquisition Target
only.
"EBITDA VARIANCE has the meaning set forth in SECTION 6.1(e).
"ENVIRONMENTAL COMPLAINT" means any third party (including private
parties, governmental agencies, and employees) action, lawsuit, claim, demand,
event, condition, report, investigation or proceeding which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the surface water,
groundwater, or land; (iii) generation, handling, treatment, storage, disposal,
air, or transportation of Hazardous Materials; (iv) exposure to Hazardous
Materials; or (v) non-compliance with any Environmental Law.
"ENVIRONMENTAL LAW" shall mean any federal, state, or local law,
statute, ordinance, or regulation pertaining to health, industrial hygiene, or
the environmental conditions, including without limitation, (i) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984, as now or hereafter amended (42 U.S.C. Section 6901 et
seq.); (h) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, as now or hereafter amended (42 U.S.C. Section 9601 et seq.); (iii) the
Clean Water Act, as now or hereafter amended (33 U.S.C. Section 1251 et seq.);
(iv) the Toxic Substances Control Act, as now or hereafter amended (15 U.S.C.
Section 2601 et seq.); (v) the Clean Air Act, as now or hereafter amended (42
U.S. C. Section 7401 et seq.), Texas Solid Waste Disposal Act (V.T.C.A. Health
and Safety Code Section 361.001 et seq.) and the Texas Water Code (V.T.C.A.
Water Code Sections 26.001-26.407); (vi) all regulations promulgated under any
of the foregoing; (vii) any local, state or foreign law, statute, regulation or
ordinance analogous to any of the foregoing; and (viii) any other federal,
state, local, or foreign law (including any common law), statute, regulation,
or ordinance, regulating, prohibiting, or otherwise restricting the placement,
discharge, release, threatened release, generation, treatment, or disposal upon
or into any environmental media of any substance, pollutant, or waste which is
now or hereafter classified or considered to be hazardous or toxic to human
health or the environment.
"ENVIRONMENTAL LIABILITY" means any claim, demand, obligation, cause
of action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action or any other cost
or expense whatsoever, including reasonable attorneys' fees and disbursements,
resulting from the violation or alleged violation of any Environmental Law, the
storage, handling, transportation or release of Hazardous Materials, or the
imposition of any Environmental Lien.
"ENVIRONMENTAL LIEN" means a Lien in favor of a Governmental Authority
or other Person (i) for any liability under an Environmental Law or (ii) for
damages arising from or costs incurred by such Governmental Authority or other
person in response to a release or threatened release of hazardous or toxic
waste, substance or constituent into the environment.
CREDIT AGREEMENT
8
<PAGE> 14
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all presently effective and future regulations issued
pursuant thereto.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 7.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXECUTIVE MANAGEMENT" means the persons holding the following
offices: chairman, president, chief executive officer, chief operating officer.
"EXISTING COMPANIES" Packaged Ice Leasing, Inc.; Southco Ice, Inc.;
Southwest Texas Packaged Ice, Inc.; Borrower; Southwestern and Mission.
"EXISTING SUBSIDIARIES" Packaged Ice Leasing, Inc.; Southco Ice, Inc.;
Southwest Texas Packaged Ice, Inc.; Southwestern and Mission, each singularly,
an "EXISTING SUBSIDIARY".
"EXISTING NON-BORROWER SUBSIDIARIES" Southwestern, Mission, Packaged
Ice Leasing, Inc.; Southco Ice, Inc.; and Southwest Texas Packaged Ice, Inc.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal fund transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, on the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FINANCING PARTIES" has the meaning set forth in SECTION L0.8.
"FISCAL MONTH", "FISCAL QUARTER" and "FISCAL YEAR" refer to the fiscal
month, fiscal quarter and fiscal year, respectively, of Borrower and each of
its Subsidiaries.
"FROST" means The Frost National Bank, a national banking association.
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means, whether now or hereafter constituted
and/or existing; (i) any government or nation; (ii) any state, province,
commonwealth, territory, possession,
CREDIT AGREEMENT
9
<PAGE> 15
county, parish, town, township, city or municipality; (iii) any other Person or
entity that exercises executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, government; (iv) any political
or other authority, district or subdivision of any of the Persons or entities
referred to in the preceding clauses (i), (ii) and (iii); (v) any court,
tribunal, panel, board, commission, department, agency, bureau, examiner or
instrumentality of the Persons or entities referred to in the preceding clauses
(i), (ii), (iii) and (iv); and (vi) any arbitrator, mediator or arbitration
and/or mediation panel, board or the like, whether impaneled pursuant to Laws,
by contract or otherwise.
"GUARANTEE" means, directly or indirectly (without duplication): (i)
any guarantee or guaranty, as applicable, an endorsement, an assumption, or an
undertaking, an understanding or a contingent agreement or other agreement
(hereinafter in this definition, the foregoing shall be collectively referred
to as "ANY AGREEMENT" or "ANY OTHER AGREEMENT", as the context may require) to
purchase or acquire, or to furnish funds or Property for the payment or
maintenance of, or otherwise to be or become liable (contingently, irrevocably,
absolutely or otherwise) under or with respect to, or to perform or cause to be
performed, the Indebtedness (or any Property constituting security therefor),
other obligations and liabilities, net worth, capital requirements, working
capital, earnings, financial condition or position, or financial covenants of
any Person, or the redemption or repurchase obligations of any Person's capital
stock, warrants or stock or other equity, partnership or similar capital
equivalents, or any class or nature; (ii) a guarantee of, or any other
agreement for, the payment of dividends or other distributions upon the stock,
equity, partnership or other interests of any Person; (iii) any agreement to
purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of its obligations or Indebtedness, or to provide assurances thereof to
any creditor or other obligee of a debtor; (iv) any agreement to assure a
creditor or other obligee against any loss, including but without limitation,
causing a bank or other Person to issue a letter of credit or other similar
instrument for the benefit of another Person; or (v) any agreement commonly
known as or referred to as a "comfort" or "keepwell" letter or agreement;
provided however, in no event shall "GUARANTEE" include endorsements for
collection or deposit made in the ordinary course of business. The terms
"GUARANTEE" and "GUARANTEED" used as a verb shall have a correlative meaning.
"GUARANTORS" means the Existing Subsidiaries and any additional
Subsidiary of any Company required to be a Guarantor pursuant to a Permitted
Acquisition in accordance with SECTION 6.11.
"GOVERNING DOCUMENTS" means (i) as to any corporation, the articles of
incorporation and bylaws of such corporation (including any amendments or
modifications); (ii) as to any limited liability company, the articles of
organization and regulations of such limited liability company (including any
amendments or modifications); (iii) as to any limited partnership, the
certificate of limited partnership and the limited partnership agreement of
such limited partnership (including any amendments or modifications); and (iv)
as to any general partnership, the partnership agreement of such partnership
(including any amendments or modifications).
CREDIT AGREEMENT
10
<PAGE> 16
"HAZARDOUS DISCHARGE" means the happening of any event, status or
circumstance involving the use, storage, spill, transportation, removal,
disposal, discharge or cleanup of any Hazardous Material.
"HAZARDOUS MATERIAL" means (i) any hazardous substance defined in the
Comprehensive Response, Compensation and Liability Act 42 U.S.C. Section 9601
et seq.; (h) any substance the presence of which on any Property requires
reporting or remediation under any Environmental Law; (iii) gasoline, diesel
fuel, fuel oil, motor oil and any other petroleum hydrocarbons, including any
additives or other byproducts associated therewith; and (iv) asbestos and
asbestos- containing materials in any form.
"HSR ACT" means the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended and the rules and regulations thereunder.
"ICE BUSINESS" means (i) the manufacture and sale (including, without
limitation, direct sales, wholesale sales and retail sales) of ice; (ii) the
manufacture and sale of ice and water by means of ice manufacturing or water
purification equipment (including ice makers, bins, baggers, merchandisers,
delivery devices and related equipment) installed on the premises of any of the
Companies' customer(s) whether or not such equipment is owned by one of the
Companies, the customers of that Company, or a third party; (iii) contract
on-premises ice or water service (including leasing of ice or water related
equipment) for a customer's internal use; (iv) providing cold storage and
freezer related services in conjunction with the traditional ice business; (v)
the sale of products incidental or related to the foregoing; and (v) all
logical extensions of the foregoing.
"INDEBTEDNESS" means, for any Person (without duplication), any
liability, indebtedness or obligation, contingent or otherwise, of such Person:
(i) for borrowed money (whether by loan or the issuance and sale of debt
securities or instruments or the sale of Property to another Person subject to
an understanding or agreement, contingent or otherwise, to repurchase such
Property from such Person); (ii) evidenced by bonds, notes, debentures or
similar instruments; (iii) representing the deferred purchase or acquisition
price of Property or services, including trade accounts payable; (iv) with
respect to amounts or obligations Guaranteed or Indebtedness of another secured
by a Lien on the Property of such Person, whether or not the respective
indebtedness or obligations so secured have been assumed by such Person; (v)
with respect to reimbursement of, or payment in respect to, letters of credit,
bankers' acceptances, surety or other bonds or similar instruments issued or
credit transactions; (vi) for any Guarantee of such Person; (vii)
[Intentionally Omitted]; (viii) under leases serving as a source of financing
or otherwise capitalized in accordance with GAAP; (ix) under sales or other
title retention agreements; (x) under, or in respect of, any indemnity and
similar obligations, howsoever arising, including, indemnities incurred or
arising in connection with the purchase, sale or use of Property, the scope of
which indemnity is unlimited, unqualified or unquantifiable, or exceeds the
fair market value of the Property being purchased, sold or used, or pertains to
Environmental Liability or to the negligence, actions, emissions or other
activities of any Person; (xi) under, or in respect of, any partnership, joint
venture or similar entity in which such Person is a general partner, joint
venturer or similar participant; (xii) in respect of unfunded vested benefits
under any Plan; (xiii)
CREDIT AGREEMENT
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<PAGE> 17
to redeem, repurchase, retire or otherwise acquire any shares of capital stock,
warrants, stock equivalents or other evidences of equity of any class or nature
of such person, or to set apart any money or other Property for a defeasance,
sinking or analogous fund for any Dividend or distribution thereon, or for any
redemption, repurchase, retirement or other acquisition thereof; (xiv) under or
in respect of Interest Rate Agreements; or (xv) which would under GAAP be shown
on such Person's balance sheet as a liability.
"INDENTURE" means collectively (i) that certain Indenture dated as of
April 17, 1997, among Packaged Ice, Inc. as Issuer, the Subsidiary Guarantors
named therein and U.S. Trust Company of Texas, N.A. as Trustee relating to
$50,000,000 12% Series A Senior Notes due April 15, 2004 and 12% Series B
Senior Notes due April 15, 2004, (ii) any indenture having substantially the
same terms and governing not more than an additional $15,000,000 of not greater
than 12% Senior Notes of the same class (Series C and D) due April 15, 2004,
and (iii) any indenture having substantially the same terms, replacing the two
aforesaid indentures and governing not more than $65,000,000 of not greater
than 12% Senior Notes due April 15, 2004 (which 12% Senior Notes shall include
Notes issued in exchange for the 12% Series B Senior Notes), as each may be
amended or supplemented from time to time, to the extent such amendment is not
prohibited hereunder.
"INTEREST PERIOD" means with respect to each Borrowing consisting of a
LIBOR Loan, the period commencing on the date of such Borrowing and ending six,
nine or twelve months thereafter, as Borrower may elect in the applicable
Notice of Borrowing or Continuation/Conversion Notice; provided that:
(i) any Interest Period which would otherwise end on a
day that is not a LIBOR Business Day shall be extended to the next
succeeding LIBOR Business Day unless such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall end
on the immediately preceding LIBOR Business Day;
(ii) any Interest Period which begins on the last LIBOR
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on the last
LIBOR Business Day of a calendar month; and
(iii) no Interest Period applicable to a Loan shall be
elected that extends beyond the Commitment Termination Date.
"INTEREST RATE AGREEMENT" shall mean any interest rate swap agreement,
interest cap agreement, interest rate collar agreement, interest rate futures
contract, interest rate option contract or other similar agreement or
arrangement to which a Person is a party, designed to protect the Person
against fluctuations in interest rates.
"INVESTMENT" in any Person means any investment, whether by means of
share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the
CREDIT AGREEMENT
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<PAGE> 18
guarantee of any Indebtedness of such Person or the subordination of any claim
against such Person to other Indebtedness of such Person.
"JUDGMENT" means any judgment, order, subpoena, levy, abstract,
mandamus, decree, injunction, restraining order or other directive, demand or
the like, of any Governmental Authority, howsoever issued by it (whether
pursuant to its equity rights or powers, or otherwise).
"LAWS" means all applicable statutes, laws, ordinances, regulations,
rules, directives, guidelines, interpretations, rulings, orders, requirements,
determinations, judgments, writs, injunctions, decrees and other similar
pronouncements or directives of any Governmental Authority, and "LAW" means
each of the foregoing.
"LEASING SUBSIDIARY" means Packaged Ice Leasing, Inc..
"LEGAL RIGHTS" means, with respect to a Person, and to such Person's
business, operations and Property, all licenses, permits, certificates,
franchises, authorizations, consents, approvals, patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, copyrights,
service marks, applications, registrations and other similar rights, privileges
and authorities, used or useful and required of such Person and/or for such
Person to own and/or operate its business and Property.
"LENDING OFFICE" means, as to any Bank, its Domestic Lending Office or
its LIBOR Lending Office, as the context may require.
"LIBOR BUSINESS DAY" means any Business Day on which commercial banks
are open for international business in London.
"LIBOR LENDING OFFICE" means, as to any Bank, its office, branch or
Affiliate identified in ANNEX A as its LIBOR Lending Office or such other
office, branch or Affiliate of such Bank as it may hereafter designate as its
LIBOR Lending Office by notice to Borrower and the Agent.
"LIBOR LOAN" means a Loan to be made or continued as or converted into
such a designated Loan pursuant to the applicable Notice of Borrowing or
Continuation/Conversion Notice, as the case may be, which will bear interest at
a rate determined with reference to the Adjusted London Interbank Offered Rate.
"LIBOR RATE BORROWING" means a Borrowing consisting of a LIBOR Loan.
"LIBOR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York with deposits exceeding five billion dollars in
respect of "Eurocurrency Liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
LIBOR Loans is determined or
CREDIT AGREEMENT
13
<PAGE> 19
any category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents).
"LIEN" means any lien, mortgage, tax lien, pledge, encumbrance,
Environmental Lien, easement, restriction, right-of-way, charge or adverse
claim affecting title or use of, or resulting in an encumbrance against,
Property of a Person, or a security interest, conditional sale or title
retention arrangement, or any other interest in Property designed to secure the
repayment of a liability or the performance of an obligation or agreement,
whether arising by agreement, under any Law or otherwise, including, without
limitation, any lease in the nature thereof, any option, right of first refusal
or other similar agreement to sell, and any filing of, or agreement to give,
any financing statement under the UCC or equivalent statute in any jurisdiction
or any other instrument that evidences the creation, perfection, continuation,
notice and/or other aspect of a present or future Lien or asserted Lien.
"LITIGATION" means any proceeding, (judicial, arbitratral mediation or
otherwise), claim, complaint, demand, lawsuit, hearing, inquiry and/or
investigation conducted or threatened by or before any Governmental Authority.
"LOAN" means any advance by the Banks to Borrower pursuant to their
Commitments.
"LOAN PAPERS" means this Agreement, each Note and any and all other
agreements (including, without limitation, pledge agreements and guaranty
agreements), documents, promissory notes, instruments, reports, opinions,
requests, certificates, notices, filings and all other documents, instruments,
agreements (including, without limitation, guaranty agreements) and writings,
now or hereafter executed or delivered pursuant to, or in connection with, this
Agreement, or the transactions provided for herein or contemplated hereby, or
in or by any other Loan Papers, each of the foregoing being in form, scope and
substance satisfactory to the Banks.
"LOAN PARTIES" means (i) Borrower and (ii) each Subsidiary of Borrower
which is now or hereafter becomes a party to a guaranty agreement described on
ANNEX C (including any Subsidiaries of Borrower that may hereafter become a
party thereto in connection with Acquisitions permitted under the terms of this
Agreement), and "LOAN PARTY" means any one of them.
"LOAN YEAR" means each one year period commencing on September 15, and
ending on the following September 14, the first Loan Year beginning on
September 15, 1997 provided, however, the last Loan Year shall end on April 15,
2003.
"LONDON INTERBANK OFFERED RATE" means, with respect to any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
1/100 of 1%) with a period equal to such Interest Period quoted in U.S.
Dollars by the British Bankers' Association at approximately 11:00 a.m. London
time five LIBOR Business Days before the first day of such Interest Period. In
the event that the London Interbank Offered Rate is no longer published or
reported as specified above, then the parties shall use the rate of interest
published in the Wall Street Journal (Southwest Edition) in the "Money Rates"
section as the "London Interbank Offered Rates
CREDIT AGREEMENT
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<PAGE> 20
(LIBOR)" for a period of time equal or comparable to the applicable Interest
Period, as of five Business Days preceding the date of Borrowing.
"MATERIAL ADVERSE EFFECT" means any circumstance or event which,
individually or in the aggregate with other circumstances or events; (i) could
reasonably be expected to have any material adverse effect whatsoever upon the
validity, performance, perfection or enforceability of any Loan Papers, (ii)
could reasonably be expected to be material and adverse to the financial
condition, business, operations or prospects of the Companies, taken as a
whole, or the Property of the Companies, taken as a whole; (iii) could
reasonably be expected to impair the ability of any Company to fulfill promptly
and completely its obligations under any of the Loan Papers to which it is a
party; or (iv) could reasonably be expected to result in or cause a Default or
an Event of Default.
"MAXIMUM RATE" means, with respect to each of the Agent and the Banks
and on any and with respect to each day, the maximum lawful non-usurious rate
of interest (if any) which, under Applicable Law, it is permitted or authorized
to contract for, charge, collect, receive, take or reserve from Borrower on its
Notes or other Obligations owed or owing to it, as the case may be, from time
to time in effect, including changes in such Maximum Rate attributable to
changes under Applicable Law which permit a greater rate of interest to be
contracted for, charged, collected, received, taken or reserved as of the
effective dates of the respective changes.
"MISSION" means Mission Party Ice, Inc., a Texas corporation, a
wholly-owned subsidiary of Borrower.
"MONTHLY DATE" means the 15th day of each calendar month during the
term of the Notes beginning October 15, 1997.
"NEGATIVE PLEDGE" means any term, provision, agreement, contract or
undertaking that, directly or indirectly, precludes or restricts, or purports
to preclude or restrict, the imposition or voluntary creation of, a Lien on
Property.
"NOTE" means a Revolving Credit Note, and "NOTES" means the Revolving
Credit Notes, and as otherwise provided in SECTION 2.3.
"NOTICE OF BORROWING" has the meaning set forth in SECTION 2.2(a).
"NOTICE OF DEFAULT" has the meaning set forth in SECTION 8.3.
"OBLIGATIONS" means all obligations, indebtedness, fees, expenses,
costs, indemnities and other indemnification obligations, and liabilities of
Borrower to the Agent and the Banks, now existing or hereafter arising, whether
direct or indirect, related or unrelated, fixed or contingent, liquidated or
unliquidated, joint, several or joint or several, or otherwise, and all
renewals, extensions, increases, refinancings, rearrangements or modifications
thereof, or any part thereof, arising pursuant to, or in connection with, this
Agreement or any other Loan Paper, and all
CREDIT AGREEMENT
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<PAGE> 21
interest accruing thereon (including, without limitation, interest which, but
for the filing of a petition in bankruptcy with respect to Borrower, would
accrue on such Obligations), and attorneys' fees incurred in the enforcement or
collection thereof.
"OTHER TAXES" has the meaning set forth in SECTION 2.14.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"PARTICIPANT" has the meaning set forth in SECTION 10.7(c).
"PERMITTED ACQUISITION" has the meaning set forth in SECTION 6.11.
"PERMITTED INDEBTEDNESS" has the meaning stated in SECTION 6.2.
"PERMITTED LIENS" means: (i) Liens imposed by mandatory provisions of
Law such as carrier's, materialmen's, mechanics', warehousemen's, landlord's
and other like Liens arising in the ordinary course of business, securing
Indebtedness not yet due, (ii) Liens for Taxes, if the same are not yet
delinquent or qualify as a Contested Claim, (iii) encumbrances consisting of
zoning restrictions, easements or other restrictions on the use of real
Property, provided that such items do not or will not impair or interfere with
the use of such Property for the purposes intended or the value thereof, and
specifically as to real property, all matters of record to the extent the same
are disclosed in writing to Agent as of the date of this Agreement (iv) pledges
or deposits in connection with or to secure worker's compensation, unemployment
insurance, pensions or other employee benefits, or public or statutory
obligations, (v) liens expressly permitted pursuant to the terms of the
Security Documents, and (vi) liens securing Indebtedness incurred under SECTION
6.2(V)A or SECTION 6.2(V)B.
"PERSON" includes any individual, corporation, company, joint venture,
general or limited partnership, trust, organization, association, limited
liability partnership, limited liability company or other entity (whether or
not incorporated), or Governmental Authority.
"PLAN" means any plan subject to Title IV of ERISA and maintained at
any time since January 1, 1986 for employees of any Company or of any member of
a "controlled group of corporations" or "trade or business," as such terms are
defined in Section 414(b) or (c) of the Code, of which any Company is a member,
or any plan subject to Title IV of ERISA to which any Company is required to
contribute, or has been required to contribute at any time since January 1,
1986, on behalf of its employees.
"PROJECTED BASE COMPANY ADJUSTED EBITDA" has the meaning set forth
in SECTION 3.2(f).
"PROJECTED INTEREST EXPENSE OF ALL COMPANIES" has the meaning set
forth in SECTION 3.2(f).
CREDIT AGREEMENT
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<PAGE> 22
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible (including, without
limitation, Legal Rights).
"PURCHASER" has the meaning set forth in SECTION 10.7(d).
"QUALIFIED BANK" means any commercial bank located in the USA, which
is organized under the laws of the USA or any state thereof, insurers its
deposits with the Federal Deposit Insurance Corporation (or any successor) and
has capital, surplus and undivided profits aggregating at least $100,000,000 as
of the date of such commercial bank's most recent financial report.
"QUARTERLY DATE" means each September 30, December 31, March 31, and
June 30.
"REGULATION D", "REGULATION G", "REGULATION T", "REGULATION U" and
"REGULATION X" mean Regulation D, G, T, U or X, as the case may be, of the
Board of Governors of the Federal Reserve System, or any successor or other
regulation hereafter promulgated by said Board to replace the prior Regulation
D, G, T, U or X and having substantially the same function.
"REQUIRED BANKS" means, as of the date of any determination, Banks
that hold at least 66 2/3% of the Commitments or, if the Commitments shall have
been terminated holding Notes evidencing 66 2/3 % of the sum of the aggregate
unpaid principal amount of the Loans.
"REVOLVING AVAILABILITY PERIOD" means the period from and including
the Closing Date to, but not including, the Revolving Commitment Termination
Date.
"REVOLVING COMMITMENT" means, as to any Bank and on each relevant date
of determination, the obligation of such Bank to make Revolving Loans to
Borrower in an aggregate principal amount at any one time outstanding not
exceeding the amount set forth opposite such Bank's name in ANNEX A under the
caption "REVOLVING COMMITMENT", as the same may be reduced from time to time
pursuant to this Agreement, including reductions attributable to each
Unavailable Commitment for the applicable quarterly period.
"REVOLVING COMMITMENT TERMINATION DATE" means the date upon which the
Revolving Commitments of all Banks have been terminated pursuant to the terms
of this Agreement.
"REVOLVING LOAN" has the meaning set forth in SECTION 2.1(a).
"REVOLVING CREDIT NOTE" means a promissory note executed by Borrower,
in form and substance satisfactory to the Agent, payable to the order of each
Bank and evidencing the obligation of Borrower to repay Revolving Loans made to
it by such Bank.
"RIGHTS" means rights, remedies, powers and privileges.
"SECURITY DOCUMENTS" means (i) this Agreement, (ii) all security
agreements, (iii) all memoranda, consents, waivers, deeds of trust, mortgages,
security agreements, assignments,
CREDIT AGREEMENT
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collateral assignments, pledge agreements, financing statements, continuation
statements, registrations and other filings, agreements, instruments and
documents that create, perfect, continue and/or otherwise provide, in whole or
part, for Liens in the Collateral (or any part thereof), and (iv) all guaranty
agreements in favor or for the benefit of the Banks, each of the foregoing
being in form, scope and substance satisfactory to the Agent, which Security
Documents include, without limitation, the security agreements, deeds of trust,
stock pledge agreements and guaranty agreements listed on ANNEX C hereto.
"SOUTHCO" means Southco Ice, Inc., a Texas corporation, a wholly owned
subsidiary of Borrower.
"SOUTHWESTERN" means "Southwestern Ice, Inc." a Texas corporation, a
wholly owned subsidiary of Borrower.
"SUBSIDIARY" means, for any Person, any corporation or other entity
(including, without limitation, any partnership or joint venture) (i) of which
at least a majority of the securities or other ownership interests having by
the terms thereof ordinary voting power to elect a majority of the board of
directors or other Persons having similar powers and/or performing similar
functions of such corporation or other entity (irrespective of whether or not
at any time securities or other ownership interests of any class or classes of
such corporation or other entity shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person, or (ii) of which such Person is a general partner, joint venturer
or similar capacity.
"TAXES" means all taxes, assessments, fees, levies, imposts, duties,
penalties or other charges of any nature whatsoever from time to time or at any
time imposed by any Law or any Governmental Authority, whether on income,
profits, Property, sales, use, excise, franchises, capital, ownership,
operations or otherwise.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the USA or any agency thereof, or obligations fully guaranteed
by the USA or any agency thereof (including indirect investments in such
obligations through repurchase agreements with the Agent or any Qualified
Bank), provided that such obligations mature within 30 days of the date of
acquisition thereof; (ii) commercial paper rated in the highest grade by two or
more national credit rating agencies and maturing not more than 30 days from
the date of acquisition thereof; (iii) demand and time deposits with, and
certificates of deposit and banker's acceptances issued by, the Agent or any
Qualified Bank; (iv) commercial paper maturing not more than 30 days from the
acquisition thereof issued by any Bank (or the parent of any Bank) and (v)
Eurodollar investments made available through any Bank.
"TEST PROJECTION" has the meaning set forth in SECTION 6.1(e).
"TOTAL FUNDED DEBT" means, as of any time, the outstanding principal
balance of (i) the Notes plus (ii) any other Indebtedness for borrowed money of
any Company, determined on a consolidated basis.
CREDIT AGREEMENT
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<PAGE> 24
"TRANSFEREE" has the meaning set forth in SECTION 10.7(e).
"TYPE" has the meaning set forth in SECTION 1.2(f).
"UCC" means the Uniform Commercial Code of the State of Texas and of
any other state to the extent Texas Law requires application of the same.
"USA" means the United States of America.
"UNAVAILABLE COMMITMENT" has the meaning set forth in SECTION 2.7.
"VOTING SHARES" of any corporation means shares of any class or
classes (however designated) having ordinary voting power for the election of
at least a majority of the members of the Board of Directors (or other
governing bodies) of such corporation.
"WHOLLY-OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding Voting Shares, are owned by such Person or
any wholly-owned Subsidiary of such Person.
"ZIONS" means Zions First National Bank, a national banking
association.
1.2 GENERAL DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have their defined
meanings when used in each Loan Paper and in each certificate, exhibit,
schedule, annex or other instrument related thereto, unless in any case the
context states or implies otherwise; and when required by the context, each
term shall include the plural as well as the singular, and vice versa.
Furthermore, in each Loan Paper: (i) the word "or" is not exclusive, and the
word "including" (in its various forms) means "including without limitation";
and (ii) provisions in the masculine or feminine genders should be construed to
include the other gender.
(b) Definitions of each Person specifically defined herein or in
each other Loan Paper shall mean and include herein and therein, unless
otherwise expressly provided to the contrary, the successors, assigns, heirs
and legal representatives of each such Person.
(c) Unless the context otherwise requires or unless otherwise
expressly provided, references to this Agreement and each other Loan Paper
shall include all amendments, modifications, supplements, restatements,
ratifications, renewals, increases, extensions, replacements, substitutions and
rearrangements thereof or thereto, as applicable, and as in effect from time to
time; provided, however, nothing contained in this sentence shall be construed
to authorize any Person to execute or enter into any such amendments,
modifications, supplements, restatements, ratifications, renewals, increases,
extensions or rearrangements to a Loan Paper to which it is a party, unless
entered into and executed pursuant to the applicable provisions of the
respective Loan Papers.
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<PAGE> 25
(d) All accounting terms not specifically defined in a Loan Paper
shall be construed, and all accounting procedures, calculations and reporting
required or provided for in any Loan Paper shall be performed or prepared, as
applicable, in accordance with GAAP consistently applied.
(e) The term "SECTION" refers to Sections of this Agreement, and
the terms "ANNEX", "EXHIBIT" and "SCHEDULE" refer to Annexes, Exhibits and
Schedules attached hereto, reference to which is hereby made for incorporation
herein for all intents and purposes, unless in any case the context states or
implies otherwise. The table of contents and headings in each Loan Paper are
inserted for convenience of reference only and shall be ignored when construing
any such Loan Paper.
(f) Loans hereunder are distinguished by "TYPE". The "TYPE" of a
Loan refers to the determination whether such Loan is a Base Rate Loan or a
LIBOR Loan.
ARTICLE 2
THE CREDITS
2.1 REVOLVING LOAN COMMITMENT.
(a) Loans. From time to time during the Revolving Availability
Period, each Bank severally agrees to make revolving loans (each a "LOAN" or a
"REVOLVING LOAN") to Borrower on and subject to the terms and conditions set
forth in this Agreement, in an aggregate principal amount at any one time
outstanding up to but not exceeding such Bank's Commitment; provided, however,
at no time shall the aggregate principal amount of all Loans outstanding exceed
the Commitments of all Banks. Subject to the terms and conditions of this
Agreement, Loans may be borrowed, repaid and reborrowed at any time during the
Revolving Availability Period without premium or penalty, but expressly subject
to SECTION 2.10 and SECTION 2.12.
(b) Amount of Borrowings: Borrowings Ratable. Each Borrowing
requested by Borrower as a Base Rate Loan shall be in a minimum principal
amount of $250,000 (aggregate of all Banks), or a multiple thereof, or if a
lesser amount, the amount of the remaining unadvanced aggregate Commitments, of
all Banks. Each Borrowing requested by Borrower as a LIBOR Loan, shall be in a
minimum principal amount of $1,000,000 (aggregate of all Banks). All Borrowings
hereunder shall be made from the Banks ratably in proportion to their
respective Commitments.
(c) Types. All Loans shall, at the option of Borrower, be either
Base Rate Loans or LIBOR Loans and may be continued or converted pursuant to
SECTION 2.5, provided that all Loans made pursuant to the same Borrowing shall
be of the same Type; provided, however, no more than 10 LIBOR Loan Borrowings
shall be outstanding at any time to Borrower, but expressly subject to SECTION
2.10 and SECTION 2.12.
CREDIT AGREEMENT
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<PAGE> 26
2.2 METHOD OF BORROWING.
(a) The Borrower shall give the Agent notice in the form attached
hereto as EXHIBIT A (a "NOTICE OF BORROWING"), not later than 11:00 A.M. (San
Antonio, Texas time) on (i) with respect to Base Rate Loans, the fifth Business
Day before each Borrowing consisting of a Base Rate Loan and (ii) with respect
to LIBOR Loans, the fifth LIBOR Business Day before each Borrowing consisting
of a LIBOR Loan, specifying:
(1) the date of such Borrowing, which shall be a Business Day in
the case of a Borrowing consisting of a Base Rate Loan or a LIBOR
Business Day in the case of a Borrowing consisting of a LIBOR Loan;
(2) the Type of the Loans comprising such Borrowing, provided that
with respect to the initial Credit Event hereunder, all Loans shall be
Base Rate Loans;
(3) the aggregate amount of such Borrowing and of each Loan
comprising such Borrowing;
(4) (i) the deposit account of the Agent's Domestic Lending Office
into which such Borrowing is requested to be deposited or (ii)
complete wiring instructions for any other account of Borrower to
which such Borrowing is requested to be wired;
(5) in the case of a LIBOR Rate Borrowing, the duration of the
Interest Period applicable thereto;
(6) if the requested Borrowing will cause the aggregate principal
balances of all Loans to exceed $10,000,000 for the first time during
the term hereof, such Notice of Borrowing shall be accompanied by a
current business valuation, on a "going concern" basis, of
Subsidiaries of Borrower other than Southwestern in form and substance
satisfactory to Banks and showing a minimum value of $6,000,000;
(7) whether any part of such Borrowing will be used to fund the
closing of an Acquisition; and
(8) A compliance certificate as described in SECTION 5.1(f),
current as of the date not earlier than the Business Day before the
delivery of the Notice of Borrowing, including a schedule showing the
changes which would occur to such compliance certificate after giving
effect to the proposed Borrowing.
Notwithstanding the foregoing, Borrower's right to designate any Loan as a
LIBOR Loan shall be subject to the restrictions referred to in SECTION 2.5(c).
(b) By 12:00 noon (San Antonio time) on the date of receipt of the
applicable Notice of Borrowing from Borrower, the Agent shall notify each Bank
of the contents thereof and of
CREDIT AGREEMENT
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<PAGE> 27
such Bank's ratable share of such Borrowing. Such Notice of Borrowing shall not
be revocable by Borrower.
(c) Not later than 1:00 P.M. (San Antonio time) on the date of
each Borrowing, each Bank shall make available its ratable share of such
Borrowing, in immediately available funds, to the Agent at the account number
of the Agent set forth in Annex A. Unless the Agent determines that any
applicable condition precedent has not been satisfied, the Agent will make the
funds so received from each Bank available to the Requesting Borrower in its
deposit account designated in the applicable Notice of Borrowing, unless
otherwise directed in writing by Borrower and accepted by the Agent.
(d) Unless the Agent has received notice from a Bank, prior to any
proposed Borrowing, that such Bank does not intend to fund its Loan requested
to be made on such date, the Agent may assume that such Bank has funded its
Loan and is depositing the proceeds thereof with the Agent on such date, and
the Agent in its sole discretion may, but shall not be obligated to, disburse a
corresponding amount to the Borrower on such date. If Loan proceeds
corresponding to that amount are not in fact deposited with the Agent by such
Bank on or prior to the funding date of such Loan, such Bank agrees to pay, and
in the event such Bank fails to immediately pay, Borrower agrees to repay, to
the Agent forthwith on demand such corresponding amount, together with interest
on the balance thereof from time to time outstanding for each day from the date
such amount is disbursed to Borrower until the date such amount is paid or
repaid to the Agent, (i) in the case of Borrower, at the interest rate
applicable to such Borrowing, and (ii) in the case of such Bank, at the Federal
Funds Rate, but in no event in excess of the Maximum Rate. If such Bank shall
pay to the Agent such corresponding amount, the amount so paid shall constitute
such Bank's Loan as part of such Borrowing for the purposes of this Agreement.
If both such Bank and Borrower shall repay such corresponding amount, the Agent
shall promptly refund to Borrower such corresponding amount (together with any
interest paid thereon by Borrower). This SECTION 2.2(d) does not relieve any
Bank of its obligation to make its Loans on any funding date therefor. The
obligations of each Bank hereunder are several, AND NEITHER ANY BANK NOR THE
AGENT SHALL BE RESPONSIBLE FOR THE OBLIGATION OF ANY OTHER PERSON (OTHER THAN
ITS AFFILIATES) HEREUNDER (OR SUCH OTHER PERSON'S DEFAULT IN THE PERFORMANCE
THEREOF), nor will the failure by the Agent or any Bank to perform any of their
respective obligations hereunder relieve the Agent or any other Bank from the
performance of its respective obligations hereunder.
(e) Unless otherwise directed in writing by the Borrower and
accepted by the Agent, all Borrowings made hereunder shall be disbursed by
credit to the deposit account maintained by Borrower at the Agent's Domestic
Lending Office that is designated in the applicable Notice of Borrowing.
2.3 NOTES.
(a) The Loans of each Bank shall be evidenced by a Revolving Note.
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(b) Upon receipt of each Bank's Notes pursuant to this SECTION
2.3, the Agent shall promptly mail or deliver such Notes to such Bank. Each
Bank shall record on its books, and prior to any transfer of its Notes shall
endorse on the schedule forming a part thereof appropriate notations to
evidence the date, amount and maturity of each Loan made by it and the date and
amount of each payment of principal made by Borrower with respect thereto;
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of Borrower or any Bank hereunder
or under any other Loan Paper. Each Bank is hereby irrevocably authorized by
Borrower so to endorse its Notes and to attach to and make a part of its Notes
a continuation of any such schedule as and when required.
2.4 INTEREST RATES AND PAYMENT.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due and payable, at a rate per annum equal to the lesser of (i) the sum
of the Base Rate as in effect for each such day plus the Applicable Margin and
(ii) the Maximum Rate. Accrued, unpaid interest on the outstanding principal of
the Base Rate Loans shall be due and payable on each Monthly Date. Any
principal of and, to the extent permitted by Law, accrued and unpaid interest
on any Base Rate Loan which has become due and payable shall bear interest on
the unpaid portion thereof, payable on demand, for each day from such due date
and until paid, at the Default Rate.
(b) Each LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the lesser of (i) the sum of the Applicable Margin plus the
applicable Adjusted London Interbank Offered Rate and (ii) the Maximum Rate.
Accrued, unpaid interest on the outstanding principal of each LIBOR Loan shall
be due and payable for each Interest Period on each Monthly Date during the
Interest Period and on the last day thereof. Any principal of and, to the
extent permitted by Law, interest on any LIBOR Loan which has become due and
payable shall bear interest on the unpaid portion thereof, payable on demand,
for each day from such due date and until paid, at the Default Rate.
(c) The Agent shall in good faith determine each interest rate
applicable to the Loans hereunder and each fee hereunder pursuant to the terms
hereof. Interest for all Base Rate Loans and all fees shall be computed on the
basis of a year of 360 days, in each case for the actual number of days elapsed
(including the first day but excluding the last day), except that, if use of a
360 day year would result in a rate in excess of the Maximum Rate, such
computation will be made on the basis of a year consisting of 365 or 366 days,
as appropriate. Each such determination by the Agent of an interest rate or fee
hereunder shall be conclusive and binding in the absence of manifest error.
(d) Notwithstanding the foregoing, if at any time the applicable
contractual rate of interest provided for herein (without reference to the
Maximum Rate limitation) exceeds the Maximum Rate, then the rate of interest on
any Loan or other Obligation shall be limited to the Maximum Rate during such
time, and at all times thereafter (including periods during which any or all of
such applicable contractual rates of interest have fallen below the Maximum
Rate), the interest rate on any Loan or other Obligation shall be the Maximum
Rate, or if there is no
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Maximum Rate in effect, the Agreed Maximum Rate, until the total amount of
interest accrued on such Loan or other Obligation equals the amount of interest
which would have accrued thereon if the applicable contractual rate of interest
(without reference to the Maximum Rate limitation) had at all times been in
effect; but in no event shall the aggregate interest payable or paid during the
period beginning on the date the initial Loan is made until the Obligations are
paid in full exceed an amount equal to interest at the Maximum Rate, so long as
the Maximum Rate shall be applicable to this Agreement and the transactions
contemplated hereby. If at maturity or final payment of any Note or other
Obligations, as applicable, the total amount of interest paid or accrued on
such Note or other Obligations under the foregoing provisions is less than the
total amount of interest which would have been paid or accrued if the
applicable contractual rate of interest provided for herein had at all times
been in effect, then Borrower agrees, to the fullest extent permitted by Law,
to pay an amount equal to the difference between (i) the lesser of (A) the
amount of interest which would have been paid or accrued on such Note or other
Obligations, as applicable, if the Maximum Rate had at all times been in effect
and (B) the amount of interest which would have been paid or accrued on such
Note or other Obligations, as applicable, if a rate per annum equal to the
applicable contractual rate of interest provided for herein had at all times
been in effect, and (ii) the amount of interest paid or accrued in accordance
with the other provisions of such Note or other Obligations, as applicable.
(e) The payment of interest (or any amount deemed to be interest)
on any Note and on any other Obligation shall, in all respects regarding each
of the Loan Papers, be subject to the provisions of SECTION 10.8.
2.5 CONTINUATIONS/CONVERSIONS, ETC.
(a) Continuation/Conversion.
(i) Borrower may elect from time to time to convert all
or any portion of the outstanding Base Rate Loan to a LIBOR Loan made
to Borrower by giving the Agent a completed and duly executed
irrevocable notice of such election, in the form and substance of
EXHIBIT B hereto (each, a "CONTINUATION/CONVERSION NOTICE") not later
than 11:00 A.M. (San Antonio time) on the second LIBOR Business Day
before the proposed date of conversion, specifying the proposed date
of conversion, the portion of the Base Rate Loan to be converted, and
the duration of the Interest Period applicable thereto.
(ii) Borrower may elect to continue (as of the last day of
the applicable Interest Period) all or any part of any LIBOR Loan made
to Borrower as the same Type of Loan by giving the Agent an
irrevocable Continuation/Conversion Notice in the form applicable to
Borrower not later than 11:00 A.M. (San Antonio time) on the second
LIBOR Business Day before the proposed date of continuation. Each
Continuation/Conversion Notice shall specify the proposed date of
continuation, the portion of LIBOR Loan to be continued, and the
duration of the Interest Period applicable thereto.
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(iii) Borrower may elect from time to time to convert all
or any portion of a LIBOR Loan into a Base Rate Loan made by Borrower
by giving the Agent an irrevocable Continuation/Conversion Notice in
the form applicable to Borrower not later than 11:00 A.M. (San Antonio
time) one Business Day before the date of conversion. Each
Continuation/Conversion Notice shall specify the portion of the LIBOR
Loan to be converted and the date of conversion.
(iv) Upon receipt of a Continuation/Conversion Notice, the
Agent shall promptly notify each Bank thereof. Any continuation
pursuant to the preceding clause (ii) or conversion pursuant to the
preceding clause (iii), may only occur on the last day of the
applicable Interest Period or upon payment of amounts due pursuant to
SECTION 2.12. Each Borrowing continued as, or converted to, a LIBOR
Loan shall be in a minimum principal amount of $1,000,000, or a
multiple of $250,000 in excess thereof, and each Borrowing continued
as, or converted to, a Base Rate Loan shall be in a minimum principal
amount of $250,000 or a multiple thereof.
(b) No Notice. If the applicable Continuation/Conversion Notice is
not given with respect to any LIBOR Loan prior to the time specified in SECTION
2.5(a)(i) or SECTION 2.5(a)(ii), or if the applicable Continuation/Conversion
Notice is timely or otherwise given, but it is incomplete and is not completed
before the respective time required by this Agreement, Borrower shall be deemed
to have converted such Loan into a Base Rate Loan on the last day of the
applicable Interest Period.
(c) Restrictions on Use of Options. Notwithstanding anything to
the contrary contained in this SECTION 2.5, no LIBOR Loan may be made or
continued as such, and no Loan shall be made or converted to a LIBOR Loan, (i)
when any Default or Event of Default has occurred and is continuing, (ii) when
any provision of any Loan Paper prohibits or would preclude any such
continuation, election or conversion, or (iii) if after giving effect to any
such proposed continuation, election or conversion, it would be necessary to
prepay, in whole or part, a LIBOR Loan prior to the expiration of its then
applicable Interest period in order for Borrower to pay, in full and in
accordance with this Agreement, a mandatory, scheduled or voluntary payment or
prepayment of principal hereunder, including the final maturity payment
hereunder. During the period that Borrower is prohibited or precluded hereunder
from continuation of LIBOR Loans, election or conversion of LIBOR Loans, and
unless otherwise expressly provided herein, each LIBOR Loan shall be
automatically converted to a Base Rate Loan on the last day of the applicable
Interest Period, and each other Loan shall be continued as a Base Rate Loan.
2.6 COMMITMENT AND OTHER FEES. Subject to SECTION 10.8:
(a) Borrower shall pay to the Agent, for the ratable account of
the Banks, the following fees: (i) during the first Loan Year, 1/4 of 1% per
annum on the total unused portion of the Commitments of all Banks during the
Availability Period, and (ii) after the first Loan Year, .375% per annum on the
total unused portion of the Commitments of all Banks during the Availability
Period. Such fees shall be payable quarterly in arrears on each Quarterly Date
during the Availability Period beginning on December 15, 1997.
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(b) On the Closing Date, Borrower shall pay to the Agent, for the
ratable account of the Banks, a facility fee in the amount of $20,000, less any
portion of the amount of $50,000 previously paid and not expended for costs for
which Borrower is responsible under the terms hereof.
2.7 REDUCTION AND TERMINATION OF COMMITMENTS.
(a) Beginning October 15, 1999 and on each Monthly Date thereafter
during the term hereof, the Commitments of all Banks shall permanently reduce
by an aggregate amount of $250,000.
(b) Each termination or reduction of any Commitment pursuant to
(a) above shall apply proportionately to the respective Commitment of each
Bank, and each such permanent reduction, once so reduced, may not be
reinstated.
(c) Any Indebtedness which is incurred after the date hereof under
SECTION 6.2(V) shall temporarily reduce, so long as such Indebtedness is
outstanding, the Commitments of all Banks by an aggregate amount equal to all
such Indebtedness incurred (such amount of reduction, being the "Unavailable
Commitment"). Each reduction of any Commitment pursuant to this SECTION 2.7(c)
shall apply proportionately to the respective Commitment of each Bank.
Beginning October 15, 1999, any reductions required under this SECTION 2.7(c)
shall be in addition to reductions required under SECTION 2.7(a). Borrower may,
upon notice to the Agent of the payment of Indebtedness described in SECTION
6.2(V), restore the Unavailable Commitment to the unused portion of the
Commitments of all Banks in an amount equal to such Indebtedness repaid, and,
thereupon, the unused portion of the Commitments shall be increased in an
amount equal to the amount so restored, provided that the fee payable under
SECTION 2.6(a) for the calendar quarter during which Borrower elects to restore
all or any part of the Unavailable Commitment shall be calculated as though
such restored portion of the Unavailable Commitment were a portion of the
unused portion of the Commitments during such entire calendar quarter and
subject to any other reductions required by SECTION 2.7(a).
(d) To the extent not theretofore terminated or permanently
reduced, as applicable, the Commitments of all Banks shall terminate on April
15, 2003.
2.8 MANDATORY PREPAYMENTS.
(a) If at any time (whether as a result of a permanent reduction
in Commitments pursuant to SECTION 2.7(a) and SECTION 2.7(b) or a temporary
reduction in Commitments pursuant to SECTION 2.7(c), or otherwise), the
aggregate principal amount of all Loans outstanding exceeds the aggregate
amount of the Commitments of all Banks, Borrower shall immediately prepay the
Loans in an amount at least equal to such excess. All such mandatory
prepayments shall be accompanied by, and Borrower shall pay, (i) interest
thereon which has accrued until the date of payment thereof and (ii) funding
losses required to be paid pursuant to SECTION 2.12, if any.
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(b) By 11:00 A.M. (San Antonio time) on the date that a mandatory
prepayment is required under SECTION 2.8(a), Borrower shall select which
outstanding Loans (indicating the Type) are to be prepaid and shall notify the
Agent thereof. Such notice shall not be revocable by Borrower. The Agent shall
notify each Bank of the contents thereof and of such Bank's ratable share of
such prepayment. Each such prepayment shall be applied to prepay ratably the
respective Loans so selected.
(c) As provided in SECTION 2.2(d), Borrower shall immediately
prepay the principal of, and accrued interest on, portions of Borrowings funded
by the Agent as to which and to the extent a Bank has not funded its pro rata
portion.
2.9 PRINCIPAL PAYMENTS ON LOANS.
(a) On each Monthly Date, commencing with the Monthly Date of
September 15, 1999 and continuing consecutively until the payment of such Loans
in full, there shall be due and payable by Borrower a principal installment in
respect of the Loans in an aggregate principal amount necessary to reduce the
balance thereof to the aggregate of the Commitments of all Banks, as adjusted
pursuant to SECTION 2.7 hereof.
(b) The aggregate unpaid principal balance of the Loans, together
with accrued, unpaid interest thereon shall (unless the maturity thereof is
sooner accelerated or otherwise becomes due and payable by Borrower in
accordance with the terms hereof or any other Loan Paper) mature and be due and
payable by Borrower on the Commitment Termination Date.
2.10 OPTIONAL PREPAYMENTS.
(a) Borrower may, upon notice to the Agent given not later than
12:00 noon (San Antonio time) on (i) the Business Day of prepayment of any Base
Rate Loan and (ii) the fifth LIBOR Business Day prior to the date of prepayment
of any LIBOR Loan, prepay any Loan in whole at any time, or from time to time
in part, in minimum principal amounts of $100,000 or any integral multiple
thereof; provided however, with respect to LIBOR Loans prepaid other than on
the last day of the Interest Period for such Loan, Borrower shall also pay any
funding losses required to be paid pursuant to SECTION 2.12 hereof. Such notice
shall specify the date and amount of prepayment and the Loan or Loans
(indicating the corresponding Type) applicable to such prepayment and shall not
be revocable by Borrower. The payment amount specified in such notice shall be
due and payable on the date specified therein, together with accrued interest
thereon, and any funding losses pursuant to SECTION 2.12, and other fees and
expenses due and owing by Borrower to the date of prepayment.
(b) Upon receipt of a notice of prepayment pursuant to this
SECTION 2.10, the Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share, if any, of such prepayment.
2.11 GENERAL PROVISIONS AS TO PAYMENTS. Borrower shall (i) make
each payment of principal of and interest on the Loans, and (ii) make each
payment of fees or any other
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Obligations of Borrower, in U.S. dollars, not later than 12:00 noon (San
Antonio time) on the date when due (it being understood that interest shall
accrue and be payable for such date on any amounts which are paid after 12:00
noon (San Antonio time)), in immediately available funds, without deduction,
setoff or counterclaim to the Agent or any Bank at the account of the Agent set
forth in Annex A. By 1:00 P.M. (San Antonio time) on the date of receipt, the
Agent will distribute to each Bank (as applicable), in accordance with the
terms of this Agreement, its ratable share of each such payment. Whenever any
payment of principal of or interest on the LIBOR Loans shall be due on a day
which is not a LIBOR Business Day, the date for payment thereof shall be
extended to the next succeeding LIBOR Business Day unless such LIBOR Business
Day falls in another calendar month, in which case the date for payment thereof
shall be the immediately preceding LIBOR Business Day. Whenever any payment of
any other Obligations 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.
If the date for any payment of principal is extended as provided above or by
operation of law or otherwise, interest thereon shall be payable for such
extended time. Unless the Agent has received notice from Borrower prior to the
date on which any payment is due to each Bank or the Agent hereunder that
Borrower will not make such payment in full, the Agent may assume that Borrower
has made such payment in full to the Agent on such date, and the Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
Borrower has not made such payment in full to the Agent, each Bank shall repay
to the Agent forthwith on demand such amount distributed to such Bank, together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent, at a rate
per annum equal to the Federal Funds Rate. In the event any payment received by
the Agent and so paid to Banks is rescinded or must otherwise be returned by
the Agent, each Bank shall, upon the request of the Agent, repay to the Agent
the amount of such payment paid to such Bank, together with interest thereon,
for each day from the date such amount is repaid by Agent until the date such
Bank repays such amount to the Agent, at a rate per annum equal to the Federal
Funds Rate, but in no event in excess of the Maximum Rate.
2.12 FUNDING LOSSES. If Borrower (i) makes any payment or
prepayment of principal with respect to any LIBOR Loan, pursuant to ARTICLE 2,
including without limitation pursuant to SECTION 2.7, SECTION 2.8 or SECTION
2.9, or otherwise, on any day other than the last day of the Interest Period
applicable thereto, (ii) fails to borrow, pay or prepay any LIBOR Loans after
notice has been given to any Bank in accordance with SECTION 2.2(b) or 2.10(b),
(iii) defaults in making a Borrowing of, conversion into, or continuation of,
LIBOR Loans after it has given a notice regarding same in accordance with the
provisions of this Agreement, or (iv) converts or continues a LIBOR Loan, or
converts a Base Rate Loan into a LIBOR Loan, in any event in this clause (iv)
pursuant to SECTION 2.5 at any time other than at the end of (or in the case of
a conversion to a Base Rate Loan, at the beginning of) the relevant Interest
Period, then Borrower shall, subject to SECTION 10.8, indemnify and reimburse
Agent and/or each Bank, as applicable, on demand for any loss or expense
incurred or sustained by it as a consequence of any thereof, including any loss
incurred or sustained in obtaining, liquidating, employing or redeploying
deposits from third parties, and including loss of Applicable Margin, for the
period after any such payment, conversion, continuation or failure to borrow,
through the end of such Interest Period;
CREDIT AGREEMENT
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provided that the Agent and/or such Bank shall have delivered to Borrower a
certificate as to the amount of such loss or expense which certificate shall be
conclusive and binding against Borrower, absent manifest error.
2.13 SHARING OF PAYMENTS, ETC. Each of the Agent and the Banks
agrees that if it shall, whether through the exercise of rights under any Loan
Paper or rights of banker's lien, set-off, counterclaim or otherwise against
Borrower or otherwise, obtain payment of a portion of the aggregate Obligations
owed to it by Borrower which, taking into account all distributions made by the
Agent under this Agreement causes the Agent or such Bank to have received more
than it would have received had such payment been received by the Agent and
distributed pursuant to this Agreement, then (i) it shall notify the Agent and
each of the other Banks, (ii) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause the Agent and all Banks to share all payments as provided
for herein, and (iii) such other adjustments shall be made from time to time as
shall be equitable to ensure that the Agent and all Banks share all payments of
Obligations as provided for herein; provided, however, nothing contained herein
shall in any way affect the right of the Agent or any Bank to obtain payment
(whether by exercise of rights of banker's lien, set-off, counterclaim or
otherwise) of indebtedness other than the Obligations. Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights of banker's lien, set-off or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this SECTION 2.13 is thereafter recovered from the seller under
this SECTION 2.13 which received the same, the purchase provided for in this
SECTION 2.13. shall be deemed to have been rescinded and the purchase price
restored to the extent of such recovery, together with interest, if any, if
interest is required pursuant to court order to be paid on account of the
possession of such funds prior to such recovery.
2.14 TAXES.
(a) No Deduction for Certain Taxes. Any and all payments by
Borrower shall be made, free and clear of and without deduction for any and all
present or future Taxes. If Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable to any Bank or the Agent, (i) the
sum payable shall be increased as may be necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this SECTION 2.14), such Bank or the Agent, as the case may be, receives
an amount equal to the sum it would have received had no such deductions been
made; (ii) the Borrower shall make such deductions; and (iii) the Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) Other Taxes. In addition, subject to SECTION 10.8, the
Borrower agrees to pay any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement, the Notes, or the other Loan Papers
(hereinafter referred to as "OTHER TAXES").
CREDIT AGREEMENT
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(c) Indemnification. SUBJECT TO SECTION 10.8, BORROWER INDEMNIFIES
EACH BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING,
WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON
AMOUNTS PAYABLE UNDER THIS SECTION 2.14, BUT NOT INCLUDING EXCLUDED TAXES AS
DEFINED BELOW) PAID BY SUCH BANK OR THE AGENT, AS THE CASE MAY BE, AND ANY
LIABILITY (INCLUDING INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY
ASSERTED. EACH PAYMENT REQUIRED TO BE MADE BY BORROWER IN RESPECT OF THIS
INDEMNIFICATION SHALL BE MADE TO THE AGENT FOR THE BENEFIT OF ANY PARTY
CLAIMING SUCH INDEMNIFICATION WITHIN 30 DAYS FROM THE DAY THE BORROWER RECEIVES
WRITTEN DEMAND DETAILING THE CALCULATION OF SUCH AMOUNTS THEREFOR FROM THE
AGENT ON BEHALF OF ITSELF AS AGENT OR ANY SUCH BANK. IF ANY BANK OR THE AGENT
RECEIVES A REFUND IN RESPECT OF ANY TAXES PAID BY BORROWER, UNDER THIS SECTION
2.14 (c), SUCH BANK OR THE AGENT, AS THE CASE MAY BE, SHALL PROMPTLY PAY TO
BORROWER ITS SHARE OF SUCH REFUND.
(d) Evidence of Tax Payments. Borrower will pay prior to
delinquency all Taxes payable in respect of any payment due hereunder. Within
30 days after the date of any payment of such Taxes, or, if later, within five
days after delivery to Borrower of a receipt for payment of such Taxes,
Borrower will furnish to the Agent, at its address referred to in Annex A, the
original or a copy of a receipt evidencing payment of such Taxes.
(e) Excluded Taxes. Borrower shall not be required to pay
franchise taxes, taxes on capital and/or gross receipts or taxes imposed on the
overall net income of any Bank or of its Lending Office for any of the Loans by
the jurisdiction in which such Bank has its principal office or such a Lending
Office.
2.15 PRO RATA TREATMENT. Except as required under SECTION 2.12, and
ARTICLE 9, each Borrowing, each payment or pre-payment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the fees,
each termination or reduction of the Commitments, and each refinancing of any
Borrowing with, conversion of any Borrowing to or continuation of any Borrowing
as a Borrowing of any Type, shall be allocated ratably and pro rata by Agent
among the Banks in accordance with their respective Commitments. Each Bank
agrees that in computing such Bank's portion of any Borrowing to be made
hereunder, the Agent may, in its discretion, round each Bank's portion of such
Borrowing to the next higher or lower whole dollar amount.
2.16 PROCEEDS OF LOANS. The proceeds of the Loans shall be used by
Borrower solely to finance the following costs incurred by the Borrower: (i)
capital expenditures, (ii) working capital and (iii) to finance Permitted
Acquisitions, whether directly by Borrower or indirectly through an Subsidiary
in accordance with this Agreement.
CREDIT AGREEMENT
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ARTICLE 3
CONDITIONS
3.1 INITIAL LOANS ON THE CLOSING DATE. The obligations of the
Banks to make any Loan on the Closing Date are subject to the conditions
precedent that on or before the Closing Date, the Agent shall have received,
there shall have been performed and there shall exist, the documents, actions
and other matters set forth in Annex C hereto, each in form, scope and
substance, and (as applicable) dated as of a date, satisfactory to the Agent
and its counsel.
3.2 ALL LOANS, CONVERSIONS/CONTINUATIONS. The obligations of the
Banks to make each Loan or to continue any Loan as, or to convert any Loan
into, a LIBOR Loan or a Base Rate Loan (except as to an automatic conversion to
a Base Rate Loan following the end of the applicable Interest Period of a LIBOR
Loan without the giving of the applicable Continuation/Conversion Notice as
required hereunder) are subject to, in addition to the conditions referred to
in SECTION 3.1, the satisfaction of the Agent as to the following conditions
precedent:
(a) Representations True and No Defaults. (i) The
representations and warranties contained and referred to in ARTICLE 4
(other than those representations and warranties limited by their
terms to a specific date) shall be true and correct in all material
respects on and as of the date of the Credit Event as though made on
and as of such date and shall be true and correct in all material
respects upon the making of the requested Loans, with the same force
and effect as though made on and as of the date hereof and thereof,
except for such representations and warranties which relate to a
particular date or which fail to be true and correct as a result of
events or occurrences permitted under the Loan Papers; and (ii) no
Event of Default or Default shall have occurred and be continuing.
(b) No Material Adverse Change. Since the date of the
most recent financial statements delivered pursuant to SECTION 5.1, as
of the date of the Credit Event, no change or event that might
reasonably be expected to cause a Material Adverse Effect shall have
occurred.
(c) Borrowing Documents. Other than a continuation or
conversion pursuant to SECTION 2.5, the Agent shall have received (i)
a certificate signed by an Authorized Officer of the Borrower dated as
of such date to the effect set forth in SECTION 3.2(a), (ii) a Notice
of Borrowing delivered in accordance with SECTION 2.2(a), (iii) a
compliance certificate as described in SECTION 5.1(f), delivered in
accordance with SECTION 2.2(a), (iv) the certification described in
SECTION 5.1(N) and (v) as provided in SECTION 2.2(a)(6), if the
requesting Borrowing will cause the aggregate principal balances of
all Loans to exceed $10,000,000 for the first time during the term
hereof, Agent shall have received a current business valuation, on a
"going concern" basis of Subsidiaries of Borrower other
CREDIT AGREEMENT
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than Southwestern in form and substance satisfactory to Banks and
showing a minimum value of $6,000,000; (vi) such other documents and
certificates relating to the transactions herein contemplated as the
Banks (through the Agent), may reasonably require.
(d) Continuation/Conversion Documents. On the date of any
continuation or conversion pursuant to SECTION 2.5, the Agent shall
have received (i) a certificate executed by an Authorized Officer of
the Borrower dated as of such date to the effect set forth in SECTION
3.2(a), and (ii) a Continuation/Conversion Notice in the form
applicable to Borrower delivered in accordance with SECTION 2.5(a),
and (iii) such other documents and certificates relating to the
transactions herein contemplated as the Banks (through the Agent) may
reasonably require.
(e) Collateral Security Documents. To secure repayment of
the Obligations, the performance of all of Borrower's obligations to
Agent and the Banks with respect thereto, Borrower shall execute and
deliver, or cause to be executed and delivered, to Agent, for the
ratable benefit of the Banks, the Security Documents which shall
create a perfected, first priority, Lien and security interest in the
Collateral, subject to the exceptions noted in the Security Documents
or in SCHEDULE 4.5, specifically excluding that portion of the
Property identified on SCHEDULE 3.2(e)[1], BUT INCLUDING ANY PROPERTY
OF THE COMPANIES ACQUIRED BY THE COMPANIES OR DISCOVERED BY THE AGENT
AFTER THE DATE HEREOF. Upon termination of the pledge of the capital
stock and assets of Southco to Southco, Inc., Borrower shall
immediately (i) pledge such stock, and (ii) cause Southco to pledge
such Assets, each to Agent for the ratable benefit of the Banks to
secure the Loans pursuant to pledge instruments satisfactory to Agent,
using instruments which are substantially similar to the Security
Documents executed on the Closing Date. Additionally, on the Closing
Date, Borrower shall obtain from L & J Lewis Properties, LLC, a Texas
limited liability company ("L & J"), and deliver to Agent an agreement
confirming that upon the acquisition of those certain Properties
described on SCHEDULE 3.2(e)[2] (the "L & J Properties") by L& J, if
such properties are leased or subleased to any Company, L & J will
immediately enter into such memoranda of lease, landlord lien
subordination documents and consents to the granting of leasehold
deeds of trust by such Company as Agent shall reasonably require.
Further, upon such lease or sublease to a Company, Borrower will cause
such Company to execute and deliver to Agent a Deed of Trust creating
a first and prior lien in favor of Agent for the benefit of the Banks
on the L & J Properties, said Deed of Trust to be in substantially the
same form as those executed by the Companies on the Closing Date
covering leasehold(s) located in Texas.
(f) Compliance With Base Company Adjusted EBITDA Requirement.
Without limiting any of the above provisions, it is specifically
agreed that the Banks shall not be obligated to make any Loan or
advance any Borrowing, until Agent shall have received evidence
reasonably satisfactory to all Banks of current compliance with the
following:
The ratio of (a) the Projected Base Company Adjusted EBITDA
for the Four Fiscal Quarters immediately following the requested Borrowing to
(b) the Projected Interest
CREDIT AGREEMENT
32
<PAGE> 38
Expense of All Companies for the same period, shall not be less than the ratios
required below for the applicable Loan balance (taking into account the
requested Borrowing):
<TABLE>
<CAPTION>
----------------------------------------------------------------------
BALANCE OF ALL LOANS RATIO
----------------------------------------------------------------------
<S> <C>
Not more than $5,000,000 None
More than $5,000,000 but not more than 1.2 to 1
$10,000,000
More than $10,000,000 but not more than 1.3 to 1
$15,000,000
More than $15,000,000 2.0 to 1
----------------------------------------------------------------------
</TABLE>
As used in this SECTION 3.2(f), "PROJECTED BASE COMPANY ADJUSTED
EBITDA" means, at any time, for the next Four Fiscal Quarters, the sum of (i)
Base Company EBITDA for the immediately preceding Four Fiscal Quarters, plus
(ii) annual projected EBITDA attributable to any Acquisitions occurring after
April 17, 1997, to the extent the same is adjusted in a manner acceptable to
the Banks. Provided, however, with respect to any Acquisition occurring after
June 30, 1997 if the cash portion of the purchase price for such Acquisition
exceeds $5,000,000 (including any deferred payments of the cash price) , the
use of the EBITDA of such Acquisition Target in the calculation of Projected
Base Company Adjusted EBITDA shall be further subject to the delivery of and
approval by Banks of the financial reporting required pursuant to SECTION
5.1(c).
As used in this SECTION 3.2(f), "PROJECTED INTEREST EXPENSE OF ALL
COMPANIES" means, at any time, for the next Four Fiscal Quarters, the interest
expense of all the Companies, (i) that would accrue during such period based on
the principal balance of all Indebtedness of the Companies on the date the
projection is made, and (ii) that would accrue on the additional principal
balance of the Indebtedness to be incurred as a result of the requested
Borrowing after giving effect to Indebtedness repaid with the proceeds of the
such Borrowing,
3.3 ACQUISITION BORROWINGS. The obligation of the Banks to make
the Loans requested by Borrower to finance, in whole or in part, an Acquisition
permitted under this Agreement, is subject to, in addition to the conditions
set forth in SECTION 3.2, the following conditions precedent:
(a) Borrower shall deliver or cause to be delivered to the Agent
(with a copy thereof for each Bank): (i) copies of Acquisition Documents in
possession of Borrower or any other Company relating to such Acquisition,
provided, however, at any time at which the balance of the Loans is less than
$10,000,000, receipt of such Acquisition Documents shall not be a condition
precedent (unless requested by Agent) but shall instead be delivered to Agent
15 Business Days following closing of such Acquisition; and (ii) a statement of
the president or chief financial officer of Borrower certifying that such
Acquisition was duly authorized by Borrower and has been or will be consummated
substantially in accordance with the Acquisition Documents.
CREDIT AGREEMENT
33
<PAGE> 39
(b) The Acquisition Documents relating to such Acquisition and all
operative instruments executed in connection therewith shall be valid, binding
and enforceable against the parties thereto in accordance with their terms,
subject to the effect of Debtor Laws.
(c) The terms and provisions of such Acquisition and the
Acquisition Documents relating to such Acquisition shall be reasonably
acceptable to the Agent and the Banks and such Acquisition shall be a Permitted
Acquisition under SECTION 6.11.
(d) With respect to an Acquisition of all or substantially all of
the assets of an Acquisition Target by Borrower or, pursuant to SECTION 6.11,
Southwestern, Mission or another Wholly-Owned Subsidiary of Borrower, the
following shall occur: (i) record and beneficial ownership of all Property to
be acquired from the Acquisition Target shall be transferred, in accordance
with applicable Law and free and clear of all Liens (other than Permitted
Liens), to such Company; (ii) if such Wholly-Owned Subsidiary of Borrower is
not a Loan Party, such Wholly-Owned Subsidiary of Borrower shall (A) execute
and deliver to the Agent a guaranty agreement, in form, scope and substance
reasonably acceptable to the Agent to guarantee the Obligations, and (B)
execute all such other documents, in form scope and substance reasonably
acceptable to the Agent, and take such other related action as the Agent may
reasonably request; and (iii) all conditions set forth in SECTION 3.2(a) and
SECTION 3.2(b) shall be satisfied before and after giving effect to the
completion of such Acquisition.
(e) With respect to an Acquisition of all of the outstanding
capital stock, partnership interests or other ownership interests of an
Acquisition Target by Borrower, or, pursuant to SECTION 6.11, Southwestern,
Mission or another Wholly-Owned Subsidiary of Borrower, the following shall
occur: (i) such Company shall be the record and beneficial owner of all of the
issued and outstanding capital stock, partnership interests or other ownership
interests of the Acquisition Target free and clear of all Liens (other than
Permitted Liens); (ii) the Acquisition Target shall (A) execute and deliver to
the Agent a guaranty agreement, in form, scope and substance reasonably
acceptable to the Agent, to guarantee the Obligations and (B) execute all such
other documents, in form, scope and substance reasonably acceptable to the
Agent, and take such other related action as the Agent may reasonably request;
and (iii) all conditions set forth in SECTION 3.2(a) and SECTION 3.2(b) shall
be satisfied before and after giving effect to the completion of such
Acquisition.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce each of the Agent and the Banks to enter into and perform
its agreements pursuant to this Agreement, including, without limitation, the
making of the Loans, Borrower (i) makes and reaffirms to each of the Agent and
the Banks each of the representations and warranties contained in each Loan
Paper, and (ii) without duplication, represents and warrants to each of the
Agent and the Banks that, at the time of execution hereof and the transactions
CREDIT AGREEMENT
34
<PAGE> 40
contemplated hereby and as of each of the dates of each of the financial
statements required to be delivered, from time to time, pursuant to SECTION
5.1:
4.1 ENTITY STATUS; POWER AND AUTHORITY. Each Company is a
corporation duly organized and validly existing in good standing under the laws
of its jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the failure to
be so qualified could reasonably be expected to have a Material Adverse Effect,
all of which jurisdictions are set forth in SCHEDULE 4.1 hereto. Each Company
has the corporate power and authority and all Legal Rights which are necessary
(i) to own, lease, use and operate its respective Property and to transact its
business as now being and as proposed to be conducted and (ii) to execute and
deliver each Loan Paper, perform and comply with all obligations and agreements
thereunder and consummate the transactions contemplated thereby. It is
understood that continued performance by Borrower and its Subsidiaries, of this
Agreement and the Loan Papers to which such Persons are a party will require
various filings, such as filings related to environmental matters, ERISA
matters, Taxes and intellectual property, filings required to maintain
corporate and similar standing and existence, filings pursuant to the UCC and
other security filings and recordings, filings required by the Securities and
Exchange Commission, routine filings in the ordinary course of business, and
filings required in connection with the exercise by the Banks and the Agent of
remedies in connection with the Security Documents.
4.2 AUTHORIZATION; CONSENTS. The execution, delivery and
performance by each Company of each Loan Paper to which it is a party, and the
consummation of the transactions contemplated thereby, have been duly
authorized by all necessary corporate and other action by, on behalf of, and
with respect to, each Company, and no consent, approval, authorization,
declaration, filing, order or other action by, on behalf of, or with respect
to, any Company is required of, or from, any Governmental Authority or other
Person in connection with any of such execution, delivery or performance, or
the validity or enforceability of any Loan Paper against each Company which is
a party thereto or any Property covered thereby which has not been obtained and
is final and in full force and effect.
4.3 NO CONFLICTS. Neither the execution or delivery of any Loan
Paper, nor the consummation of any transaction contemplated therein, nor the
performance of, or compliance with, any of the terms and provisions thereof,
does or will (i) conflict with, or result in or constitute a breach, violation
or default of, or, except as provided in SECTION 4.2, require a consent under,
(A) any provision of Law to which any Company or any of its Property is subject
or bound, (B) any judgment or Legal Right applicable to any Company or any of
its Property, (C) any lease, indenture, loan agreement, note, purchase or
acquisition agreement, mortgage, deed of trust or other agreement or instrument
to which any Company is a party or by which it or any of its Property may be
bound or subject, including without limitation, the Indenture or any document
or instrument executed in connection with the Indenture that could reasonably
be expected to have a Material Adverse Effect or (D) any provision of the
charter or bylaws of any Company, or (ii) result in the creation or imposition
of any Lien or Negative Pledge upon any Company or any of its Property, except
for the benefit of the Agent and the Banks.
CREDIT AGREEMENT
35
<PAGE> 41
4.4 ENFORCEABLE OBLIGATIONS. Each Loan Paper has been duly
executed and delivered by each Company which is a party thereto and constitutes
the legal, valid and binding obligations of each Company, enforceable against
each Company in accordance with its respective terms. Each Security Document
creates a legal and valid Lien in the Property covered thereby, and such Lien
is a perfected and first-priority Lien (subject to Permitted Liens) in favor of
the Agent on behalf of the Banks and as such, is enforceable against each
Company which is a party thereto and all Persons claiming by, through or
against each such Company or any of the Property covered by such Lien.
4.5 TITLE TO PROPERTIES. Each Company has good and indefeasible
title to, or valid leasehold interests in, as applicable, all of its Property,
free and clear of all Liens and Negative Pledges, except as permitted under
SECTION 6.3 and any other material adverse claims of any nature, except any of
the foregoing which are for the benefit of the Agent and the Banks. Except (i)
as set forth in SCHEDULE 4.5 and (ii) in connection with Liens permitted under
SECTION 6.3 there are no financing statements, lien instruments, abstracts of
judgment, levies, executions or other filings of record in any jurisdiction
naming any Company as "debtor", "mortgagor", "obligor" or the like, or covering
any Property of any Company.
4.6 FINANCIAL CONDITION.
(a) Financial Statements. Borrower has delivered to the Agent
copies of the audited consolidated balance sheet of the Companies as of
December 31, 1996, and the related statements of income, stockholders' equity
and cash flows for the year ended on such date, with reports thereon by
Deloitte & Touche, LLP, independent public accountants, and unaudited copies of
such financial statements of the Companies for the quarterly periods ended
March 31, 1997 and June 30, 1997. Such financial statements (together with
related schedules and notes, the "Financial Statements") fairly present, in all
material respects the financial condition of the Companies for the periods and
as of the respective dates thereof and have been prepared in accordance with
GAAP applied throughout the periods covered thereby on a basis consistent with
that of prior periods, subject to normal year-end audit adjustments and the
absence of footnotes. As of the date hereof, no Company has any (i)
obligations, liabilities or other Indebtedness (including Guarantees) or (ii)
Investments in any Person which are (separately or in the aggregate) required
by GAAP to be, but which are not reflected in such Financial Statements; and
there has been no material adverse change in the financial condition,
management, control, operations, business or prospects of the Companies and
their respective Property since the date of the Financial Statements.
(b) Solvency. Upon giving effect to the issuance of each Note (and
the incurrence of the Indebtedness thereunder), the execution, delivery and
performance of each Loan Paper by each Company which is a party thereto, and
the consummation of the transactions contemplated thereby, the following are
and will be true, complete and accurate in all material respects as to each
Company:
CREDIT AGREEMENT
36
<PAGE> 42
(i) the fair saleable value of the assets of each Company
exceeds the amount that will be required to be paid on or in respect
of the existing debts and other liabilities (including contingent
liabilities) of such Company, as they mature;
(ii) the assets of each Company do not constitute
unreasonably small capital for such Company to carry out its business
as now conducted and as proposed by it to be conducted;
(iii) no Company intends to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and
amounts of cash to be received by such Company, and of amounts to be
payable on or in respect of debt of such Company); and
(iv) no Company intends, nor believes, that final
judgments against it in actions for money damages will be rendered at
a time when, or in an amount such that, it will be unable to satisfy
any such judgments promptly in accordance with their terms (taking
into account the maximum reasonable amount of such judgments in any
such actions and the earliest reasonable time at which such judgments
might be rendered).
4.7 FULL DISCLOSURE. There is no fact concerning any Company that
Borrower has not disclosed to the Banks which might reasonably be expected to
have a Material Adverse Effect. Neither the financial information referenced in
SECTION 4.6(a) nor any certificate, report, exhibit, schedule, statement,
disclosure letter or other information furnished to the Agent or any Bank by,
or on behalf of, any Company, whether heretofore or herewith, in connection
with the negotiation, preparation, execution, delivery or consummation of this
Agreement and the other Loan Papers, or included therein or delivered pursuant
thereto, contains any untrue statement of a material fact or omits or omitted
to state any material fact necessary to make and keep the statements contained
herein or therein from being misleading. All information furnished after the
date hereof by or on behalf of any Company shall be true, complete and accurate
in all material respects.
4.8 NO DEFAULT OR ADVERSE CONDITION. No event has occurred and is
continuing which constitutes a Default or an Event of Default, and there exists
no event, circumstance, condition or casualty (whether or not covered by
insurance) which could reasonably be expected to have a Material Adverse
Effect.
4.9 MATERIAL AGREEMENTS; INSURANCE. No Company is in default
under, or in violation or breach of (nor has any event or circumstance occurred
which, but for the passage of time or the giving of notice, or both, would
constitute a default under, or a violation or breach of), (i) its charter,
bylaws or other internal governance document, (ii) any material Judgment
affecting it or any of its Property, or (iii) any partnership agreement or any
material indenture promissory note, contract, lease, purchase or acquisition
agreement, loan agreement, mortgage, deed of trust, security agreement,
license, permit, franchise or other material agreement or obligation to which
it is a party or by which it or any of its Property is bound. Attached hereto
as SCHEDULE 4.9 is a complete and correct list of all of each Company's
material patents, trademarks, trade names, copyrights and service marks and all
applications, registrations and licenses relating
CREDIT AGREEMENT
37
<PAGE> 43
thereto. No Company is a party to, or bound by, any material futures contract,
forward agreement or contract, Interest Rate Agreement, commodity price swap
contract or other hedging agreement. Each Company maintains insurance in
compliance with SECTION 5.10.
4.10 NO LITIGATION. Except as set forth on SCHEDULE 4.10 (and
therein designating which of the following clauses (i) through (iv) is
applicable thereto), as of the date hereof, there is no Litigation or Judgment
pending, or to the knowledge of any Company threatened, against, affecting or
challenging (as applicable) (i) any Property of any Company having a value in
excess of $100,000, including, without limitation, each Company's sole legal
and beneficial title therein and all Legal Rights with respect thereto, (ii)
the validity or enforceability of any Loan Paper, (iii) the ability of each
Company to enter into, execute, deliver and perform its obligations under each
Loan Paper to which it is a party as provided therein, and otherwise to
consummate the actions and transactions contemplated thereby, (iv) any Company
which, if adversely determined, could reasonably be expected to result in a
Judgment, (A) individually or when aggregated with all other Judgments, for the
payment of money in excess of $1,000,000 (regardless of insurance coverage) or
(B) for the forfeiture of any Legal Rights of any Company that might reasonably
be expected to have a Material Adverse Effect on such Company), or (v) any
Company, or any of its respective Property or Legal Rights, which might
otherwise reasonably be expected to have a Material Adverse Effect.
4.11 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Loans will
be used solely as provided in SECTION 2.16, and none of such proceeds will be
used (i) for the purpose of purchasing or carrying any "margin stock" as
defined in Regulations G, T, U or X, (ii) for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry a "margin stock", or (iii) for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
Regulations G, T, U or X. No Company nor any Person acting on behalf of any
Company is engaged in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying "margin stock". No
Company nor any Person acting on behalf of any Company has taken or will take
any action which might cause any of the Loan Papers to violate Regulations G,
T, U or X, or any other regulations of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act or any rule or regulation
thereunder, in each case as now in effect or as the same may hereafter be in
effect.
4.12 NO FINANCING OF REGULATED CORPORATE TAKEOVERS. No proceeds of
the Loans will be used to acquire any security in any transaction which is
subject to Sections 13 or 14 of the Exchange Act, including particularly
Sections 13(d) and 14(d) thereof.
4.13 TAXES. All Tax returns, reports, statements and filings
required to be filed by each Company in any jurisdiction have been timely and
correctly filed, and all Taxes upon each Company or any of its Property have
been paid prior to the time that such Taxes could give rise to a Lien thereon,
except for Contested Claims. No tax or similar Lien has been filed on, or is
being enforced against, any Company or any of its Property, and no United
States Federal income tax returns of any Company have ever been and are not now
being, examined or audited,
CREDIT AGREEMENT
38
<PAGE> 44
and, to the best of Borrower's knowledge, there is no proposed Tax assessment
against any Company or any of its Property, and there is no basis for any such
assessment.
4.14 PRINCIPAL OFFICE; NAMES; PRIMARY BUSINESS. The actual and
anticipated principal place of business of each Company, or if it has more than
one such place, its chief executive office, is shown in SCHEDULE 4.14(a), and
each Company intends to maintain its principal records and books at such
office. SCHEDULE 4.14(a) also lists the address of each location at which each
Company operates or conducts its business or maintains or stores any of its
equipment, inventory or other Property. No Company (i) is now conducting, nor
does it currently plan hereafter to conduct, any business or operations, or now
owns or is now operating, or currently plan hereafter to own or operate, any
Property, in any name, other than set forth on SCHEDULE 4.14(b) and (ii) has
heretofore merged into, consolidated with, or acquired, and has no current
binding commitments to merge into, consolidate with or acquire, any Person
other than as set forth on SCHEDULE 4.14(b). The primary business of each
Company is as described in SECTION 5.14.
4.15 SUBSIDIARIES. Except for the Existing Subsidiaries, which are
subsidiaries of Borrower, no Company has any Subsidiaries and is not a general
or limited partner in any Person, except as set forth in SCHEDULE 4.15(a),
which lists as to each Subsidiary or general or limited partnership interest:
(i) name of entity; (ii) jurisdiction of incorporation or organization; (iii)
foreign qualification; (iv) share/percentage/nature ownership; and (v) primary
business. Except as set forth in SCHEDULE 4.15(b), to the knowledge of Borrower
there are no outstanding warrants, options, rights, contracts or commitments of
(A) any Company, of any kind entitling any Person to purchase or otherwise
acquire (a) any shares of capital stock of such Company or (b) any securities
convertible into or exchangeable for any shares of capital stock of such
Company.
4.16 ERISA. No Reportable Event (as defined in Section 4043(b) of
ERISA) to which the notice requirement has not been waived has occurred with
respect to any Plan. Each Plan complies with all applicable provisions of
ERISA, and each Company has filed all reports required by ERISA and the Code to
be filed with respect to each Plan. No Company has any knowledge of any event
which could result in a liability of such Company to the PBGC. Each Company has
met all requirements with respect to funding the Plans imposed by ERISA or the
Code. Since January 1, 1986, there have not been any, nor are there now
existing any events or conditions that would permit, termination of any Plan
under circumstances which would cause the Lien provided under Section 4068 of
ERISA to attach to any Property of any Company. The value of the Plans'
liabilities as defined in Section 4001(a)(16) of ERISA on the date hereof does
not exceed the value of such Plans' assets allocable to such benefits as of the
date of this Agreement and shall not be permitted to do so hereafter. No Plan
is or has been a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
4.17 COMPLIANCE WITH LAW. Each Company has complied in all material
respects with, and is in compliance in all material respects with, all Laws
applicable to it and its Property, including Environmental Laws and the
provisions of the Fair Labor Standards Act of 1938, 29
CREDIT AGREEMENT
39
<PAGE> 45
U.S.C. Section 200, et seq., as amended, including specifically, but without
limitation, 29 U.S.C. Section 215(a).
4.18 GOVERNMENT REGULATION. No Company is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Investment Company Act of 1940, the Interstate Commerce Act (as any of the
preceding acts have been amended), or any other Law which regulates either the
incurring by such Company of Indebtedness or the determination or setting of,
or changes to, the rates or amounts charged by Borrower for the goods or
products it sells or the services it performs, including Laws relating to
common contract carriers or the sale of electricity, gas, steam, water or other
public utility services. No Company is (i) an "investment company" registered
or required to be registered under the Investment Company Act of 1940, as
amended, and no Company is 'controlled" by such a company, or (ii) a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, and is not a "subsidiary company" or an
"affiliate" of any such company.
4.19 INSIDER. No Company is, and no Person having "control" (as
that term is defined in 12 U.S.C. Section 375(b)(5) or in regulations
promulgated pursuant thereto) of any Company is, an "executive officer",
"director" or "principal shareholder" (as those terms are defined in 12 U.S.C.
Section 375(b) or in regulations promulgated pursuant thereto) of any Bank, of
a bank holding company of which any Bank is a Subsidiary, or of any Subsidiary
of a bank holding company of which any Bank is a Subsidiary.
4.20 CERTAIN ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE
4.20, (i) no Company (A) is aware of, and has not received notice or otherwise
learned of, any Environmental Complaint or Environmental Liability which could
individually or in the aggregate have a Material Adverse Effect, (B) has any
threatened or actual liability (contingent, direct or otherwise) in connection
with the release or threatened release, generation, handling, treatment,
storage, disposal or transportation of any Hazardous Material, or other
substance which could individually or in the aggregate have a Material Adverse
Effect, (C) is aware of, and has not received notice or otherwise learned of,
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release or threatened release, and/or the generation,
handling, treatment, storage, disposal or transportation of any Hazardous
Material for which such Company is or may be liable, (D) is in violation of any
Judgment or Litigation based upon Environmental Laws, or subject to any such
Judgment or Litigation, (E) does not have, in full force and effect, all
permits, licenses, approvals and other authorizations necessary for the use and
operation of its Property, including, the generation, handling, treatment,
storage, disposal, transportation or release of any Hazardous Material, and (F)
is not in compliance with all Environmental Laws, except to the extent the
failure to so comply could not reasonably be expected to have a Material
Adverse Effect or to result in any Environmental Liability that could
reasonably be expected to have a Material Adverse Effect; and (ii) all
Properties of each Company are free from any Hazardous Material except as
disclosed on environmental reports submitted to Agent and Environmental Liens.
There have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted by or on behalf of, or which are in the
possession or knowledge of, any Company, or any of such Company's predecessors,
in relation to
CREDIT AGREEMENT
40
<PAGE> 46
any Property now or previously owned or leased by such Company, or any of such
Company's predecessors, which have not been (y) made available to any Bank or
its agents, employees or contractors and (z) listed in SCHEDULE 4.20. No
Company has received a notice of any Environmental Liability, Environmental
Lien or Environmental Complaint other than those which have been provided to
the Agent and listed in SCHEDULE 4.20.
4.21 INSURANCE; CERTIFICATIONS. The insurance certificates
delivered pursuant to SECTION 3.1 are true, correct and complete, and the
insurance coverage set forth therein complies in all regards with the
requirements set forth in SECTION 5.10. In furtherance of the foregoing, but
not in limitation thereof, and in furtherance of all other matters as to which
certifications are required pursuant to SECTION 3.1, all matters certified to
by each and every Person which were evidenced by certificates and
certifications referred to in SECTION 3.1 were true, correct and complete, as
so certified and received by the Agent and each Bank, as of the Closing Date
and were certified by officers of each Company, each of whom was authorized to
execute and deliver such certificate for and on behalf of such Company.
4.22 COMPLIANCE WITH INDENTURE. The terms, conditions and covenants
of this Credit Agreement, the Loans and the Loan Papers do not violate the
terms, conditions and covenants of the Indenture or any document or instrument
issued or executed pursuant to the Indenture.
CREDIT AGREEMENT
41
<PAGE> 47
ARTICLE 5
AFFIRMATIVE COVENANTS
Until payment in full of the Notes, the payment and performance of all
other Obligations, and so long as the Banks have any obligation hereunder to
make any Loans, Borrower will, and Borrower will cause each Company to,
punctually and completely perform and observe each of the following covenants:
5.1 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS. Borrower shall
deliver the following to the Agent, in form, substance and scope satisfactory
to Agent and otherwise as provided herein, each item to be consolidated or
consolidating for all Companies, except as noted below:
(a) Quarterly Statements. As soon as available, and in any event
within 45 days after the end of each Fiscal Quarter(other than the last Fiscal
Quarter of each Fiscal Year), copies of the consolidated statements of income,
stockholders' equity and cash flow of the Companies for such quarter and for
the portion of the Fiscal Year ending with such quarter, and the related
consolidated balance sheet as at the end of such period, in each case setting
forth in comparative form the corresponding figures for the corresponding
periods of the preceding Fiscal Year, all in reasonable detail and certified by
the president, chief financial officer or controller of Borrower as fairly
presenting in all material respects the consolidated financial condition and
results of operations of the Companies for the periods therein covered, and as
having been prepared in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;
(b) Annual Statements. As soon as available, and in any event
within 120 days after the end of each Fiscal Year, copies of the audited
consolidated statements of income, stockholders' equity and cash flow of the
Companies for such Fiscal Year, and the related consolidated balance sheet of
the Companies as at the end of such Fiscal Year, in each case setting forth in
comparative form the corresponding figures for the preceding Fiscal Year, all
in reasonable detail and accompanied by (i) an unqualified opinion of Deloitte
& Touche LLP or other independent, public accountants of recognized national
standing selected by Borrower and satisfactory to the Banks, to the effect that
such financial statements have been prepared in accordance with GAAP,
consistently applied, and fairly present in all material respects the
consolidated financial condition and results of operations of the Companies, as
at the end of, and for, such Fiscal Year, and (ii) a certificate executed by
the president, chief financial officer or controller of Borrower to the same
effect as such opinion;
(c) Annual or Post Acquisition Statements. With respect to any
Acquisition occurring after June 30, 1997 if the cash portion of the purchase
price for such Acquisition exceeds $5,000,000 (including any deferred payments
of the cash price), as soon as available, and in any event within 75 days after
the closing of such Acquisition, copies of the audited
CREDIT AGREEMENT
42
<PAGE> 48
consolidated statements of income, stockholders' equity and cash flow of the
Acquisition Target for the Fiscal Year of such Acquisition Target most recently
concluded prior to such Acquisition, and the related balance sheets of such
Target Acquisition as of the end of such Fiscal Year, in each case setting
forth in comparative form the corresponding figures for such Fiscal Year, all
in reasonable detail and accompanied by (i) an unqualified opinion of
independent, public accountants of recognized national standing selected by
Borrower and satisfactory to the Banks, to the effect that such financial
statements have been prepared in accordance with GAAP, consistently applied,
and fairly present the consolidated financial condition and results of
operations of the Companies, as at the end of, and for, such Fiscal Year, and
(ii) a certificate executed by the president, chief financial officer or
controller of Borrower to the same effect as such opinion;
(d) Audit, Management and Other Reports. Immediately upon the
request of the Agent, a copy of each written report submitted to any Company by
independent accountants in any annual, quarterly or special audit, review or
examination;
(e) SEC and Other Reports. Promptly upon its becoming available,
one copy of each financial statement, report, notice or proxy statement sent by
any Company to its stockholders or debtholders generally and of each regular or
periodic report, registration statement or prospectus filed by any Company with
any securities exchange or the Securities and Exchange Commission or any
successor agency or any similar Governmental Authority of a foreign country,
and of any order issued by any Governmental Authority in any proceeding to
which any Company is a party;
(f) Compliance Certificate. Concurrently with the delivery of the
financial statements delivered pursuant to SECTIONS 5.1(a) and (b),
respectively, a certificate in the form of EXHIBIT C, and in connection with
any Notice of Borrowing as required by SECTION 2.2(a), executed by the
president, chief financial officer or controller of Borrower, (i) stating that
a diligent review of the activities of the Companies during such period has
been made under such officer's supervision and that to the knowledge of such
officer, each Company has observed, performed and fulfilled each and every
obligation and covenant contained in each Loan Paper to which it is a party and
is not in Default under any Loan Paper to which it is a party, or, if any such
Default has occurred, specifying the nature and status thereof, and (ii)
setting forth in reasonable detail the computation and information necessary to
determine whether the Companies are in compliance with SECTION 6.1 as of the
end of the respective Fiscal Quarter or Year, as applicable.
(g) Projected Base Company Adjusted EBITDA. Concurrently with the
delivery of the financial statements delivered pursuant to SECTIONS 5.1(a) and
(b), in order to confirm compliance with SECTION 6.1(e), a projection
acceptable to the Banks of Projected Base Company Adjusted EBITDA for the
succeeding Four Fiscal Quarters prepared in a manner consistent with financial
reporting previously provided to the Banks;
CREDIT AGREEMENT
43
<PAGE> 49
(h) Acquisition Reports. Within 5 days after the execution by
Borrower or any other Company, a copy of any Asset Purchase Agreement, contract
or other written agreement governing such proposed Acquisition.
(i) Insurance Report. Within 15 days after any significant change
in insurance coverage by Borrower, a report describing such change;
(j) INTENTIONALLY OMITTED;
(k) Environmental Notices. Notice to the Agent, in writing,
promptly upon any Company's receipt of notice or otherwise learning (whichever
first occurs) from any Person of any (i) Environmental Complaint or
Environmental Lien or (ii) any other claim, demand, action, event, condition,
report or investigation indicating any potential or actual liability (A) upon
which any Environmental Liability or Environmental Lien could result against
any Company, any Bank or any Property of any Company or (B) arising in
connection with (1) the non-compliance with, or violation of, the requirements
of any Environmental Law, (2) the release or threatened release, generation,
treatment, handling, storage, disposal or transportation of any Hazardous
Material into the environment or which act, occurrence or event any Company
would have a duty to report to a Governmental Authority under an Environmental
Law, or (3) the existence of any Environmental Lien on any Property of any
Company; and such Company shall immediately deliver a copy of each such notice
to the Agent;
(l) Supplemented Schedules. As soon as possible, and in any event
within 15 days after Borrower obtains knowledge thereof, Borrower, as
applicable, shall provide the Agent with a supplement to any existing Schedule
which would make such Schedule (and any subsequent supplement thereto), and the
corresponding representation and warranty to which it applies, true, complete
and accurate; provided, however, any such supplement shall not be deemed to
have amended any Schedule to this Agreement unless and until the Banks have
approved such amendment; and
(m) Monthly Reports. Within 30 days after the end of each Fiscal
Month in which the balance of all Loans has been in excess of $10,000,000
during such Fiscal Month, an aging schedule of accounts receivable and payable
in summary form, certified by the president or chief financial officer of
Borrower, which reflects aging of current accounts receivable of the Companies
which are current or 30, 60 or 90 days past due as of the end of such preceding
Fiscal Month and which lists accounts payable in form satisfactory to Agent.
(n) Compliance With Indenture. (i) Within 45 days after the end of
each Fiscal Quarter, or in connection with and as a condition to a proposed
Borrowing, as required under SECTION 3.2(c), a Certification of Borrower on its
behalf and on behalf of all Companies executed by the president, chief
financial officer or controller of Borrower that such Companies are in
compliance with all terms and conditions of the Indenture, such Certificate
shall also state and include such supporting information to demonstrate to the
satisfaction of Agent that there is not then outstanding any Indebtedness of
Borrower or any other Company, including the Obligations, which is in violation
of any limitation on Indebtedness in the Indenture, whether due
CREDIT AGREEMENT
44
<PAGE> 50
to the failure of Borrower to maintain the "Consolidated Fixed Charge Coverage
Ratio" described in the Indenture, or otherwise; if such Certification is in
connection with a proposed Borrowing, it shall also demonstrate, to the
satisfaction of Agent that all of the foregoing shall continue to be correct
after giving effect to the requested Borrowing, and (ii) within 5 days after
delivery in accordance with the Indenture, a copy of any legal opinion required
to be given by counsel to any Company pursuant to the terms of the Indenture.
(o) Other Information. Within such period reasonably prescribed by
the Agent, such other information concerning the business, operations, Property
or financial condition of any Company as any Bank (through the Agent) shall
reasonably request.
5.2 PAYMENT OF TAXES AND OTHER LIABILITIES. Borrower will, and
Borrower will cause each Company to, pay and discharge in a timely manner, (i)
all trade payables, (ii) royalties, (iii) license fees, (iv) franchise fees,
(v) operating costs and expenses, and (vi) similar expenses and obligations
related to its operations, except for Contested Claims; and, except for
Contested Claims, Borrower will, and will cause each Company to, timely pay and
discharge when due (a) all Taxes, (b) all other lawful claims against it or any
of its Property, and (c) all of its other Indebtedness, obligations and
liabilities. In no regard shall the foregoing serve as a basis of excusing or
delaying the payment by Borrower or any Company of any Indebtedness or other
amounts from time to time owed by it.
5.3 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS.
Borrower will, and will cause each Company to, preserve and maintain its
existence and all of its Legal Rights necessary or desirable in the ordinary
course of its business and conduct and the ownership, maintenance and operation
of its Property, and conduct its business in an orderly and efficient manner
consistent with good business practices and industry standards and in
accordance with all Laws, except where the failure to so preserve, maintain or
conduct would not reasonably be expected to cause a Material Adverse Effect. In
addition, Borrower will, and will cause each Company to, act prudently and in
accordance with customary industry standards and with its contractual
obligations in managing and operating its Property, business and investments
and will keep in good working order and condition, ordinary wear and tear
excepted, all of its Property and Legal Rights which are necessary or desirable
to the conduct of its business and the ownership and maintenance of its
Property.
5.4 NOTICE OF DEFAULT. Borrower shall furnish to the Agent,
immediately upon any Company becoming aware of the existence of any condition
or event which constitutes or would become a Default or an Event of Default,
written notice thereof that specifies the nature and period of existence
thereof and the action which such Company is taking or proposes to take with
respect thereto.
5.5 OTHER NOTICES. As soon as possible, but in any event within 7
days of any Company becoming aware thereof, Borrower will promptly notify the
Agent of (i) any material adverse change in the financial condition,
operations, Property or business of any Company, (ii) any default under, or any
threatened or actual acceleration of the maturity of, any Indebtedness owing or
secured by any Company (or any of its Property), which individually or in the
CREDIT AGREEMENT
45
<PAGE> 51
aggregate represents a monetary obligation of $250,000 or more, or one with
respect to which a default thereunder might have a Material Adverse Effect,
(iii) any default or event of default under any lease pertaining to a location
at which any Company operates or conducts any of its business or stores any of
its Property, (iv) any significant adverse claim against or affecting any
Company or any of the Property of any Company, and (v) the commencement of,
and/or any material determination in, any Litigation which could reasonably be
expected to result in a Judgment in excess of $250,000 (without regard to
insurance coverage). In respect to each of the foregoing notices, Borrower will
promptly provide to the Agent all reasonably related information requested by
the Agent, in reasonable detail satisfactory to the Agent.
5.6 COMPLIANCE WITH LOAN PAPERS. Borrower will, and will cause
each Company to, promptly and completely comply with and observe and perform
all covenants and provisions of each Loan Paper to which it respectively is a
party. In furtherance of the foregoing, but in no way limiting the generality
thereof, the proceeds of each Loan will be used strictly in compliance with
SECTION 2.16.
5.7 COMPLIANCE WITH AGREEMENTS. Borrower will, and will cause each
Company to, promptly comply in all material respects with all material
contracts, leases, agreements, indentures, mortgages or documents binding on it
or affecting it or its Property, business or operations, including, without
limitation, the Indenture and all documents and instruments executed or issued
pursuant to the Indenture.
5.8 ACCESS; BOOKS AND RECORDS. Upon reasonable advance notice,
during all business hours, Borrower authorizes and will permit, and will cause
each Company to authorize and permit, any representatives of the Agent or any
Bank (i) to have access to, and grant permission for such representatives to
examine, copy or make excerpts from, any and all books, records and documents
that relate to the business, operations or Property of any Company, (ii) to
inspect any and all Property of any Company, and (iii) to discuss the business,
operations and financial condition of any Company with its officers, partners
and employees. Borrower will, and will cause each Company to, maintain complete
and accurate books and records of its respective transactions in accordance
with GAAP.
5.9 COMPLIANCE WITH LAW. Borrower will, and will cause each
Company to, comply in all material respects with all Laws applicable to it or
any of its Property, business operations or transactions.
5.10 INSURANCE. Borrower will, and will cause each Company to,
maintain insurance with reputable insurers of sound financial strength and
creditworthiness with respect to its Property and as to its operations and
business, all as required by each Loan Paper to which it is a party and
otherwise in such types, amounts, scope and coverage, and against such risks,
casualties, contingencies and liabilities, as required or necessitated by Law,
and additionally, as is customarily maintained by other Persons engaged in
similar businesses and operations, the foregoing insurance coverage
specifically including the following (except with respect to any particular
item of Collateral, to the extent a lesser amount or narrower coverage is
required by a Security Document covering such Collateral, in which case, such
Security Document shall
CREDIT AGREEMENT
46
<PAGE> 52
control): (i) worker's compensation or similar insurance as may be required by
applicable Law, (ii) public liability insurance against claims for personal
injury, death or property damage suffered upon, in or about, any Property
occupied by any Company or occurring as a result of the ownership, maintenance
or operation by any Company of any equipment, vehicle or other Property or as
the result of the use of products or equipment manufactured, constructed, sold
or operated by any Company or services rendered by it, and (iii) insurance
against the loss or damage to the Property and businesses of any Company now
owned or hereafter acquired. In addition, within 30 days of the date of this
Agreement, (A) Borrower will, and will cause each Company to, (x) name the
Agent ("The Frost National Bank, Agent") as loss payee on all such insurance,
and (y) cause each policy of insurance to provide that such policy will not be
canceled or modified (as to term, coverage, scope, property or risks covered,
or otherwise) without 30 days prior written notice to the Agent and (B)
Borrower will deliver copies of the policies and endorsements for such
insurance to the Agent promptly after issuance or renewal of each.
5.11 ERISA COMPLIANCE.
Borrower will, and will cause each Company to, at all times:
(a) make contributions to each Plan in a timely manner
and in an amount sufficient to comply with the minimum funding
standards requirements of ERISA and the Code;
(b) immediately upon acquiring knowledge of any
"reportable event" to which the notice requirement has not been waived
or of any "prohibited transaction" (as such terms are defined in the
Code or ERISA, as applicable) in connection with a Plan, furnish the
Agent with a statement executed by an Authorized Officer of such
Company, setting forth the details thereof and the action which such
Company proposes to take with respect thereto and, when known, any
action taken by the Internal Revenue Service with respect thereto;
(c) notify the Agent immediately upon receipt by any
Company of any notice of an interest by the PBGC to terminate or
appoint a trustee or of the institution of any proceeding or other
action which may result in the termination of any Plan and furnish to
the Agent copies of such notice;
(d) furnish the Agent with copies of each annual report
(together with all related schedules and attachments) for each Plan
filed with the Internal Revenue Service not later than 30 days after
such report has been filed; and
(e) furnish the Agent with copies of any request for
waiver of the funding standards or extension of the amortization
periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code promptly after the request is submitted to the Secretary of
the Treasury, the Department of Labor or the Internal Revenue Service,
as the case may be.
CREDIT AGREEMENT
47
<PAGE> 53
5.12 FURTHER ASSURANCES. Borrower will, and will cause each Company
to, cure and cause to be cured promptly any defects or deficiencies in the
execution, delivery, creation or issuance of the Loan Papers, or any of them,
and any of the transactions contemplated thereby. In addition, Borrower will,
and will cause each Company to, promptly make, execute or endorse, and
acknowledge and deliver or file, or cause each of the same to be done, all such
vouchers, invoices, notices, certifications and additional agreements,
documents, instruments, undertakings or other assurances, and take any and all
such other action, as the Agent may, from time to time, reasonably request or
deem reasonably necessary or proper under any of the Loan Papers to which such
Company is a party and the obligations of such Company thereunder.
5.13 MAINTENANCE OF CORPORATE IDENTITY. Upon request by Agent,
Borrower will, and will cause each Company to, maintain separate corporate
records, books and accounts. Borrower will, and will cause each Company to,
observe the formal legal, financial and accounting requirements necessary for
the maintenance of each Company as a separate legal entity, including the
keeping of corporate records indicating that, to the extent required by Law or
its charter documents, transactions are reviewed and authorized by its Board of
Directors and stockholders.
5.14 PRIMARY BUSINESS. Borrower will, and will cause each Company,
other than the Leasing Subsidiary, to conduct the Ice Business as its primary
business. Borrower will cause the Leasing Subsidiary to continue to enter into
lease transactions involving inventory manufactured by other Companies as its
primary business.
5.15 SUBORDINATION OF AFFILIATE OBLIGATIONS. Borrower will, and
will cause each Company to, cause all loans or advances of any Company to any
Affiliate of any Company, other than loans or advances of any Loan Party to any
other Loan Party, at any time arising or existing to be evidenced by promissory
notes. All such promissory notes are set forth on SCHEDULE 5.15. Borrower will
obtain and deliver to the Agent, and will cause each Company to obtain and
deliver to the Agent, the written agreement, in form, substance and scope
satisfactory to the Agent, of the holder of each such promissory note
evidencing the subordination of such holder's right to payment under each such
note to the payment of the Obligations, which agreement shall not prohibit the
payment of principal payments under such promissory note to the holder thereof
so long as no Default or Event of Default has occurred and is continuing.
Borrower will, and will cause each Company to, cause the face of each
promissory note to be marked with a reference to such subordination agreement,
and will take and cause to be taken all such further and additional actions as
the Agent may reasonably request to effect and evidence such subordination.
ARTICLE 6
NEGATIVE COVENANTS
Until payment in full of the Notes, the payment and performance of all
other Obligations, and so long as the Banks have any obligation hereunder to
make any Loans, Borrower will, and will cause each Company to, punctually and
completely perform and observe each of the following covenants:
CREDIT AGREEMENT
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<PAGE> 54
6.1 CERTAIN FINANCIAL MATTERS. Borrower will not permit:
(a) Minimum Consolidated Current Ratio. The ratio of (i)
the Consolidated Current Assets, to (ii) the sum of (A) the
Consolidated Current Liabilities, less the Consolidated Current
Maturities of Long Term Debt, to be less than 1.25 to 1.00 at the end
of any Fiscal Quarter; or
(b) INTENTIONALLY OMITTED
(c) Minimum Consolidated Fixed Charge Coverage (Under
Indenture). Borrower shall not permit the "Consolidated Fixed Charge
Coverage Ratio" (as that term is defined in the Indenture) of Borrower
to be less than the ratios required in order to permit, pursuant to
the Indenture, the Obligations to be "Incurred" (as that term is
defined in the Indenture).
(d) Minimum Adjusted Interest Coverage Ratio (Projected).
Borrower shall not as of end of any Fiscal Quarter permit the ratio of
(a) the Projected Base Company Adjusted EBITDA for the next succeeding
Four Fiscal Quarters to (b) the Projected Interest Expense of All
Companies for the same period, to be less than the ratios required
below for the applicable Loan balance
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
BALANCE OF ALL LOANS RATIO
-----------------------------------------------------------------------
<S> <C>
Not more than $5,000,000 None
-----------------------------------------------------------------------
More than $5,000,000 but not more than 1.2 to 1
$10,000,000
-----------------------------------------------------------------------
More than $10,000,000 but not more than 1.3 to 1
$15,000,000
-----------------------------------------------------------------------
More than $15,000,000 2.0 to 1
-----------------------------------------------------------------------
</TABLE>
(e) Minimum Adjusted Interest Coverage Ratio (One Quarter
Actual). Borrower shall not, as of end of any Fiscal Quarter, permit
actual Base Company Adjusted EBITDA for such quarter (the "APPLICABLE
QUARTER") to be below the Projected Base Company Adjusted EBITDA for
said Applicable Quarter (according to the projection (the "TEST
PROJECTION") due pursuant to SECTION 5.1(g) 45 days following the
beginning of said Applicable Quarter) by any amount (the "EBITDA
VARIANCE") such that the application of the EBITDA Variance, expressed
as a percentage, to the cumulative four Fiscal Quarters contained in
the Test Projection will yield a ratio of Projected Base Company
Adjusted EBITDA for said four Fiscal Quarters (as modified by the
EBITDA Variance) to (b) the Projected Interest Expense of All
Companies for the same period (as shown in the Test Projection), to be
less than the ratios required below for the applicable Loan balance:
CREDIT AGREEMENT
49
<PAGE> 55
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
BALANCE OF ALL LOANS RATIO
-----------------------------------------------------------------------
<S> <C>
Not more than $5,000,000 None
-----------------------------------------------------------------------
More than $5,000,000 but not more than 1.2 to 1
$10,000,000
-----------------------------------------------------------------------
More than $10,000,000 but not more than 1.3 to 1
$15,000,000
-----------------------------------------------------------------------
More than $15,000,000 2.0 to 1
-----------------------------------------------------------------------
</TABLE>
6.2 LIMITATION ON INDEBTEDNESS. Borrower will not, and will not
permit any Company to, incur, create, contract, assume, have outstanding,
permit or suffer to exist, Guarantee or otherwise be or become, directly or
indirectly, liable in respect of any Indebtedness, except the following
(collectively, "PERMITTED INDEBTEDNESS"):
(i) the Obligations;
(ii) current liabilities (including all accruals) incurred in the
ordinary course of business which are not yet delinquent;
(iii) trade payables arising in the ordinary course of business;
(iv) Indebtedness pursuant to the Indenture as listed in SCHEDULE
6.2; and
(v) Indebtedness incurred after the date hereof, not exceeding
$3,000,000 in the aggregate for the following purposes:
a. financing of the purchase of vehicles or other
transportation equipment;
b. assumption of existing debt of an Acquisition Target by
Borrower (or other Subsidiary of Borrower, to the extent
permitted by SECTION 6.11) pursuant to a Permitted Acquisition
and to the extent such debt is not secured by any Property,
except Property which is purchased in such Acquisition or
owned by such Acquisition Target;
c. unsecured debt of Borrower (or other Subsidiary of
Borrower, to the extent permitted by SECTION 6.11) to the
sellers of an Acquisition to Borrower;
Notwithstanding the foregoing or any other provision hereof,
at no time during the term hereof shall the sum of all
principal owed or available for advance on the Indebtedness
described in subsections (i), (iv) and (v) of this SECTION 6.2
exceed, (i) prior to September 15, 1999, $85,000,000 and (ii)
after September 15, 1999, $85,000,000, minus any reduction of
the Commitments pursuant to SECTION 2.7.
CREDIT AGREEMENT
50
<PAGE> 56
6.3 LIMITATION ON LIENS. Borrower will not, and will not permit
any Company to, grant, create, enter into, incur, permit or suffer to exist,
upon or with regard to any of its respective Property now owned or hereafter
acquired, (A) any Lien, except for Permitted Liens, or (B) any Negative Pledge,
except (i) in connection with Permitted Liens and (ii) agreements governing
Permitted Indebtedness described in SECTION 6.2(V)(a) or SECTION 6.2(V)(b) or
(iii) for the benefit of the Agent and Banks. Anything in the foregoing or
elsewhere in the Loan Papers to the contrary notwithstanding, it is understood
that no Liens, or Negative Pledges, other than Permitted Liens, except for the
benefit of the Banks, are permitted on or with respect to any of the Property
of Borrower. Without limiting the foregoing, it is specifically agreed that
Borrower shall not grant any lien on or give any further pledge of the capital
stock of Southco and upon the termination of the pledge to Southco, Inc.,
Borrower shall pledge such stock to Agent for the benefit of the Banks to
secure the Loans. Further, from the date hereof Borrower shall not permit
Southco to enter into any pledge of its assets, except in favor of Agent for
the benefit of the Banks to secure the Loans.
6.4 RESTRICTED PAYMENTS. Borrower will not, and will not permit
any Company to, directly or indirectly (i) declare or make, or incur any
liability to pay or make, any Dividends or (ii) redeem, repurchase, retire or
otherwise acquire for value any of its capital stock, warrants, stock
equivalents or other evidence of equity of any class or nature, or (iii) set
apart any money or other Property for a defeasance, sinking or analogous fund
for any Dividend or distribution thereon, or for any redemption, retirement or
other acquisition thereof.
6.5 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Borrower will
not, and will not permit any Company to, make or have outstanding any
Investments in any Person, except for:
(i) Temporary Cash Investments;
(ii) Investments listed in SCHEDULE 6.5, if any, and
(iii) Investments (including Permitted Acquisitions)
expressly permitted by other provisions of this Agreement.
Borrower will not, and will not permit any Company to make, any loan or advance
of funds to any Person, except (i) between Companies or (ii) to the sellers of
an Acquisition Target in connection with a Permitted Acquisition, on the
express conditions that (a) such loan shall be secured by a first priority
security interest and shall be evidenced by a written debt instrument which
debt instrument shall be delivered to Agent (endorsed with recourse for the
ratable benefit of the Banks) within 5 business days following the making of
such loan, together with an assignment of (x) such debt instrument and the
collateral for such debt instrument and (y) any option agreements given to such
Company, each in form reasonable satisfactory to Agent, and (b) the aggregate
of loans of the type described in this subsection (ii) outstanding at any time
shall not exceed $5,000,000.
CREDIT AGREEMENT
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<PAGE> 57
6.6 AFFILIATE TRANSACTIONS. Borrower will not, and will not permit
any Company to, enter into any transaction with, or pay any management or other
fees or compensation to, any Affiliate of any Company other than transactions
in the ordinary course of business which are on terms no less favorable to
Borrower or such other Company, as applicable, than would be obtained in a
comparable arm's-length transaction with a Person who is not an Affiliate of
Borrower or any such other Company, as applicable. In addition, Borrower will
not, and will not permit any Company to, enter into any transaction with, or
pay any management or other fees or compensation to, any Person (a
"NON-AFFILIATED PERSON") who is not an Affiliate of any Company wherein such
Affiliate is directly or indirectly involved in, related to, or associated
with, such transaction other than transactions in the ordinary course of
business which are on terms no less favorable to Borrower or such other
Company, as applicable, than would be obtained in a comparable arm's-length
transaction with a Non-Affiliated Person wherein an Affiliate of Borrower or
such other Company is not directly or indirectly involved, related or
associated.
6.7 LIMITATION ON SALE OF PROPERTY. Borrower will not, and will
not permit any Company to, sell, assign, lease, sublease or discount or
otherwise exchange or dispose of any of its Property other than (i) sales or
leasing of inventory in the ordinary course of its business, (ii) sales or
other dispositions of obsolete equipment that is no longer needed for its
ordinary business or which is being replaced by equipment of at least
comparable value and utility to the equipment replaced when such equipment was
efficiently operational and functional.
6.8 ACCOUNTING METHOD. Borrower will not, and will not permit any
Company to, change its Fiscal Year or method of accounting, without the prior
approval of the Banks.
6.9 INTERNAL GOVERNANCE DOCUMENTS: NAME AND PRINCIPAL PLACE OF
BUSINESS. Borrower will not, and will not permit any Company to, amend their
respective Governing Documents in any respect which could have a Material
Adverse Effect. Without notifying the Agent in writing at least 30 Business
Days prior to the effective date of each of the following changes (or 15
Business Days prior to the effective date of any such change which is in
connection with a Permitted Acquisition), Borrower will not, and will not
permit any Company to, (i) change its name, or operate any of its business,
operations or Property or own or lease any Property under any name, different
than as set forth in SCHEDULE 4.14(b), (ii) operate or conduct any of its
business or store or maintain any of its inventory, equipment or other
Property, at a location other than as set forth in SCHEDULE 4.14(a), (iii)
change its identity or corporate structure, or (iv) change its principal place
of business or chief executive office, as applicable, from such address and
location set forth in SCHEDULE 4.14(a).
6.10 CERTAIN ENVIRONMENTAL MATTERS. Except in compliance in all
material respects with Environmental Laws, and otherwise in no way posing an
imminent and significant endangerment to public health or welfare or the
environment, Borrower will not, and will not permit any Company to, (i) cause
or permit any Hazardous Material to be placed, held, transported, located,
released or disposed of on, under, from, to, or at, any Property now or
hereafter owned, leased or otherwise controlled directly or indirectly by any
Company (for purposes of this SECTION 6.10, the "SUBJECT PROPERTY"), or (ii)
permit the Subject Property ever to
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be used (whether by any Company or any other Person) as a dump site or storage
site (whether permanent or temporary) for any Hazardous Material. Without
limitation of the Agent's and the Banks' Rights under the Loan Papers, the
Agent and its representatives shall have the right, but not the obligation, to
enter upon the Subject Property or take such other actions as the Agent or any
Bank deems necessary or advisable to cleanup, remove, resolve or minimize the
impact of, or otherwise deal with, any Hazardous Discharge or Environmental
Complaint upon the Agent's or any Bank's receipt of any notice from any
Governmental Authority or other Person, asserting the existence of any
Hazardous Discharge or Environmental Complaint on or pertaining to the Subject
Property which, if true, could result in Environmental Liability against
Borrower, the Agent, any Bank or otherwise which, in the sole opinion of any of
them, could jeopardize any of their present or future Liens against or rights
to the Subject Property. All costs and expenses incurred by the Agent, the
Banks and their representatives in the exercise of any such Rights shall become
part of the Obligations and be payable upon demand, together with interest on
the unpaid portion thereof at the Default Rate.
6.11 MERGERS, ACQUISITIONS AND DISSOLUTIONS. Borrower will not, and
will not permit any Company to, (x) become a party to a merger, acquisition or
consolidation, or purchase or otherwise acquire by merger, lease or purchase
all or a substantial part of the assets or Property of any Person or any shares
or other evidence of legal or beneficial ownership of any Person, except in
connection with a Permitted Acquisition, or (y) dissolve or liquidate. A
"PERMITTED ACQUISITION" means (i) the Acquisition(s) listed on SCHEDULE 6.11,
if any; and (ii) any single Acquisition by Borrower Southwestern, Mission or
another a Wholly-Owned Subsidiary of Borrower (with a series of related
Acquisitions being treated as a single Acquisition); provided however, as to
each such transaction described in (i), or (ii):
(a) no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur as a result
of the Permitted Acquisition;
(b) the primary business activity of the Acquisition
Target is substantially related to the Ice Business;
(c) the financial ratios under SECTION 6.1 are complied
with after giving effect to the Permitted Acquisition, such compliance
being determined on a pro forma basis as of the date of such
Acquisition;
(e) each of the Banks receives such information as such
Bank may reasonably request to confirm the assumptions described in
(c) above;
(f) the Borrower, or if permitted pursuant to (ii) above,
the Subsidiary engaging in such transaction, shall be the surviving or
continuing corporation in any merger or consolidation; and
(g) such Acquisition does not result in the creation of a
new Subsidiary of any Company unless all of the capital stock of such
newly formed Subsidiary is pledged to
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secure the Obligations in such manner as required by Agent and such
new Subsidiary executes a guarantee of the Obligations.
6.12 SUBSIDIARIES. Borrower will not, and will not permit any
Company to, create or permit to exist any Subsidiary of such Person, except for
(i) the Existing Subsidiaries and (ii) Subsidiaries formed or acquired pursuant
to a Permitted Acquisition that becomes a Loan Party. Borrower will not, and
will not permit any Company to become a general partner, venturer or similar
capacity in any partnership, venture or similar Person.
6.13 SALE OF RECEIVABLES. Unless in favor of the Agent and the
Banks or reasonably necessary in connection with collection efforts on
delinquent receivables and in the ordinary course of business, Borrower will
not, and will not permit any Company to, sell or discount any of its accounts
or notes receivable.
6.14 SALE OF CERTAIN INTERESTS. Borrower will not, and will not
permit any Company to, transfer or sell any outstanding capital stock,
partnership interests or other ownership interests of any Subsidiary of
Borrower.
6.15 COMPLIANCE WITH INDENTURE. Borrower will not, and will not
permit any Company to, prepay any sums (except pursuant to Section 3.07(b)
thereof) due under the Indenture or modify the terms of the Indenture or any
document executed or issued pursuant to the Indenture (except pursuant to
Section 9.01 thereof or as described in subsections (ii) or (iii)of the
definition of Indenture in this Agreement).
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ARTICLE 7
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any
one or more of the following events shall occur and be continuing:
(a) Borrower fails or refuses to pay, within five (5) Business
Days of the date when due, any principal of, or interest on, any Note,
or any fee, expense or other Obligations payable by Borrower; or
(b) any representation, warranty or certification made or deemed
made by, or on behalf of, any Company under, or in connection with,
any of the Loan Papers, or in any certificate, notice, request,
statement or other communication furnished or made to the Agent or any
Bank pursuant hereto or in connection herewith is untrue, misleading
or inaccurate in any material respect as of the date on which such
representation, warranty or certification was made (or deemed made) or
furnished; or
(c) either (i) any Company fails to perform, observe or comply
with any covenant or agreement contained in ARTICLE 6 or the
occurrence of an event or circumstance designated as a "default" or an
"event of default' under any other Loan Paper or (ii) except as
provided in SECTION 7.1(a) or SECTION 7.1(c)(i), any Company fails to
perform, observe or comply with any covenant or agreement contained in
this Agreement or any other Loan Paper, which failure continues for a
period of 30 days after the occurrence thereof; or
(d) either (i) any Company defaults in the payment of any
Indebtedness in excess of $100,000 of such Company or defaults in
respect of any note, agreement, indenture, loan agreement, credit
agreement, bond or other document evidencing or relating to any such
Indebtedness, including without limitation, the Indenture, and such
default continues for more than the period of grace, if any, specified
therein or (ii) any Indebtedness of any Company in excess of $100,000
becomes due or prepayable before its stated maturity by acceleration
of the maturity thereof or otherwise; or
(e) any Company (i) applies for or consents to the appointment of,
or the taking of possession by, a receiver, trustee, custodian,
intervenor or liquidator of such Company or of all or a substantial
part of its Property, (ii) commences or files a voluntary petition,
proceeding or case in bankruptcy, or admit in writing that it is
unable to pay its debts as they become due or generally not pay its
debts as they become due, (iii) makes a general assignment for the
benefit of creditors, (iv) files a petition or answer seeking
reorganization or an arrangement with creditors or take advantage of
any Debtor Laws, (v) files an answer admitting the material
allegations of or consenting to, or defaults in answering, a petition,
proceeding or case filed against it in any bankruptcy, reorganization
or insolvency proceeding or (vi) takes corporate action for the
purpose of effecting any of the foregoing; or
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(f) an involuntary petition, proceeding, case or complaint is
filed against any Company seeking bankruptcy, liquidation,
dissolution, winding-up or reorganization of such Company or the
composition or readjustments of its debts, or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of it or all or
substantially all of its Property, and such petition, proceeding, case
or complaint is not dismissed within 60 days of the filing thereof; or
an order, order for relief, judgment or decree shall be entered by any
court of competent jurisdiction or other competent authority approving
a petition, proceeding, case or complaint seeking liquidation,
reorganization, dissolution, winding-up or bankruptcy of any Company
or appointing a receiver, custodian, trustee, intervenor or liquidator
of any Company, or of all or substantially all of its Property, and
such order, order for relief, judgment or decree continues unstayed
for a period of 60 days; or
(g) one or more final and non-appealable Judgments that,
individually or in the aggregate, require the payment of money (in
excess of applicable insurance coverage for which no coverage dispute
exists) in excess of the sum of $250,000 or any other Judgments that,
individually or in the aggregate, require the payment of money (in
excess of applicable insurance coverage for which no coverage dispute
exists) in excess of the sum of $1,000,000 are rendered against any
Company or with respect to its Property, and such Judgment or
Judgments shall not be satisfied or discharged within 30 days of the
date it is rendered; or
(h) both (i) and (ii) following shall occur: (i) either (A)
proceedings are instituted to terminate, or a notice of termination is
filed with respect to, any Plan by any Company, any member of the
"controlled group" (as defined in the Code) of any Company, PBGC or
any representative of any thereof, or any such Plan shall be
terminated, in each case under Section 4041 or 4042 of ERISA, or (B) a
"reportable event" (as defined in Title 4 of ERISA) occurs with
respect to any Plan arid continues for a period of 60 days, and (ii)
the sum of the estimated liability to PBGC under Section 4062 of ERISA
and the currently payable obligations of the Companies to fund
liabilities (in excess of amounts required to be paid to satisfy the
minimum funding standard of Section 412 of the Internal Revenue Code)
under the Plan or Plans subject to such event exceeds 10% of the
Companies' consolidated net worth at such time; or
(i) a Change in Executive Management which is not acceptable to
Banks shall occur, except to the extent any change is due to death or
disability ;
(j) a Change in Control shall occur; or
(k) except pursuant to the express terms of any Loan Paper or
except with the prior written consent of Agent, any Loan Paper shall,
at any time after its execution and delivery and for any reason, cease
to be in force and effect or be declared to be null and void, or
Borrower or any other Company(other than the Agent or the Banks) shall
deny that it has any or any further liability or obligations under any
Loan Paper to which it is a party.
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7.2 REMEDIES UPON EVENT OF DEFAULT. In the event an Event of
Default occurs and is continuing, the Agent may, and upon written request of
the Required Banks, shall, exercise any one or more of the following Rights,
and any other Rights available at law or in equity or provided in any of the
Loan Papers: (i) terminate all or any portion of the Commitments, and such
Commitments shall thereupon terminate, (ii) declare the principal of, and all
earned and accrued unpaid interest on, the Notes then outstanding and all other
accrued and unpaid Obligations to be immediately due and payable, whereupon the
same shall be and become due and payable, each and all of the foregoing without
presentment, demand, protest, notice of default, NOTICE OF INTENT TO
ACCELERATE, NOTICE OF ACCELERATION or other notice of any kind, all of which
are hereby waived by Borrower, and (iii) if requested by the Required Banks, by
notice to Borrower, exercise any or all of the Banks; Rights under any or all
of the Security Documents, provided however, upon the occurrence of any Event
of Default specified in SECTION 7.1(e) or SECTION 7.1(f), all of the
Commitments shall thereupon automatically and immediately terminate and the
principal of, and all earned and accrued unpaid interest on the Notes then
outstanding and all other accrued and unpaid Obligations shall thereupon be and
become automatically and immediately due and payable, each and all of the
foregoing without presentment, demand, protest, notice of default, NOTICE OF
INTENT TO ACCELERATE, NOTICE OF ACCELERATION or other notice of any kind, all
of which are hereby waived by Borrower. If any amount payable under any of the
Loan Papers is not paid when due the outstanding and unpaid portion of such
amount shall bear interest at the Default Rate.
ARTICLE 8
THE AGENT AND BANKS
8.1 APPOINTMENT OF THE AGENT. Each of the Banks hereby appoints
the Agent to act as herein specified, and acting in the manner and to the
extent provided in this ARTICLE 8, the Agent accepts such appointment. Each of
the Banks hereby irrevocably authorizes the Agent to receive payments of
principal, interest and other amounts due hereunder as specified herein and
otherwise to take such action on its behalf, to exercise such powers and to
perform such duties under the Loan Papers as are specifically delegated to, or
required of, the Agent by the terms of the Loan Papers, together with all other
powers reasonably incidental thereto, which authorization permits the Agent to
perform any of its duties under the Loan Papers by or through its agents,
attorneys or employees. The Agent shall have no duties or responsibilities
except those expressly set forth with respect to it in the Loan Papers. The
relationship of the Agent to the Banks is only that of one company acting
solely as an administrative agent for others, and nothing in the Loan Papers,
express or implied, is intended to, or shall be construed to, constitute the
Agent a trustee or other fiduciary for any holder of any of the Notes, or of
any participation therein, nor to impose on the Agent duties and obligations
other than those expressly provided for in the Loan Papers. As to any matters
not expressly provided for in the Loan Papers and any matters to which the Loan
Papers place within the discretion of the Agent, the Agent shall not be
required to exercise any discretion or take any action and it may request
instructions from the Banks with respect to any such matter, in which case it
shall be required to act or refrain from
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acting (and shall be fully protected and free from liability to all Banks in so
acting or refraining from acting) upon the instructions of the Required Banks
(including itself), and such instructions shall be binding upon all Banks and
all holders of, and participants in, the Notes; provided however, (i) the Agent
shall in all cases be fully justified in failing or refusing to act under any
Loan Paper unless it shall be indemnified to its satisfaction by the Banks
against any and all liability and expense (other than any such liability or
expense proximately caused by the Agent's gross negligence or willful
misconduct, as determined by a final judgment) which may be incurred by it by
reason of taking or continuing to take any such action, and (ii) the Agent
shall not in any event be required to take any action which (A) is contrary to
any Loan Paper or Law or (B) exposes it to a risk of personal liability that it
reasonably considers unreasonable.
8.2 EXCULPATION: AGENT'S RELIANCE. AS AMONG THE BANKS, NEITHER THE
AGENT NOR ANY OF ITS AFFILIATES, NOR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
AGENTS, ATTORNEYS, INSURERS OR EMPLOYEES, NOR ANY OF ITS OR THEIR SUCCESSORS,
HEIRS, LEGAL REPRESENTATIVES OR ASSIGNS (COLLECTIVELY, THE "AGENT
INDEMNITEES"), SHALL EVER BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN
BY ANY OF THEM UNDER OR IN CONNECTION WITH ANY LOAN PAPER, INCLUDING THEIR
NEGLIGENCE OF ANY KIND, EXCEPT THAT EACH SHALL RESPECTIVELY BE LIABLE FOR ITS
OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limiting the generality of
the foregoing or any other provision of any Loan Paper, the Agent: (i) may
treat the payee of any Note as the holder thereof until the Agent receives and
accepts an assignment and acceptance entered into by the Persons as provided in
SECTION 10.7 and all other provisions of SECTION 10.7 are complied with to the
reasonable satisfaction of the Agent; (ii) may consult with legal counsel
(including counsel for any Company), independent public accountants and other
experts and advisors selected by it and shall be fully protected and free from
liability to all Banks for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, experts
or advisors; (iii) makes no warranty or representation to any Bank and shall
not be responsible to any Bank for any statements, recitals, information,
warranties or representations made in or in connection with any Loan Paper, or
in any communication or writing made or delivered in connection therewith; (iv)
shall not have any duty to ascertain, to inquire or to keep itself informed as
to the financial condition of the Companies or any of them or the performance
or observance of any of the terms, covenants or conditions of any Loan Paper on
the part of any Person or to inspect the Property (including the books and
records) of any Company or such Company's Subsidiaries or any other Person; (v)
shall not be responsible to any Bank for the financial condition of the
Companies or any of them or the due execution, legality, validity,
enforceability, collectibility, genuineness, sufficiency or value of any Loan
Paper or instrument or document furnished in connection therewith, or the
creation, perfection, continued creation or perfection, or priority, of any
Lien purported to be created by any Loan Paper, or any other instrument or
document furnished pursuant hereto or thereto; and (vi) may rely, and shall be
fully protected and free from liability to all Banks in relying, (A) upon the
representations and warranties of any Company, the Banks in exercising its
powers hereunder, and (B) upon any notice, consent, certificate, statement,
resolution, instrument or other writing (which may be by telegram, cable,
telecopy, facsimile, telex, mail or telephone) believed by it to be genuine and
signed, sent, communicated or otherwise made by the proper Person or Persons.
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8.3 DEFAULTS. The Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest on Loans or of commitment fees) unless the Agent has
received written notice from any Bank or Borrower specifying the occurrence of
such Default or Event of Default and stating that such notice is a "NOTICE OF
DEFAULT". In the event that the Agent receives a Notice of Default, it shall
give prompt notice thereof to the Banks (and shall give each Bank prompt notice
of each such non-payment). Subject to SECTION 8.1, the Agent shall take such
action with respect to such Default or Event of Default as shall be directed by
the Required Banks; provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall in its sole and absolute discretion deem
advisable in the best interest of the Banks.
8.4 RIGHTS AS A BANK. The Frost National Bank (and any successor
acting as the Agent), in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any Bank and may exercise the same as though it
were not the Agent, and the term "BANK", "BANKS", "REQUIRED BANKS", "HOLDERS OF
NOTES" or similar terms shall, unless otherwise expressly indicated, include
The Frost National Bank (and any successor acting as Agent) in its individual
capacity. The Frost National Bank (and any successor acting as the Agent) and
its Affiliates may accept deposits from, lend money to, act as trustee under
indentures or as transfer agent in respect of capital stock of, and generally
engage in any kind of banking, trust, investment, financial advisory or other
business with, the Borrower or its respective Affiliates, and may accept fees
and other consideration from Borrower or its respective Affiliates for services
in connection with any of the foregoing, any of the Loan Papers or otherwise,
all as if it were not Agent hereunder and without having to account for the
same to the Banks. All fees and other amounts received by Agent for its
capacity as Agent hereunder shall solely be for its benefit and no other party
hereto.
8.5 INDEMNIFICATION. EACH BANK AGREES TO INDEMNIFY, REIMBURSE AND
HOLD HARMLESS EACH AGENT INDEMNITEE (TO THE EXTENT NOT INDEMNIFIED AND
REIMBURSED, ON DEMAND, BY BORROWER), RATABLY ACCORDING TO ITS PERCENTAGE SHARE,
FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES,
PENALTIES, ACTIONS, SUITS, JUDGMENTS, DEMANDS, SETTLEMENTS, COSTS,
DISBURSEMENTS OR EXPENSES (INCLUDING THE REASONABLE FEES AND EXPENSES OF
ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER
(IN THIS SECTION 8.5 THE FOREGOING IS COLLECTIVELY REFERRED TO AS THE
"LIABILITIES AND COSTS"), WHICH TO ANY EXTENT (IN WHOLE OR PART) MAY BE IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST, SUCH AGENT INDEMNITEE IN ANY WAY RELATING
TO, OR ARISING OUT OF, THE LOAN PAPERS AND THE TRANSACTION AND EVENTS
(INCLUDING THE ENFORCEMENT THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR
CONTEMPLATED THEREIN (INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY
ENVIRONMENTAL LAWS BY ANY PERSON OR ANY LIABILITIES OR DUTIES OF ANY PERSON
WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN
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OR RELEASED INTO THE ENVIRONMENT) OR AS A RESULT OF ANY ACTION TAKEN OR OMITTED
TO BE TAKEN BY SUCH AGENT INDEMNITEE, INCLUDING ITS NEGLIGENCE OF ANY KIND,
OTHER THAN AS PROVIDED IN THE FOLLOWING PROVISO, THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF AN AGENT INDEMNITEE; PROVIDED THAT NO BANK SHALL BE
LIABLE FOR ANY PORTION, OF ANY LIABILITIES AND COSTS, IF ANY, WHICH IS
PROXIMATELY CAUSED BY THE AGENT'S OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH BANK AGREES,
IN PROPORTION WITH ITS PERCENTAGE SHARE, TO REIMBURSE THE AGENT PROMPTLY UPON
ITS DEMAND FOR ANY COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND EXPENSES
AND OTHER CHARGES) INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION,
EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT
(WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL
ADVICE IN RESPECT OF THEIR RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN PAPERS,
OR ANY OF THEM, OR ANY OTHER DOCUMENTS CONTEMPLATED BY THE LOAN PAPERS, TO THE
EXTENT THAT THE AGENT IS NOT REIMBURSED, ON DEMAND, FOR SUCH AMOUNTS BY
BORROWER. Agent agrees that it shall, in turn, reimburse each Bank, in
proportion with its percentage share, for any sums actually paid by such Banks
pursuant to this provision, to the extent the same are actually recovered by
Agent and paid to Agent by Borrower or other Loan Party, less costs and
expenses of Agent in obtaining such payment(s). Each Bank's obligations under
this paragraph shall survive the termination of this Agreement and the
discharge of Borrower's obligations hereunder.
8.6 BANK'S CREDIT DECISION AND NON-RELIANCE. Each Bank hereby
acknowledges that it has, independently and without reliance upon the Agent or
any other Person, and based upon such documents and information as it has
deemed appropriate, made (i) its own independent investigation and analysis
(including legal and credit investigation and analysis) of the Companies and
their Affiliates, and their respective financial conditions, operations and
affairs, and Properties, and the transactions provided for in, and contemplated
by, each of the Loan Papers, including without limitation, the conformity of
such transactions with the terms of the Indenture and any documents executed or
issued pursuant to it, and (ii) its own independent decision to enter into and
perform each Loan Paper. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Person, and
based on such investigation, analysis, documents and information as it shall
deem appropriate at the time, continue to make its own independent legal,
credit and other decisions in taking or omitting to take action under or in
connection with the Loan Papers. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the affairs,
financial condition, or business of the Companies or any of their respective
Affiliates which may come into the possession of the Agent or any of its
Affiliates.
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8.7 DEFERRAL OF DISTRIBUTIONS; INVESTMENTS. Whenever the Agent in
good faith determines that it is uncertain about how to distribute to the Banks
any funds which it has received, or whenever the Agent in good faith determines
that there is any dispute among the Banks about how such funds should be
distributed, the Agent may choose to defer distribution of the funds which are
the subject of such uncertainty or dispute. If the Agent in good faith believes
that the uncertainty or dispute will not be promptly resolved, it may, or if
the Agent is otherwise required to invest funds pending distribution to the
Banks, it shall, invest such funds (in thirty day United States Treasury bills)
pending distribution in any manner it deems appropriate, absent timely
instructions from the Required Banks; all interest on any such investment (net
of investment and related costs, if any, incurred in connection therewith)
shall be distributed upon the distribution of such investment and in the same
proportion and to the same Persons as such investment. All moneys received by
the Agent for distribution to the Banks (other than to the Person who is the
Agent in its separate capacity as a Bank) shall be held by the Agent pending
such distribution solely as the Agent for such Banks, and the Agent shall have
no equitable title to any portion thereof. ABSENT GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON ITS PART BUT EXCLUDING ITS OWN NEGLIGENCE OF ANY OTHER KIND, THE
AGENT SHALL BE FULLY PROTECTED AND FREE FROM LIABILITY TO THE BANKS FOR ANY
COSTS AND LIABILITIES RESULTING FROM OR RELATED TO THE DEFERRAL OF
DISTRIBUTIONS AND/OR MAKING OF INVESTMENTS AS PROVIDED FOR IN THIS SECTION 8,7
INCLUDING THE FAILURE OF ANY SUCH INVESTMENT.
8.8 NATURE OF ARTICLE 8. The provisions of this ARTICLE 8 (other
than the following SECTION 8.9) are intended solely for the benefit of the
Agent and the Banks, and neither Borrower nor any other Person shall be
entitled to rely on any such provision or assert any such provision in a claim
or defense against the Agent or any Bank. The Agent and the Banks may waive or
amend such provisions as they desire without any notice to or consent of
Borrower. Nothing contained in any Loan Paper, and no action taken by any Bank
or the Agent pursuant hereto or in connection herewith or pursuant to or in
connection with the Loan Papers, shall be deemed to constitute the Banks,
together or with or without the Agent, a partnership, association, joint
venture or other entity.
8.9 RESIGNATION AND REMOVAL BY AGENT. The Agent may resign at any
time as the Agent under the Loan Papers by giving written notice thereof (which
notice shall contain the date of such resignation) to the Banks and the
Borrower and, upon the gross negligence or manifest incompetence of the Agent,
the Agent may be removed as the Agent under the Loan Papers by the Required
Banks. Upon any such resignation or removal, the Required Banks (without having
to obtain the consent of Borrower) shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required Banks
and shall have accepted such appointment within 30 calendar days after the
retiring Agent's giving of notice of resignation or the Required Banks' removal
of the retiring Agent, as applicable, then the retiring Agent may, on behalf of
Banks (without having to obtain the consent of Borrower) appoint a successor
Agent, which shall be a commercial bank organized under the laws of the United
States of America or of any State thereof having a combined capital and surplus
of at least $500,000,000. In any case where a successor Agent is being
selected, the parties agree to attempt to select such successor from one of the
Banks. Upon the acceptance of any appointment
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as the Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, privileges and
duties of the retiring or removed Agent and the retiring or removed Agent shall
be discharged from its duties and obligations under the Loan Papers. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this ARTICLE 8 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Agent under the Loan Papers.
ARTICLE 9
CHANGED CIRCUMSTANCES
9.1 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If
on or prior to the first day of any Interest Period, (i) the Agent shall have
determined (which determination shall be conclusive and binding upon Borrower)
that, by reason of circumstances affecting the interbank eurodollar market, or
reporting or data gathering and/or dissemination networks, systems or companies
related thereto or dealing therewith, adequate and reasonable means do not
exist for ascertaining the London Interbank Offered Rate for such Interest
Period, or (ii) the Agent shall have received written notice from the Required
Banks that for reasons beyond their control the London Interbank Offered Rate
determined or to be determined for such Interest Rate Period will not
adequately and fairly reflect the cost to such Banks (as conclusively certified
by such Banks) directly related to the making or maintaining of their LIBOR
Loans during such Interest Period, then the Agent shall forthwith give notice
thereof to Borrower and the Banks. Until the Agent notifies Borrower that such
notice has been withdrawn by the Agent, no further LIBOR Loans by any Bank
shall be made or continued as such, nor shall Borrower have the right to
convert Loans to LIBOR Loans.
9.2 ILLEGALITY. Notwithstanding any other provision herein, if at
any time a Bank determines (which determination shall be reasonably exercised
and if so reasonably exercised, shall be conclusive and binding upon the
parties, absent manifest error) that the making or maintaining LIBOR Loans
hereunder has become unlawful pursuant to applicable Law, or any
interpretation, application or administration thereof (whether or not having
the force of law), then such Bank (an "AFFECTED BANK") shall so promptly notify
the Agent, the other Banks and Borrower. Upon giving such notice (i) the
obligations of all Banks to make or continue, or to convert Base Rate Loans
into, LIBOR Loans shall be suspended until the Affected Bank notifies the
Agent, the other Banks and Borrower that it may again make and maintain LIBOR
Loans, and (ii) Borrower shall, upon the request of any Bank, prepay any LIBOR
Loan then outstanding (which prepayment, if requested by Borrower, shall be
made with the proceeds or effect of a Base Rate Loan extended contemporaneously
by such Bank), together with accrued interest thereon, and loss and expenses,
if any, provided for in SECTION 2.12.
9.3 INCREASED COST AND REDUCED RETURN.
(a) If the adoption of, or any change in, any Law, or in the
interpretation, application or administration thereof, or compliance by any
Bank (or its Lending Office) with any request or
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directive (whether or not having the force of law) of any central bank or other
Governmental Authority:
(i) shall subject any Bank (or its Lending Office) to any
tax, duty or other charge of any kind whatsoever with respect to this
Agreement or any Note or any LIBOR Loan made by it, or its obligations
in respect to any of the foregoing, or shall change the basis of
taxation of payments to such Bank (or its Lending Office) in respect
to any amounts due to it in respect to any of the foregoing (except
for changes in the rate of tax on the overall net income, gross
receipts or capital of such Bank or its Lending Office imposed by any
jurisdiction); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit, compulsory loan or similar requirement (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System) against assets of, deposits
with or other liabilities of or for the account of, advances, loans or
other extensions of credit by, or other acquisition of funds by, any
Bank (or its Lending Office), which is not otherwise included in the
determination of the Adjusted London Interbank Offered Rate; or
(iii) shall impose on any Bank (or its Lending Office) or
on the London interbank market any other condition affecting this
Agreement, any Note, or any LIBOR Loan, or its obligations in respect
to any of the foregoing;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Lending Office) of making, converting into, continuing or
maintaining any LIBOR Loan or to reduce the amount of any sum received or
receivable by such Bank (or its Lending Office) under this Agreement or under
its Notes with respect thereto, then subject to SECTION 10.8 within 5 Business
Days after written demand by such Bank (with a copy to the Agent), made within
90 days after such event, Borrower shall, without limiting the effect of any
other applicable provision hereof (but without duplication) pay to such Bank
such additional amount or amounts as will compensate such Bank for such
increased costs or reduction of amount receivable.
(b) If the adoption of, or any change in, any Law
regarding capital adequacy or risk-based capital guidelines or requirements, or
in the interpretation, application or administration thereof or compliance by
any Bank (or its Lending Office, or its or any of their Affiliates) with any
request or directive regarding capital adequacy or risk-based capital
guidelines or requirements (whether or not having the force of law) of any
central bank or other Governmental Authority, does or shall, in the reasonable
determination of such Bank, have the effect of reducing the rate of return on
such Bank's (or its Lending Office, or its or their Affiliates) capital or
assets as a consequence of its obligations hereunder, to a level below that
which such Bank (or its Lending Office, or its or their Affiliates) could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's (or its Lending Office, or its or their Affiliates) policies with
respect to capital adequacy or risk-based capital guidelines or requirements),
then from time to time, within 5 Business Days after written demand by such
Bank (with a copy to the Agent) made within 90 days after such event, subject
to SECTION
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10.8, Borrower shall, without limiting the effect of the foregoing provisions
of this SECTION 9.3 (but without duplication), pay to such Bank such additional
amount or amounts as will compensate such Bank for the amount of such
reduction.
(c) Each Bank will promptly notify Borrower and the Agent of any
event of which it has knowledge which will entitle such Bank to compensation
pursuant to this SECTION 9.3. A certificate of any Bank claiming compensation
under this SECTION 9.3 and setting forth the additional amount or amounts to be
paid to it, as well as the manner in which such amount or amounts were
calculated, hereunder shall be conclusive and binding on Borrower in the
absence of manifest error. In determining such amount, such Bank may use, among
others, any reasonable averaging and attribution methods.
9.4 SUBSTITUTE RATE FOR AFFECTED LIBOR LOANS.
(a) If the obligation of any Bank to make, convert or continue (as
applicable) a LIBOR Loan shall be suspended pursuant to SECTION 9.1 or SECTION
9.2 (each such affected LIBOR Loan, an "AFFECTED LOAN"), then each such
Affected Loan that otherwise would have been made, converted or continued (as
applicable) by the Banks as a LIBOR Loan shall be made, converted or continued
(as applicable) instead as a Base Rate Loan.
(b) If the London Interbank Offered Rate is not published or
reported for 30 consecutive days or 30 days have passed since Borrower's
receipt of an Agent's notice as provided under in SECTION 9.1 or an Affected
Bank's notice as provided in SECTION 9.2, as applicable, and the circumstance
underlying such notice continues to exist, then within 15 days after the
earlier to occur of any such event (such earliest to occur event, a "LIBOR
Event"), and so long as such LIBOR Event shall be continuing, Borrower may
notify the Agent and the Banks that it desires to discuss with them the
availability of a reasonably comparable alternate rate option or additional
interest rate option for the Loans that is mutually agreeable to Borrower, the
Agent and the Banks; and, if Borrower, the Agent and the Banks so mutually
agree within 30 days after such notice is given by Borrower, the parties shall
as soon as reasonably practical thereafter enter into an amendment to this
Agreement and any other affected Loan Papers in form, scope and substance, and
upon terms and conditions, satisfactory to the Agent and the Banks. If, in any
event, any Bank does not, in its sole discretion (with due respect for, among
other matters, its independent requirements, considerations and circumstances),
agree to any proposed alternate or additional interest rate option within such
30-day period, no such alternate or additional interest rate option shall be
available with respect to the LIBOR Event initiating the discussions related to
such proposed alternative or additional interest rate option.
9.5 ALTERNATE LENDING OFFICE DESIGNATION. Each Bank agrees that it
will endeavor to use reasonable efforts to designate an alternate Lending
Office with respect to any LIBOR Loans affected by the matters or circumstances
described in any of SECTIONS 9.1, 9.2 and 9.3 to reduce the liability of
Borrower or avoid the results provided thereunder, so long as such designation
is not disadvantageous to such Bank as determined by it in its sole discretion;
provided, however, no Bank shall have any obligation to so designate an
alternate Lending Office located in the United States of America.
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ARTICLE 10
MISCELLANEOUS
10.1 NOTICES.
(a) All notices, requests and other communications to any party
under any Loan Paper shall be in writing or, in the case of a Notice of
Borrowing, by telephone confirmed the same day in writing on or before 11:00
A.M. (San Antonio time) (including bank wire, telecopy, telex or similar
writing) and shall be given to such party at its address, telecopy or telex
number set forth in Annex A or such other address, telecopy or telex number as
such party may hereafter specify for the purpose by notice to the Agent and
Borrower. Each such notice, request or other communication shall be effective
(i) if given by telex, when such telex is transmitted to the telex number
specified pursuant to this SECTION 10.1 and the appropriate answerback is
received, (ii) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified pursuant to this SECTION 10.1, and the sender has
received electronic confirmation thereof, (iii) if given by registered or
certified mail, return receipt requested, 72 hours after such communication is
deposited in the mails with postage prepaid, addressed as aforesaid or (iv) if
given by any other means, when delivered at the address specified pursuant to
this SECTION 10.1; provided that notices to the Agent under ARTICLE 2 or
ARTICLE 9 shall not be effective until actually received by a representative of
the Agent, as distinguished from received at its place of business only.
(b) Any verbal communication or instrument in writing received by
the Agent in connection with a Borrowing or a Loan, or any other matter with
respect to any Loan Paper, which purports to be dispatched or signed by or on
behalf of Borrower and confirmed, in the case of a verbal communication, by the
Agent by telephone confirmation with an Authorized Officer of Borrower, shall
conclusively be deemed to have been dispatched or signed by or on behalf of
Borrower pursuant to such Person's authority to bind Borrower and all other
Persons for the liabilities and matters in connection therewith to the Agent
and each Bank; and the Agent and each Bank may conclusively rely thereon and
shall have no obligation, duty or responsibility to determine the validity or
genuineness thereof or the authority of the Person or Persons executing or
dispatching the same.
10.2 NO WAIVERS. No failure or delay by the Agent or any Bank in
exercising any Right under any Loan Paper, and no course of dealing with
respect to any such Rights, shall operate as a waiver thereof, nor shall any
single or partial exercise thereof or any abandonment or discontinuance of
steps or actions to enforce any Rights, preclude or prejudice the concurrent or
subsequent exercise thereof or the exercise of any other such Rights. The
Rights provided in the Loan Papers shall be cumulative and not exclusive of any
rights or remedies provided by Law or in equity.
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10.3 PAYMENT OF COSTS AND EXPENSES; PROFESSIONALS AND CONSULTANTS.
(a) Borrower agrees to pay all reasonable costs and expenses
incurred (whether before, after or during the Closing Date) by or on behalf of
the Agent and Banks (including audit costs and expenses and all attorneys' and
other professionals' and consultants' fees, costs and expenses of Agent and
Banks incurred in connection with the preparation of, advice or counsel
regarding, or enforcement of, any Loan Paper) in connection with (i) the
investigation, review, negotiation, preparation, execution, delivery,
administration, syndication, participation, filing, recordation, refinancing,
restructuring, renegotiation or enforcement of each of the Loan Papers, and any
and all renewals, amendments, extensions, restatements, supplements,
rearrangements, consents, waivers, assignments and modifications thereto or
thereof, and the transactions contemplated thereby, (ii) the monitoring,
evaluating, making, maintaining, servicing, enforcement and collection of the
Loans, (iii) the creation, preservation, maintenance, protection, perfection
and enforcement of Rights under each Loan Paper and Liens in Property (whether
or not incurred in connection with the commencement of a proceeding,
litigation, foreclosure or other proceeding), specifically including all costs
and expenses incurred with respect to any bankruptcy, insolvency or
reorganization proceeding, regardless of whether the Agent ultimately prevails
in such bankruptcy, insolvency or reorganization proceeding, and (iv) all
amounts expended, advanced or incurred by or on behalf of the Agent or Banks to
satisfy any obligation of Borrower under any Loan Paper which is not timely
satisfied by Borrower, if the Agent, or any Bank at its discretion, so chooses
to incur any such expenses or costs.
(b) Should Borrower fail to perform or observe any covenant or
agreement contained in any of the Loan Papers and such failure continues
through the cure period provided for therein, if any, the Agent or any Bank may
then perform or attempt to perform such covenant or agreement on behalf of
Borrower. Such Person will endeavor to give Borrower notice of such performance
or attempted performance. Borrower shall, at the request of such Person,
promptly pay any amount expended in such performance or attempted performance
to such Person at the principal office of the Agent, together with interest on
the portion thereof from time to time remaining unpaid at the Default Rate.
Notwithstanding the foregoing, it is expressly understood and agreed that (i)
neither the Agent nor any Bank assumes any liability or responsibility for the
performance of any covenants or agreements of Borrower hereunder or under any
of the other Loan Papers, or any other documents, or other control over the
management and affairs of Borrower, and (ii) Borrower's failure to perform any
covenant or agreement that is cured, in whole or part, by any of their action
shall be and continue a Default unless and until (A) all of such Person's
attendant costs and expenses have been reimbursed as herein provided and (B)
Borrower has submitted, and the Agent has received and approved. with the
consent of the Required Banks, such objective evidence that supports the
determination that such Default will not reoccur.
(c) Borrower acknowledges and agrees that all attorneys,
accountants, auditors, and other professional Persons and consultants who are
from time to time engaged or employed by the Agent or any Bank (including,
without limitation, Jenkens and Gilchrist, Groce, Locke and Hebdon, a
Professional Corporation, who are only attorneys for Agent and Frost,
individually) and whose fees and expenses are or may be paid or reimbursed, as
applicable, by Borrower, pursuant to the terms of any Loan Paper, are not the
professionals of Borrower, and each of them (i) shall have the right to act
exclusively in the interest of the Agent, and (ii) shall have no duty
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of disclosure, duty of loyalty, duty of care or any other duty of any type or
nature whatsoever, or deemed to have any attorney-client or other similar
professional relationship whatsoever, to Borrower.
10.4 INDEMNIFICATION. SUBJECT TO SECTION 10.8, BORROWER SHALL
INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS EACH BANK AND THE AGENT, AND THEIR
RESPECTIVE AFFILIATES, SUBSIDIARIES, PARENT COMPANIES AND OTHER RELATED
ENTITIES, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS AND OTHER PROFESSIONALS AND CONSULTANTS, INSURERS AND STOCKHOLDERS,
AND EACH OF THEM (AND TOGETHER WITH EACH AND ALL OF THEIR RESPECTIVE
SUCCESSORS, ASSIGNS, HEIRS AND LEGAL REPRESENTATIVES, THE "INDEMNIFIED
PARTIES"), ALL PARTIES FROM AND AGAINST LIABILITIES, OBLIGATIONS, LOSSES,
CLAIMS, ACTIONS, SUITS AND OTHER LEGAL PROCEEDINGS, JUDGMENTS, PENALTIES,
DAMAGES, COSTS, INTEREST, CHARGES, ATTORNEYS' AND OTHER PROFESSIONALS' AND
CONSULTANTS' FEES AND OTHER EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER ("INDEMNIFIED COSTS"), WHICH MAY BE IMPOSED ON, INCURRED OR
SUSTAINED BY, OR ASSERTED AGAINST, THE INDEMNIFIED PARTIES, OR ANY OF THEM, BY
REASON OF, ARISING OUT OF, OR IN ANY MANNER RELATED TO (DIRECTLY OR INDIRECTLY,
CONSEQUENTIALLY, OR OTHERWISE), ANY LOAN PAPER, THE TRANSACTIONS CONTEMPLATED
THEREBY, OR THE ENFORCEMENT, PROTECTION OR ADMINISTRATION THEREOF OF WITH
RESPECT THERETO (COLLECTIVELY, THE "SUBJECT TRANSACTIONS"), INCLUDING , WITHOUT
LIMITATION, DAMAGES, COSTS AND EXPENSES INCURRED BY ANY OF THE INDEMNIFIED
PARTIES IN INVESTIGATING, PREPARING FOR, DEFENDING AGAINST, OR PROVIDING
EVIDENCE, PRODUCING DOCUMENTS, OR TAKING ANY OTHER ACTION IN RESPECT OF ANY
COMMENCED OR THREATENED LITIGATION UNDER ANY FEDERAL OR STATE, OR ANY
SUBDIVISION THEREOF, SECURITIES OR ENVIRONMENTAL LAW OR ANY OTHER LAW OR ANY
OTHER LAW OR ANY JURISDICTION OR AT COMMON LAW.
THE FOREGOING IS INTENDED TO INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS EACH
OF THE INDEMNIFIED PARTIES AGAINST ALL RISKS, FORESEEABLE OR UNFORESEEABLE,
INVOLVED IN THE SUBJECT TRANSACTIONS, INCLUDING WITHOUT LIMITATION, THE
NEGLIGENCE OR ALLEGED NEGLIGENCE (WHETHER SOLE, COMPARATIVE, CONTRIBUTORY OR
OTHERWISE) OF ANY OF THE INDEMNIFIED PARTIES, ALL Of WHICH RISKS ARE HEREBY
ASSUMED BY BORROWER. THE OBLIGATIONS OF BORROWER UNDER THIS SECTION 10.4 AND
UNDER SECTION 10.3 SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT
OF THE NOTES AND ALL OTHER OBLIGATIONS. TO THE EXTENT THAT THE FOREGOING
INDEMNIFICATION MAY BE DEEMED UNENFORCEABLE, IN WHOLE OR IN PART, FOR ANY
REASON WHATSOEVER, INCLUDING BECAUSE IT IS VIOLATIVE OF LAW OR PUBLIC POLICY AS
DETERMINED BY A FINAL, NON-APPEALABLE JUDGMENT OR ORDER OF A
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COURT OF COMPETENT JURISDICTION, BORROWER AGREES TO CONTRIBUTE THE MAXIMUM
PORTION THAT IT IS NOT PROHIBITED TO PAY UNDER APPLICABLE LAW, TO THE PAYMENT
AND SATISFACTION OF THE SUBJECT TRANSACTIONS; PROVIDED, HOWEVER AN INDEMNIFIED
PARTY SHALL NOT BE ENTITLED TO INDEMNIFICATION FOR INDEMNIFIED COSTS TO THE
EXTENT SUCH INDEMNIFIED COSTS ARE DIRECTLY CAUSED BY A BREACH OF ITS MATERIAL
OBLIGATIONS UNDER ANY LOAN PAPER OR ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.
10.5 SHARING OF SET-OFFS. Borrower hereby grants to Agent and each
Bank the right of set-off, to secure repayment of the Obligations, upon any and
all monies, securities or other Property of Borrower and the proceeds
therefrom, now or hereafter held or received by or in transit to Agent or any
Bank or any of their respective agents, from or for the account of Borrower,
whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and all deposits (general or special) and credits
of Borrower, and any and all claims of Borrower against Agent or any Bank at
any time existing. In connection with any set off, counterclaim or similar
action by any Bank, such Bank agrees that it shall comply with, and otherwise
be bound by, the provisions of SECTION 2.13. Borrower, the Agent and each Bank
agree that any Person purchasing a participation from a Bank pursuant to
SECTION 10.7(b) shall, to the fullest extent permitted by Law and if provided
in the participation agreement between the Bank and the participant, have all
of the obligations of a Bank pursuant to the terms of this SECTION 10.5.
Without limiting any Bank's right of set-off or counterclaim or otherwise, the
Agent shall have the right to charge any account of Borrower maintained with
Agent for the amount of any payment due under any Loan Paper or under the
Notes.
10.6 AMENDMENTS AND WAIVERS. All modifications, consents,
amendments, waivers and the like of any provision of any Loan Paper, or consent
to any departure by Borrower therefrom (collectively, the foregoing are
referred to in this SECTION 10.6 as a "modification"), shall be effective only
if the same is in a writing in form, scope and substance, and subject to
conditions and requirements, if any, acceptable to the Agent and the Required
Banks, and if so acceptable, is signed by Borrower, the Agent and, at least,
the Required Banks; provided that no such modification shall, unless consented
to in writing by all the Banks, (i) modify the Commitment of any Bank or
subject any Bank to any additional funding obligation, (ii) reduce the
principal amount or the stated rate of interest on any Loan or reduce any fees
hereunder (other than fees payable solely to the Agent), (iii) extends the date
fixed for any principal reduction pursuant to SECTION 2.8 or SECTION 2.9, the
payment of any interest on any Loan, the payment of any Reimbursement
Obligation or the payment of any fees hereunder (other than fees payable solely
to the Agent), the maturity date of any of the Obligations, the Revolving
Commitment Termination Date, (iv) release or impair the Lien in any Property in
favor of the Banks, (v) release any guarantor of the Obligations, (vi) change
the percentage of the Commitments or the aggregate unpaid principal amount of
the Notes, or the number of Banks which shall be required for the Banks or any
of them to take any action under this SECTION 10.6 or any other provision of
the Loan Papers, or (vii) affect this SECTION 10.6 or SECTION 10.3 or SECTION
10.4 or modify the definition of "Required Banks"; provided, further, that, no
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modification or waiver which modifies the rights, duties or obligations of the
Agent shall be effective without the prior written consent of the Agent.
10.7 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS.
(a) The Loan Papers shall be binding upon, and inure to the
benefit of the parties thereto and their respective successors and assigns,
except that (i)Borrower may not assign or transfer any of its rights or
obligations under any Loan Paper without the prior written consent of the Agent
and all the Banks, and (ii) unless otherwise permitted under this SECTION 10.7,
no Bank may transfer, pledge, assign, sell participations in or otherwise
convey or encumber its Commitments or Loans. Borrower shall not directly or
indirectly purchase or otherwise retire any Obligations owed to any Bank nor
will any Bank accept any offer to do so, unless each Bank shall have received
substantially the same offer with respect to the same pro rata share of the
Obligations owed to it. If Borrower, directly or indirectly, at any time
purchases some but less than all of the Obligations owed to the Agent and the
Banks, then notwithstanding any provision herein to the contrary such purchaser
or purchasers shall not be entitled to any rights of the Agent or the Banks
under the Loan Papers (including voting rights or the right to participate in
or determine any modification (as that term is defined in SECTION 10.6)),
unless and until Borrower has purchased all of the Obligations.
(b) Neither this Agreement nor any other Loan Paper, nor any
benefits hereunder or thereunder, shall inure to or for the benefit of any
Person that is not a signatory party hereto, other than any of such Persons
that are expressly named or designated as indemnitees, releasees or exculpatees
herein. All conditions to make the Loans hereunder, and all covenants,
warranties, representations, and other terms and provisions of, and applicable
to, Borrower in each Loan Paper are imposed solely and exclusively for the
benefit of the Agent and each Bank, and their respective successors and
assigns. No other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that no
Loans will be made in the absence of strict compliance with any or all of such
conditions; and no other Person shall, under any circumstances, be deemed to be
a beneficiary of such conditions, covenants, warranties, representations and
other terms and provisions. Any of such conditions, and the breach of, or
noncompliance with, any such covenants, warranties, representations and other
terms and provisions may be freely waived in whole or in part by the Agent and
the Banks (subject to applicable provisions hereof) at any time if in its or
their (as applicable) sole discretion it or they (as applicable) deem it
advisable to do so. No such conditions, covenants, warranties, representations
or other terms or provisions are intended to release, or authorize or permit a
breach by, Borrower of any of its obligations and requirements to any third
Person, or any noncompliance therewith, or to evidence the contractual
interference therewith by the Agent and the Banks.
(c) Subject to the provisions of this SECTION 10.7, any Bank may,
in the ordinary course of its business, without prior notice to or consent from
Borrower, and in accordance with applicable Law, at any time sell to one or
more Persons (each a "PARTICIPANT") participating interests in all or any part
of any Loans, or in the Commitments, of such Bank. In the event of any such
sale by a Bank to a Participant, (i) such Bank shall remain a "Bank" for all
purposes
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under this Agreement, and the Participant shall not constitute a "Bank"
hereunder, (ii) such Bank's obligations under this Agreement shall remain
unchanged, (iii) such Bank shall remain solely responsible for the performance
of its obligations under this Agreement, (iv) such Bank shall remain the holder
of any such Note and the obligor to fund its respective Commitments for all
purposes under this Agreement, and (v) Borrower, the Agent and the other Banks
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement and the other Loan
Papers. Participants shall have no rights under this Agreement or any of the
Loan Papers, other than rights of set off (and attendant obligations) expressly
set forth herein. No Bank shall sell any participating interest under which the
Participant shall have, and no Participant shall have, any rights to vote on
any modification (as such term is defined in SECTION 10.6) of this Agreement or
any other Loan Paper, and any agreement between any Bank and any Participant
granting any Participant any voting rights shall be void ab initio. Except in
the case of the sale of a participating interest to a Bank, the relevant
participation agreement shall not permit the Participant to transfer, pledge,
assign, sell participations in, or encumber its portion of, the Commitments or
the Loans.
(d) Subject to the provisions of this SECTION 10.7, any Bank may,
with consent of Agent and the Required Banks in the ordinary course of its
business, without prior notice to or consent from Borrower, in accordance with
applicable law, assign to one or more Qualified Banks (each a "PURCHASER") a
proportional part (not less than $2,000,000) of that Bank's Commitment, unless
such Bank is reducing its Commitments to the minimum permitted hereunder) of
its rights and obligations under the Loan Papers, and such Purchaser shall (i)
assume all such rights and obligations, pursuant to an assignment and
assumption agreement and other necessary and related documents, all in form,
scope and substance satisfactory to the Agent, executed by such Purchaser, such
transferor Bank and the Agent, (ii) execute and deliver the Assignment and
Acceptance Agreement attached hereto as EXHIBIT D and (iii) pay to the Agent,
for its account, a non-refundable processing fee in the amount of $2,000. Upon
the effectiveness of such assignment and assumption agreement, such Purchaser
shall for all purposes be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank under this Agreement to the same extent as if
it were an original party hereto with Commitments as set forth in the
assignment agreement, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by Borrower, the Banks or the Agent shall be required. Upon the
consummation of any transfer to a Purchaser pursuant to this SECTION 10.7(d),
the transferor Bank, the Agent and Borrower shall make appropriate arrangements
so that, if required, new Notes are issued to such Purchaser. Any sale
pursuant to this SECTION 10.7(d) shall be of an equal pro rata portion of each
of the transferor Bank's Commitments and Loans, provided, however, that in no
event shall Frost or Zions reduce its respective Commitment to be below 33 1/3%
of the total Commitments of all Banks, without the prior consent of the other.
A Purchaser shall be subject to all the provisions of this SECTION 10.7 the
same as if it were a Bank signatory hereto as of the Closing Date.
(e) Borrower authorizes each Bank to disclose any and all
financial information in such Bank's possession concerning Borrower which has
been delivered to such Bank by or on behalf of them pursuant to this Agreement
or which has been delivered to such Bank by them in connection with such Bank's
credit evaluation prior to entering into this Agreement (i) to any
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Participant or Purchaser (each a "TRANSFEREE"), and (ii) with the prior consent
of Borrower, to any prospective Transferee.
(f) No Transferee (including for this purpose a different Lending
Office of a Bank) shall be entitled to receive any greater payment under this
Agreement than the transferor Bank would have been entitled to receive with
respect to the rights assigned, unless such assignment is made with the prior
written consent of Borrower or by reason of the provisions referred to in
SECTION 9.5 regarding the designation of a different Lending Office under
certain circumstances.
(g) Notwithstanding any other provisions of this SECTION 10.7, no
transfer or assignment of the interests or obligations of any Bank hereunder or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require Borrower to file a registration statement
with the Securities and Exchange Commission or to qualify the Loans under the
'Blue Sky" laws of any state.
(h) Each Bank initially party to this Agreement hereby represents,
and each person that becomes a Bank pursuant to an assignment permitted by
SECTION 10.7(d) will, upon its becoming party to this Agreement, represent that
it is a Qualified Bank, and that it will make or acquire Loans only for its own
account in the ordinary course of its business; provided, however, that subject
to the preceding provisions of this SECTION 10.7, the disposition of any
promissory notes or other evidences of or interests in Obligations held by it
shall at all times be within its exclusive control.
10.8 MAXIMUM INTEREST RATE. It is the intent of the parties hereto
that each of the Agent and the Banks (collectively, the "FINANCING PARTIES"),
and Borrower in the execution, delivery and performance of all Loan Papers, the
transactions provided for therein and contemplated thereby, and all matters
incidental and related thereto and arising therefrom, shall comply and conform
strictly with Applicable Law from time to time in effect, including without
limitation, usury Laws. In furtherance thereof, the Financing Parties and
Borrower stipulate and agree that none of the terms and provisions contained
in, or pertaining to, the Loan Papers shall ever be construed to create a
contract to pay for the use or forbearance or detention of money with interest
at a rate or in an amount in excess of the Maximum Rate or maximum amount of
interest permitted or allowed to be contracted for, charged, received, taken or
reserved under said Laws. For purposes of each Loan Paper, (i) 'interest' shall
include the aggregate of all amounts which constitute or are deemed to
constitute interest under the Laws of the State of Texas or, to the extent they
may apply, the Laws of the United States of America, that are contracted for,
chargeable, receivable (whether received or deemed to have been received),
taken or reserved under each such document, and (ii) all computations of the
maximum amount of interest permitted or allowed under Applicable Law will be
made on the basis of the actual number of days elapsed over a 365 or 366 day
year, whichever is applicable. Neither Borrower nor any other person shall ever
be required to pay unearned interest on, or with respect to any of, the Loan
Papers and shall never be required to pay interest on, or with respect to any
of, the Loan Papers at a rate or in an amount in excess of the Maximum Rate or
maximum amount of interest that may be lawfully contracted for, charged,
received, taken or reserved under Applicable Law, AND THE PROVISIONS OF THIS
PARAGRAPH SHALL CONTROL OVER ALL OTHER PROVISIONS OF THE LOAN
CREDIT AGREEMENT
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PAPERS. In determining whether the interest paid or payable under any specific
contingency exceeds the Maximum Rate, Borrower, Agent and Banks shall, to the
maximum extent permitted under applicable law, (i) characterize any
nonprincipal payment as an expense or fee rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof, and (iii) amortize, prorate,
allocate and spread, in equal parts, the total amount of interest throughout
the entire contemplated term of the Notes so that the interest rate is uniform
throughout the entire term; provided that, if the Notes are paid and performed
in full before the end of the full contemplated term thereof, and if the
interest received for the actual period of existence thereof exceeds the
Maximum Rate, Agent and such Banks shall refund to Borrowers the amount of the
excess or credit the amount of the excess against the principal amount of the
Notes and, in that event, Agent and such Banks shall not be subject to any
penalties provided by any laws for contracting for, charging. taking, reserving
or receiving interest in excess of the Maximum Rate. If the effective rate or
amount of interest which would otherwise be payable under the Loan Papers would
exceed the Maximum Rate or maximum amount of interest any Financing Party or
any other holder of any Note or other Obligations is allowed by Applicable Law
to charge, contract for, take, reserve or receive, or in the event any
Financing Party or any holder of any Note or other Obligations shall charge,
contract for, take, reserve or receive monies that are deemed to constitute
interest which would, in the absence of this provision, increase the effective
rate or amount of interest payable under the Loan Papers to a rate or amount in
excess of that permitted or allowed to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect, then the principal
amount of such Note or other Obligations or the amount of interest which would
otherwise be payable thereunder shall be payable at, or reduced to, as
applicable, the maximum amount allowed pursuant to the then applicable
indicated (weekly) rate ceiling referred to hereinabove at the definition of
the term Applicable Law, or if no such ceiling is then in effect, as authorized
and allowed under said Laws as now or hereafter construed by the courts having
jurisdiction, and all such monies so charged, contracted, for, received, taken
or reserved that are deemed to constitute interest in excess of the Maximum
Rate or maximum amount of interest permitted by Applicable Law shall be
immediately returned or credited to the account of Borrower upon such
determination.
10.9 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT,
EACH NOTE AND EACH OTHER LOAN PAPER (INCLUDING ITS AND THEIR VALIDITY,
ENFORCEABILITY AND INTERPRETATION) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ANY
CONFLICTS OF LAW PRINCIPLES) AND TO THE EXTENT CONTROLLING, THE FEDERAL LAWS OF
THE USA; PROVIDED THAT (i) THE PROVISION OF CHAPTER 15 OF THE TEXAS CREDIT CODE
(VERNON'S TEXAS CIVIL STATUTES, ARTICLE 5069-15.01 ET SEQ., AS THE SAME MAY BE
OR MAY HAVE BEEN CODIFIED IN THE FINANCE CODE OF THE STATE OF TEXAS, EFFECTIVE
SEPTEMBER 1, 1997) ARE EXPRESSLY DECLARED BY THE PARTIES NOT TO BE APPLICABLE
TO ANY LOAN PAPER OR THE TRANSACTIONS CONTEMPLATED BY ANY OF THEM, (ii) THE
LAWS OF THE STATE OF TEXAS AND/OR THE UNITED STATES OF AMERICA SHALL NOT LIMIT
THE AMOUNT OR RATE OF INTEREST WHICH THE HOLDER OF ANY NOTE MAY CONTRACT FOR,
CHARGE, RECEIVE, COLLECT, TAKE, RESERVE AND/OR APPLY IF OTHER
CREDIT AGREEMENT
72
<PAGE> 78
APPLICABLE LAWS PERMIT AT ANY TIME A HIGHER AMOUNT OR RATE AND (iii) THE LAWS
OF OTHER JURISDICTIONS SHALL APPLY TO THE EXTENT NECESSARY TO TAKE, GRANT,
PERFECT OR REALIZE THE BENEFITS OF ANY LIEN, MORTGAGE, DEED OF TRUST OR
SECURITY INTEREST IN THE COLLATERAL. THE PARITIES EXPRESSLY ACKNOWLEDGE THAT
(y) THEY INTEND THAT THIS AGREEMENT AND EACH OTHER LOAN PAPER SHALL BE GOVERNED
BY THE PROVISIONS (INCLUDING, WITHOUT LIMITATION, THE RIGHT OF THE PARTIES TO
SELECT THE GOVERNING LAW) OF THE UNIFORM COMMERCIAL CODE AND NOT BY COMMON LAW
AND (z) THE STATE OF TEXAS BEARS A REASONABLE RELATIONSHIP TO THIS TRANSACTION
AND NO OTHER STATE HAS A MATERIALLY GREATER INTEREST IN THIS TRANSACTION THAN
THE STATE OF TEXAS. BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS (SAN ANTONIO
DIVISION) AND OF ANY TEXAS STATE COURT SITTING IN BEXAR COUNTY, TEXAS FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE LOAN PAPERS
OR THE TRANSACTIONS CONTEMPLATED THEREBY.
10.10 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, and by each of the parties hereto on separate
counterparts, all of which taken together shall constitute one and the same
instrument. This Agreement shall become effective when the Agent shall have
received counterparts hereof signed by all of the parties hereto.
10.11 INDEPENDENCE OF COVENANTS. Each covenant and agreement of
Borrower under each Loan Paper shall be given independent effect so that, if a
particular action or condition is prohibited or required by any covenant, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default or
Event of Default if such action is taken or condition exists.
10.12 SURVIVAL. The obligations of Borrower under SECTIONS 2.12,
9.3, 10.3, 10.4, 10.8, 10.18 and 10.20 and of the Agent and the Banks under
Section 10,18 shall survive the termination of this Agreement, the payment of
all other Obligations and the termination of the Commitments. The
representations and warranties set forth in this Agreement and each of the
other Loan Papers shall survive the execution, delivery and performance of this
Agreement and the other Loan Papers and shall continue until one year after the
later of (i) the repayment of the Obligations and (ii) the date on which the
Banks' obligations to make Loans shall have fully and finally terminated; and
any investigation at any time by or on behalf of the Agent or any Bank shall
not diminish any of their respective rights to rely thereon.
10.13 SEVERABILITY. In case any one or more of the provisions or
part of a provision contained in any Loan Paper shall for any reason be held to
be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall be deemed not to affect any
other jurisdiction or any other provision or part of a provision of any Loan
Paper, but such Loan Paper shall be reformed and construed in such jurisdiction
as if such provision or part of a provision held to be invalid or illegal or
unenforceable had never been contained herein and such provision or part
reformed so that it would be valid, legal and enforceable in such jurisdiction
to the maximum extent possible.
CREDIT AGREEMENT
73
<PAGE> 79
10.14 GOVERNMENTAL REGULATION. Anything contained in any Loan Paper
to the contrary notwithstanding, Borrower acknowledges and agrees that neither
the Agent nor any Bank shall be obligated (i) to extend or fund any credit or
other financial accommodation to, or for the benefit of, Borrower in an amount,
or (ii) to perform any other agreement or obligation to, or for the benefit of,
Borrower in any regard, in contradiction or violation of any limitation or
prohibition provided by any applicable statute or regulation, or any
interpretation, ruling, decision, opinion or other pronouncement in respect
thereto (whether or not having the effect of law), which any of them in good
faith believes is applicable.
10.15 NO CONTROL. None of the covenants, terms or other provisions
of any Loan Paper or any document executed in conjunction therewith or related
thereto shall, or shall be deemed to, give the Agent or any Bank rights or
powers to exercise control over, or participate in the management of, the
business, affairs, operations or management of Borrower or any of their
respective Property, including any right or power to influence or affect any of
its treatment, transportation, storage or disposal of toxic and/or hazardous
waste, substances or constituents. The relationship between Borrower and the
other parties hereto created by this Agreement and each of the other Loan
Papers is only that of debtor-creditor (with or without security, as
applicable), and the Rights of such other parties hereunder and thereunder are
limited to the rights to receive payment of the Obligations and to exercise the
Rights provided herein and therein and in any other document executed in
conjunction herewith or therewith or related hereto or thereto.
10.16 RENEWALS, EXTENSIONS, REARRANGEMENTS, TERMINATION, ETC. With
respect to each and every (i) renewal, extension, increase and rearrangement,
if any, of the Obligations, or any part thereof, and (ii) amendment,
modification, supplement, restatement, waiver and consent, if any, of or to
this Agreement or any other Loan Paper, all provisions of this Agreement and
the other Loan Papers shall apply with equal force and effect to each such
event or circumstance, except to the extent, if any, expressly set forth in
connection with each such event or circumstance; provided, however, the
foregoing is not intended in any regard to convey, acknowledge or otherwise
evidence on the part of the Agent or any Bank, expressly or by implication, any
present consent or agreement to any such event or circumstance occurring
subsequent to the date hereof, it being acknowledged and agreed that the entry
by the parties hereto to any such events or circumstances shall be evaluated as
they occur and subject to the other provisions of the Loan Papers, as same may
be applicable. Except as expressly provided therein, all Loan Papers shall
remain in effect until full and complete payment of all Obligations,
termination of all commitments and obligations of the Banks to make or extend
any credit or financial accommodation to, or for the benefit of, Borrower, and
receipt by the Agent and the Banks, or any of the foregoing Persons, if so
requested, of such written assurances of Borrower and any other designated
Person or Persons that no other claims, rights, defenses, liabilities or
obligations exist in respect hereto or against any of them or any other
Indemnified Party.
CREDIT AGREEMENT
74
<PAGE> 80
10.17 CONFLICTS. In the event of any inconsistency or conflict
between the terms of this Agreement and the terms of any other Loan Paper, the
terms of this Agreement shall control.
10.18 CONFIDENTIALITY. Each Bank and the Agent agree to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any information supplied to
it by Borrower pursuant to this Agreement, provided that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any Bank or
the Agent, (iii) to bank examiners, auditors or accountants of any Bank or the
Agent, (iv) to any other Bank or the Agent, (v) in connection with any
litigation related in any way to the Loans to which any Bank or the Agent is a
party, provided, further, that, unless specifically prohibited by applicable
Law or court order, each Bank and the Agent shall, at least 5 Business Days
prior to disclosure thereof, notify Borrower of any request for disclosure of
any such non-public information (A) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of such Bank's financial condition by such governmental agency) or
(B) pursuant to legal process, or (vi) to any Transferee (or any prospective
Transferee, with the consent of Borrower) so long as such Transferee (or any
such prospective Transferee) agrees in writing to handle such information
confidentially, as provided in this Section provided further that nothing shall
limit the disclosure of any such information which (a) is already in the
possession of the Agent or any Bank, provided that such information is not
known by the Agent or any Bank to be subject to a confidentiality agreement or
obligation of secrecy to any Company or any other Person, (b) becomes generally
available to the public other than as a result of a disclosure by the Agent or
any Bank, or (c) becomes available to the Agent or any Bank on a
non-confidential basis from a source other than any Company, provided that such
source is not known by the Agent or any Bank to be bound by a confidentiality
agreement with other obligation of secrecy to any Company or any Person.
10.19 PAYMENTS SET ASIDE. To the extent that Borrower makes a
payment or payments to the Agent or any Bank, or any of them (or their
Transferee), or the Agent or any Bank, or any of them (or their Transferee)
enforces any Lien or exercises its right of setoff, and such payment or
payments or the proceeds of such enforcement or setoff, or any part thereof,
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other Person
under any Debtor Laws or equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
rights and remedies therefor, shall be revived and shall continue in force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
10.20 LIMITATION OF LIABILITY; COMMENCEMENT OF ACTIONS. To the
extent not prohibited by applicable Law, no claim may be made by or on behalf
of Borrower or any other Person against the Agent or any Bank or any other
Indemnified Party for any special, indirect, consequential or punitive damages
in respect of any claim for breach of contract arising out of or related to the
transactions contemplated by any Loan Paper, or any act, omission, or event
occurring in connection therewith (whether any of such is a claim based on
contract, tort, duty imposed by law or otherwise), and Borrower hereby waives,
releases, and agrees not to sue, or
CREDIT AGREEMENT
75
<PAGE> 81
commence or authorize the commencement of any Litigation, upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor. Further, any claim made by or on behalf of Borrower or
any other Person against the Agent or any Bank or any other Indemnified Party
shall be barred unless it is asserted by the commencement of an action or
proceeding in a court as prescribed in SECTION 10.9 by the filing of a
complaint therein within one (1) year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based (i) is discovered, or, (ii) in the exercise of reasonable diligence,
should have been discovered; and Borrower agrees that such period of time is a
reasonable and sufficient time for it to investigate and act upon any such
claim or cause of action. The provisions of this SECTION 10.20 shall survive
any termination, howsoever occurring, of this Agreement and each Loan Paper and
the full and final payment of the Notes and the other Obligations.
10.21 REVIEW. Borrower on its own behalf, and on behalf of each
Company acknowledges and represents to the Agent and each Bank that Borrower
has reviewed this Agreement and each other Loan Paper, has had the benefit of
legal counsel of its own choice throughout its review and negotiation of this
Agreement and each other Loan Paper, has been afforded an opportunity to review
and negotiate this Agreement and each other Loan Paper with the advice of its
legal counsel, and is fully informed and knowledgeable of the terms,
provisions, rights and effects of this Agreement and each other Loan Paper. In
furtherance of the foregoing, but not in limitation thereof, Borrower on its
own behalf and on behalf of each Company, acknowledge and agree that each Loan
Paper should be and shall be construed as if jointly drafted by the parties
hereto.
10.22 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provisions of this
Agreement.
10.23 INVESTIGATION. Notwithstanding any right of the Agent or the
Banks to investigate the affairs of the Companies and notwithstanding any
knowledge of facts determined or determined by the Agent of the Banks pursuant
to such investigation or right of investigation, the Agent and the Banks have
the right to rely fully upon the representations, warranties, covenants and
agreements of any Company contained in any of the Loan Papers.
10.24. ARBITRATION. Any controversy or claim between or among the
parties hereto including but not limited to those arising out of or relating to
this Agreement or any related agreements or instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), and the "SPECIAL RULES" set forth
below. In the event of any inconsistency, the Special Rules shall control.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this agreement applies in any court having jurisdiction over the
action.
CREDIT AGREEMENT
76
<PAGE> 82
(a) Special Rules. The arbitration shall be conducted in San
Antonio, Texas and presided over by an arbitrator provided at the
nearest location of the AAA. All arbitration will be commenced within
120 days of the demand for arbitration and the decision/award rendered
within 30 days thereafter further, the arbitrator shall only, upon
showing of cause, be permitted to extend the commencement period for
an additional 60 days.
(b) Reservation of Rights. Nothing in this Agreement shall be
deemed to (i) limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this
Agreement; or (ii) be a waiver by the Agent or any Bank of the
protection afforded to it by 12 U.S.C. Sec. 91 or any substantially
equivalent state law; or (iii) limit the right of any party hereto (A)
to exercise self help remedies such as (but not limited to) setoff, or
(B) to foreclose against any real or personal property collateral, or
(C) to obtain from a court provisional or ancillary remedies such as
(but not limited to) injunctive relief or the appointment of a
receiver. Any party may exercise such self help rights, foreclose upon
such property, or obtain such provisional or ancillary remedies
before, during or after the pendency of any arbitration proceeding
brought pursuant to this Credit Agreement. At Agent's option,
foreclosure under a deed of trust or mortgage may be accomplished by
either the exercise or power of sale under the deed of trust or
mortgage, or by judicial foreclosure. Neither exercise of self help
remedies nor the institution or maintenance of an action for
foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in any such
action, to arbitrate the merits of the controversy or claim
occasioning resort to such remedies.
10.25. WAIVER AND RELEASE OF CLAIMS. Borrower on its own behalf and
on behalf of all Companies (i) represent that they have no defense to or
setoffs against any indebtedness or other obligations owing to any Agent, Banks
or their affiliates, nor claims against Agent or such Banks or their affiliates
for any matter whatsoever, related or unrelated to any indebtedness or other
obligations owing to Agent or to such Banks, and (ii) release Agent and Banks
and their affiliates from all claims, causes of action, and costs, in law or
equity, existing as of the date of this Agreement, which Borrower or any
Company have or may have by reason of any matter of any conceivable kind or
character whatsoever, related or unrelated to the any indebtedness or other
obligations owing to Agent or to such Banks, including the subject matter of
this Agreement. This provision shall not apply to claims for performance of
express, written contractual obligations owing to Borrower by Agent, Banks or
their affiliates.
10.26. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
PAPERS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE AGENT OR
BANKS IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
CREDIT AGREEMENT
77
<PAGE> 83
10.27 NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT AND ALL OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER COVERED HEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
BORROWER:
PACKAGED ICE, INC., a Texas corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BANKS:
THE FROST NATIONAL BANK, a national
banking association, Individually and
as the Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ZIONS FIRST NATIONAL BANK, a national
banking association
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CREDIT AGREEMENT
78
<PAGE> 84
ANNEX A
THE FROST NATIONAL BANK
1. Domestic Lending Office:
The Frost National Bank
100 West Houston Street
San Antonio, Texas 78205
2. LIBOR Lending Office:
The Frost National Bank
100 West Houston Street
San Antonio, Texas 78205
3. Revolving Commitment: $10,000,000.00
4. Total Commitment: $10,000,000.00
5. Information for Notices:
The Frost National Bank
P.O. Box 1600
San Antonio, Texas 78296
Attention: Richard D. Young
Phone: (210) 220-4210
Fax: (210) 220-4626
Street Address for personal delivery:
100 West Houston Street, 3rd Floor
San Antonio, Texas 78205
Attention: Richard D. Young
ANNEX A
<PAGE> 85
ZIONS FIRST NATIONAL BANK
1. Domestic Lending Office:
Zions First National Bank
P.O. Box 25822
Salt Lake City, Utah 84125
2. LIBOR Lending Office:
Zions First National Bank
P.O. Box 25822
Salt Lake City, Utah 84125
3. Revolving Commitment: $10,000,000.00
4. Total Commitment: $10,000,000.00
5. Information for Notices:
Zions First National Bank
P.O. Box 25822
Salt Lake City, Utah 84125
Attention: Michael R. Brough
Phone: (801) 524-4621
Fax: (801) 524-2136
Street Address for personal delivery:
One South Main Street Suite 200
Salt Lake City, Utah 84111
Attention: Michael R. Brough
ANNEX A
<PAGE> 86
PACKAGED ICE, INC.
Information for Notices:
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent, Suite 1500
San Antonio, Texas 78205
Attention Alan Schoenbaum, P.C..
ANNEX A
<PAGE> 87
ANNEX B
CERTAIN DEFINITIONS
As used herein, the following terms shall have the respective
meanings assigned to them as follows:
See Article 1
ANNEX B
<PAGE> 88
ANNEX C
CONDITIONS PRECEDENT: INITIAL LOAN
(a) Agreement and Schedules. This Agreement duly executed by
Borrower and all Schedules, duly and fully completed, that are provided for in
this Agreement.
(b) Revolving Notes. A Revolving Note duly executed by Borrower in
favor of each Bank in the respective amount of such Bank's Revolving
Commitment.
(c) Security Documents. (i) A Guaranty Agreement executed by all
Existing Subsidiaries in form and substance acceptable to Agent, securing the
obligations described therein, including the Obligations, (ii) a Stock Pledge
Agreement duly executed by Borrower securing the obligations described therein,
including the Obligations, in form and substance acceptable to Agent, (iii)
Security Agreements executed by each Company securing the obligations described
therein, including the Obligations, in form and substance acceptable to Agent,
and (iv) all other Security Documents required by Agent to create a perfected,
first priority, Lien and security interest in the Collateral, in form and
substance acceptable to Agent.
(c) Opinion of Counsel to the Companies. Opinion of legal counsel
for the Companies in form and substance acceptable to Agent and its counsel.
(d) Notice of Borrowing and Other Certificates. A Notice of
Borrowing in the form of EXHIBIT A duly completed and executed by Borrower, and
a Compliance Certificate in the form of EXHIBIT C duly completed and executed
by Borrower.
(e) Secretary Certificate. With respect to each Company, a
Certificate signed by the secretary of such Company, which secretary's office
and signature shall be confirmed by another officer of such Company, dated and
effective as of the Closing Date, or such earlier date as shall be acceptable
to Agent, attaching thereto or containing therein, and certifying as to the
following: corporate resolutions, as in effect and neither revoked nor
rescinded, duly adopted by the board of directors of such Company authorizing
the execution, delivery and performance of the Loan Papers to which it is or
will be a party, and the transactions contemplated thereby.
(f) Official Certificates. With respect to each Company,
Certificates as to incorporation, existence and good standing for such Company
issued by the Secretary of State (and/or other appropriate official) of the
state of incorporation of such Company and certificates of foreign
qualification and good standing (or other similar instruments) for such
Company, issued by the Secretary of State (and/or other appropriate official)
of each of the states wherein such Company is or should be qualified to do
business as a foreign corporation, each of the foregoing certificates being
dated within 60 days prior to the date of the Closing Date.
(g) Articles of Incorporation, Charter and Bylaws. A copy of the
Certificate or Articles of Incorporation of each Company and all amendments
thereto.
ANNEX C
<PAGE> 89
(h) Litigation Report. A report (see SCHEDULE 4.10)describing all
pending or threatened Litigation by or against any Company or any of its
Property (including Litigation for which any Company will be responsible after
the Closing Date). There shall be no outstanding order or injunction of any
Governmental Authority which would prohibit (i) the execution, delivery or
performance, now or hereafter, of any Loan Paper or (ii) any of the
transactions contemplated by the Loan Papers.
(i) Environmental Reports. Copies of all environmental surveys or
reports relating to real Property owned or leased by any Company (i) which have
heretofore been performed or prepared (each of which is described in SCHEDULE
4.20 hereof) and (ii) additional reports or surveys in form, scope and
substance satisfactory to the Agent.
(j) Insurance Certificates. A listing of all insurance coverage of
such Company (including copies of the Declarations pages of each policy) and
reflecting that the policies evidencing such coverage conforms to the
requirements of this Agreement and each of the other Loan Papers, including,
without limitation, loss payable endorsements in favor of the Agent and
notification of cancellation and modification endorsements as specified in
SECTION 5.10.
(k) Financial Statements. Copies of financial statements of the
Companies for the most recent period required under SECTION 5.1.
(l) UCC Reports. Copies of the results of Uniform Commercial Code
searches showing all financing statements and other documents or instruments on
file against each Company in the appropriate central and local offices of the
relevant jurisdictions, each such search to be through a search period ending
as of a date no more than 60 days prior to the Closing Date.
(m) Regulatory and Other Approvals. Evidence that all necessary
approvals or consents of Governmental Authorities and all other Persons have
been obtained.
(n) Compliance with Laws. Evidence that each Company has complied
with all Laws necessary to consummate the transactions contemplated by this
Agreement and each of the other Loan Paper.
(o) Fees. Payment of (i) the facility fees payable to the Agent on
the Closing Date, and (ii) fees of counsel to the Banks payable by Borrower in
connection with the preparation, negotiation and closing of the transactions
contemplated by this Agreement.
(p) Additional Documentation. Such additional approvals, opinions,
documents, instruments, reports, certifications and/or agreements as the Agent,
the Banks or their counsel may reasonably request.
Additionally, for any Advance which would cause the aggregate outstanding
balances on all Loans to exceed $10,000,000:
Agent shall have received and all Banks shall have approved a current
business valuation, on a "going concern" basis of Subsidiaries of
Borrower other than Southwestern in form and substance satisfactory to
Banks and showing a minimum value of $6,000,000.
ANNEX C
<PAGE> 90
EXHIBIT A
NOTICE OF BORROWING
TO: THE FROST NATIONAL BANK, as the Agent under the Credit Agreement dated
as of September 15, 1997 (including any amendments or modifications
thereof, the "CREDIT AGREEMENT") among PACKAGED ICE, INC., a Texas
corporation ("BORROWER") and THE FROST NATIONAL BANK, a national
banking association, individually and as agent for the Banks acting in
the manner and to the extent provided in ARTICLE 8 of the Credit
Agreement (in such capacity, the "AGENT"), ZIONS FIRST NATIONAL BANK,
a national banking association, individually, and each of the
financial institutions which becomes a party to said Credit Agreement
as provided in SECTION 10.7 thereof (individually, a "BANK" and
collectively, the "BANKS"). Unless otherwise defined herein, terms
defined in the Credit Agreement shall have the same meanings in this
Notice of Borrowing.
<TABLE>
<S> <C>
1. The Borrower hereby requests a Borrowing on the date
and in the amount as follows:
$_____________________ under the Revolving Notes
Requested funding date: _______________, 199____
Type of Borrowing: _____ Base Rate Loans
_____ LIBOR Loans
If LIBOR Loans, length of Interest Period: _____ Six Months
_____ Nine Months
_____ Twelve Months
Borrowing _____is ____is not an Acquisition Borrowing
Check one:
_____ DEPOSIT ACCOUNT: The Agent is hereby instructed to deposit the proceeds of the
Loans requested above into Account No. at the Agent's Domestic Lending Office.
_____ WIRING INSTRUCTIONS: The Agent is hereby instructed to wire the proceeds of
the Loans requested above into Account No. ______________ of _______________________, whose
routing number is _____________, and is located in _____________, ________________.
2. The Borrower hereby certifies that no Default or Event of Default has occurred and is continuing under the
Credit Agreement.
</TABLE>
EXHIBIT A
<PAGE> 91
3. As of the date hereof, and as a result of the making
of the requested Loans, there does not and will not exist any
Default or Event of Default.
4. The representations and warranties contained in
ARTICLE 4 of the Credit Agreement (other than those by their
terms limited to a specific date) are true and correct in all
material respects as of the date hereof and shall be true and
correct in all material respects upon the making of the
requested Loans, with the same force and effect as though made
on and as of the date hereof and thereof, except for such
representations and warranties which relate to a particular
date or which fail to be true and correct as a result of
events or occurrences permitted under the Loan Papers.
5. No event has occurred since the date of the most
recent financial statements provided to the Banks pursuant to
SECTION 5.1 of the Credit Agreement that has caused a Material
Adverse Effect.
6. The undersigned certifies that he is the
_____________ of the Borrower and that as such he is
authorized to execute this certificate on behalf of Borrower.
DATED: __________________, 19___.
PACKAGED ICE, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Required Submittals:
(a) Compliance Certificate (SECTION 2.2(a)(8) and SECTION 5.1(f)))
(b) If requested Borrowing is an Acquisition Borrowing, Acquisition
Reports (SECTION 3.3 and SECTION 5.1(h) and agreements required under
SECTION 6.11(g), if any.)
(c) If requested Borrowing will cause the balances of all Loans to exceed
$10,000,000 for the first time, the valuation of Subsidiaries of
Borrower other than Southwestern required by SECTION 2.2 (a)(6)
EXHIBIT A
<PAGE> 92
EXHIBIT B
CONTINUATION/CONVERSION NOTICE
TO: THE FROST NATIONAL BANK, as the Agent under the Credit Agreement dated
as of September 15, 1997 (including any amendments or modifications
thereof, the "CREDIT AGREEMENT") among PACKAGED ICE, INC., a Texas
corporation ("BORROWER") and THE FROST NATIONAL BANK, a national
banking association, individually and as agent for the Banks acting in
the manner and to the extent provided in ARTICLE 8 of the Credit
Agreement (in such capacity, the "AGENT"), ZIONS FIRST NATIONAL BANK,
a national banking association, individually, and each of the
financial institutions which becomes a party to said Credit Agreement
as provided in SECTION 10.7 thereof (individually, a "BANK" and
collectively, the "Banks"). Unless otherwise defined herein, terms
defined in the Credit Agreement shall have the same meanings in this
Continuation/Conversion Notice.
Pursuant to SECTION 2.5 of the Credit Agreement, this
Continuation/Conversion Notice (this "NOTICE") represents the election of the
Borrower , to [complete, as applicable, one or more of the following]:
1. Use if converting LIBOR Loans to Base Rate Loans.
Convert $________________ in aggregate principal amount of
LIBOR Loans with a current Interest Period ending on
________,19____ to Base Rate Loans on ___________, 19___ [and]
2. Use if converting Base Rate Loans to LIBOR Loans.
Convert $_________ in aggregate principal amount of Base Rate
Loans to LIBOR Loans on ________, 19___. The Interest Period
for such LIBOR Loans is requested to be a [six] [nine]
[twelve] (_______) month period. [and]
3. Use if continuing LIBOR Loans.
Continue $_________ in aggregate principal amount of LIBOR
Loans with a Current Interest Period ending on ________,
199___. The initial Interest Period for such continued LIBOR
Loans is requested to be a[six] [nine] [twelve](_______) month
period.
4. The Borrower hereby certifies, warrants and represents to the
Agent, and each Bank as follows:
(a) to the knowledge of the Borrower, the representations
and warranties contained in ARTICLE 4 of the Credit Agreement (other
than those by their terms limited to a specific date) are true and
correct in all material respects as of the date hereof and shall be
true and correct in all material respects upon the making of the
requested Loans, with the same force and effect as though made on and
as of the date hereof and thereof, except for such representations and
EXHIBIT B
<PAGE> 93
warranties which relate to a particular date or which fail to be true
and correct as a result of events or occurrences permitted under the
Loan Papers;
(b) no event has occurred since the date of the most
recent financial statements delivered pursuant to SECTION 5.1 of the
Credit Agreement (or if this Borrowing request precedes the delivery
of such financial statements, ______________199__) that has caused a
Material Adverse Effect;
(c) as of the date hereof, and as a result of the making
of the requested Loans, there does not and will not exist any Default
or Event of Default; and
(d) as of the date hereof, no change or event has
occurred that could reasonably be expected to cause a Material Adverse
Effect.
5. The undersigned certifies that he/she is the [president]
[chief financial officer] of the Borrower and that as such he/she is familiar
with the terms of the Credit Agreement, has knowledge of all information
necessary to deliver this Certificate and is authorized to execute this
certificate on the Borrower.
DATED:_________________________, 199__.
PACKAGED ICE, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT B
<PAGE> 94
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: THE FROST NATIONAL BANK, as the Agent under the Credit Agreement dated
September 15, 1997 (including any amendments or modifications thereof,
the "CREDIT AGREEMENT") among PACKAGED ICE, INC., a Texas corporation
("BORROWER") and THE FROST NATIONAL BANK, a national banking
association, individually and as agent for the Banks acting in the
manner and to the extent provided in ARTICLE 8 of the Credit Agreement
(in such capacity, the "AGENT"), ZIONS FIRST NATIONAL BANK, a national
banking association, individually, and each of the lenders which
becomes a party to said Credit Agreement as provided in SECTION 10
thereof (individually, a "BANK" and collectively, the "BANKS"), and
the financial institutions now or hereafter parties thereto. Unless
otherwise defined herein, terms defined in the Credit Agreement shall
have the same meanings in this Notice of Borrowing.
This Compliance Certificate is delivered pursuant to SECTION 5.1(f)
and/or SECTION 2.2 of the Credit Agreement and relates to the Companies'
compliance with the covenants set forth in SECTION 6.1 of the Credit Agreement.
This Compliance Certificate contains "short-hand" descriptions of such
covenants. The precise descriptions of such covenants, including defined terms
used in connection therewith, are more fully set forth in the Credit Agreement,
which shall control to the extent of any inconsistency with the "short-hand"
descriptions used herein.
1. The Companies are in compliance with the covenants set forth
in SECTION 6.1 of the Credit Agreement for the Fiscal Quarter ended
_______________, ____ (the "DETERMINATION DATE"), as follows:
SECTION 6.1(a): Minimum Consolidated Current Ratio (Companies)
As of the Determination Date:
<TABLE>
<S> <C> <C>
(1) Consolidated Current Assets: $__________
(2) Consolidated Current Liabilities: $___________
(3) Consolidated Current Maturities of Long Term Debt: $___________
Ratio: (1) to [(2) less (3)] ____ to _____
Minimum Ratio: 1.25 to 1.00
</TABLE>
EXHIBIT C
<PAGE> 95
SECTION 6.1(d): Minimum Adjusted Interest Coverage Ratio (Projected)
For the four-quarter period ended as of the Determination Date:
<TABLE>
<S> <C>
(1) Base Company EBITDA: $___________
(2) EBITDA attributable to any Acquisitions occurring after April 17,
1997, adjusted in a manner acceptable to Banks (attach explanation
of adjustments) (and specifically excluding EBITDA, with respect to
any Acquisition occurring after June 30, 1997 if the cash portion
of the purchase price for such Acquisition exceeds $5,000,000
(including any deferred payments of the cash price), unless the
the Banks receive and approve financial reporting required pursuant to
SECTION 5.1(c)): $___________
(3) Projected Base Company Adjusted EBITDA: sum of (1) and (2) $___________
(4) Projected interest expense of all Companies on outstanding
Indebtedness: $___________
(5) Projected interest expense on requested Borrowing(s),
if this certificate is given in connection with a requested Borrowing: $___________
(6) Projected Interest Expense of all Companies: sum of (4) and (5) $___________
(7) Adjusted Interest Coverage Ratio: (3) divided by (6): ____________
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
BALANCE OF ALL LOANS MINIMUM RATIO ADJUSTED INTEREST
COVERAGE RATIO
------------------------------------------------------------------------------------
<S> <C>
Not more than $5,000,000 None
------------------------------------------------------------------------------------
More than $5,000,000 but not more than 1.2 to 1
$10,000,000
------------------------------------------------------------------------------------
More than $10,000,000 but not more than 1.3 to 1
$15,000,000
------------------------------------------------------------------------------------
More than $15,000,000 2.0 to 1
------------------------------------------------------------------------------------
</TABLE>
SECTION 6.1(e): Minimum Adjusted Interest Coverage Ratio (One Quarter Actual)
For the Applicable Quarter ended as of the Determination Date:
<TABLE>
<S> <C>
(1) Projected Base Company Adjusted EBITDA for the Applicable
Quarter (per Test Projection due 45 days following beginning of such quarter): $____________
(2) Actual Base Company EBITDA for the Applicable Quarter: $____________
(3) EBITDA for the Applicable Quarter attributable to any
Acquisitions occurring after April 17,1997, adjusted in a manner
acceptable to Banks (attach explanation of adjustments)
</TABLE>
EXHIBIT C
<PAGE> 96
<TABLE>
<S> <C>
(and specifically excluding EBITDA, with respect to
any Acquisition occurring after June 30, 1997 if the cash portion
of the purchase price for such Acquisition exceeds $5,000,000
(including any deferred payments of the cash price), unless the
the Banks receive and approve financial reporting required pursuant to
SECTION 5.1(c)): $___________
(4) Actual Base Company Adjusted EBITDA for the Applicable
Quarter: sum of (2) and (3) $___________
(5) EBITDA Variance (as a percentage): (4) divided by (1) ____________
(6) Projected Base Company Adjusted EBITDA for the four quarter
period covered by the Test Projection $___________
(7) Projected Base Company Adjusted EBITDA for the four quarter
period covered by the Test Projection AS MODIFIED by the EBITDA Variance
(6) x (5) $___________
(8) Projected interest expense of all Companies as shown on Test
Projection: $___________
(7) Adjusted Interest Coverage Ratio(One Quarter Actual):
(7) divided by (8): ____________
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
BALANCE OF ALL LOANS MINIMUM RATIO ADJUSTED INTEREST
COVERAGE RATIO
-------------------------------------------------------------------------------------
<S> <C>
Not more than $5,000,000 None
-------------------------------------------------------------------------------------
More than $5,000,000 but not more than 1.2 to 1
$10,000,000
-------------------------------------------------------------------------------------
More than $10,000,000 but not more than 1.3 to 1
$15,000,000
-------------------------------------------------------------------------------------
More than $15,000,000 2.0 to 1
-------------------------------------------------------------------------------------
</TABLE>
2. Borrower hereby certifies, warrants and represents to the
Agent, and each Bank as follows:
(a) Neither Borrower nor any Subsidiary has incurred any
Indebtedness of the type described in SECTION 6.2(V) except as listed
below:
_________________
(b) the representations and warranties contained in
ARTICLE 4 of the Credit Agreement (other than those by their terms
limited to a specific date) are true and correct in all material
respects as of the date hereof and shall be true and correct in all
material respects upon the making of the requested Loans, with the
same force and effect as though made on and as of
EXHIBIT C
<PAGE> 97
the date hereof and thereof, except for such representations and
warranties which relate to a particular date or which fail to be true
and correct as a result of events or occurrences permitted under the
Loan Papers;
(c) Borrower is in compliance with the all terms and
conditions of the Indenture, as provided in SECTIONS 5.1(N) AND 6.1(c)
of the Credit Agreement;
(d) no event has occurred since the date of the most
recent financial statements delivered pursuant to SECTION 5.1 of the
Credit Agreement that has caused a Material Adverse Effect;
(e) as of the date hereof, there does not exist any
Default or Event of Default; and
(f) as of the date hereof, no change or event has
occurred that could reasonably be expected to cause a Material Adverse
Effect.
3. The undersigned certifies that he/she is the [president]
[chief financial officer] of Borrower, and that as such he/she is familiar with
the terms of the Credit Agreement, has knowledge of all information required to
deliver this certificate and is authorized to execute this certificate on
behalf of Borrower.
DATED:____________________, 19__.
PACKAGED ICE, INC., a Texas corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT C
<PAGE> 98
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement (this "AGREEMENT") is made as
of _____________, 199__ (the "EFFECTIVE DATE"), between ________________ (the
"ASSIGNOR") and __________________ (the "ASSIGNEE").
Reference is made to that certain Credit Agreement dated as of
September 15, 1997 (the "CREDIT AGREEMENT") by and among Packaged Ice, Inc., a
Texas corporation, (the "BORROWER"), The Frost National Bank, a national
banking association, individually and as agent for the Banks defined therein
(collectively, the "BANKS"), and the Banks. This Agreement is executed and
delivered pursuant to, and as contemplated in, the Credit Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned
thereto in the Credit Agreement.
The Assignor and the Assignee hereby covenant and agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, $____________ of the
Assignor's Revolving Commitment, representing a pro rata share in the Loan and
the Loan Papers of _____% as of the Effective Date. The foregoing interest for
all events and circumstances shall be deemed such Assignee's pro rata share (in
addition to any other pro rata share of Assignee, if any) in the Loan, the Loan
Papers and all payments made to or received from Borrower pursuant to the Loan
Papers and is subject to the terms and conditions provided in the Loan Papers.
2. The Assignor (i) hereby represents and warrants to the
Assignee that Assignor is the legal and beneficial owner of the pro rata share
being assigned by it hereunder and such interest is free and clear of any
adverse claim, (ii) hereby represents and warrants that as of the date hereof
the pro rata share in the Loan and Commitment being assigned hereunder is
______% without giving effect to assignments that are not yet effective, and
(iii) has attached a copy of the Note delivered to it under the Loan Agreement.
3. The Assignee hereby confirms and acknowledges that, except as
specifically set forth herein, the Assignor: (i) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Papers, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value for the Loan Papers or any other instrument or document furnished
pursuant thereto; (ii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any other
person or entity which is a party to an y of the Loan Papers (collectively,
"OTHER PARTY"); and (iii) makes no representation or warranty and assumes no
responsibility with respect to the performance or observance by Borrower or any
Other Party of any of its obligations under any of the Loan Papers or any other
instrument or document furnished pursuant thereto.
4. The Assignee hereby: (i) confirms that it is has received a
copy of the Loan Papers, together with such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Agreement; and (ii) agrees that it will, independently and without
reliance upon the Assignor or any other counterparty and based on such
documents and information as it
EXHIBIT D
<PAGE> 99
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Papers.
5. The Assignee hereby: (i) appoints and authorizes the Agent
under the Loan Papers to take such action as agent on its behalf and to
exercise such powers under the Loan Papers as are delegated to the Agent by the
terms of the Loan Papers; and (ii) agrees with the Assignor for the benefit of
Agent and Borrower that it will perform all of the obligations which by the
terms of the Loan Papers are required to be performed by it as a counterparty
(including, without limitation), the obligation to make payments pursuant to
the Loan Papers) and that it shall be liable directly to the Assignor, Agent,
Borrower and to each of the Banks for the performance of such obligations.
6. If the Assignee is organized under the laws of a jurisdiction
outside the United States, it hereby represents and agrees that it has
delivered or will within three (3) days after the date of the execution of this
Agreement deliver to the Assignor and the Agent completed and signed copies of
any forms that may be required by the United States Internal Revenue Service in
order to certify the Assignee's exemption from United States withholding taxes.
7. As of the Effective Date, (i) the Assignee shall be a party to
the Loan Papers and, to the extent provided in this Agreement, have the rights
and obligations of a counterparty thereunder, and (ii) the Assignor shall, to
the extent provided in this Agreement, relinquish its rights and be released
from its obligations in the Loan Papers with respect to the pro rata share
being assigned hereunder.
8. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to the
conflict of laws principles thereof.
9. The Assignee hereby represents and warrants as of the
Effective Date:
A. The Assignee has all necessary corporate power and
authority to purchase and own the interest being assigned to it
hereunder, and has all necessary corporate power and authority to
perform all its obligations with respect to this Agreement;
B. The execution and delivery of this Agreement and all
other instruments and documents executed in connection herewith have
been duly authorized by all requisite corporate action of the
Assignee; and
C. No approval, authorization, order, license or consent
of, or registration or filing with, any governmental authority or
other person is required in connection with this Agreement.
11. This Agreement may be executed in two or more counterparts
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
EXHIBIT D
<PAGE> 100
12. Assignee's address for notices and payments under the Credit
Agreement and this Agreement as set forth in SCHEDULE 1 attached hereto and
made a part hereof. Assignee may by notice to the Assignor, the Agent and
Borrower change the address or telex number or facsimile number at which
notices, communications and payments are to be given to it.
ASSIGNOR:
-------------------------------
By:
----------------------------
Title:
-------------------------
ASSIGNEE:
-------------------------------
By:
----------------------------
Title:
-------------------------
EXHIBIT D
<PAGE> 101
SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE AGREEMENT
ADDRESS FOR NOTICES AND ACCOUNTS FOR PAYMENTS
Address:
-----------------------------
-----------------------------
-----------------------------
Telecopier:
------------------
Account for Payments
Account No.:
-----------------------------
Attention: -----------------------------
-----------------------------
Reference: -----------------------------
Depositary: -----------------------------
-----------------------------
-----------------------------
-----------------------------
SCHEDULE 1-ASSIGNMENT &
ACCEPTANCE AGREEMENT
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (hereinafter referred to as
the "FIRST AMENDMENT") dated as of October 16, 1997, amends that certain Credit
Agreement dated as of September 15, 1997 (the "CREDIT AGREEMENT") and entered
into by and among PACKAGED ICE, INC., a Texas corporation ("BORROWER"), and THE
FROST NATIONAL BANK, a national banking association, individually and as agent
for the Banks acting in the manner and to the extent provided in ARTICLE 8 (in
such capacity, the "AGENT"), ZIONS FIRST NATIONAL BANK, a national banking
association, individually, and each of the lenders which becomes a party to as
provided in SECTION 10.7 of the Credit Agreement (individually, a "BANK" and
collectively, the "BANKS").
RECITALS
1. Borrower requested and the Agent and the Banks provided,
pursuant to the terms and subject to the conditions in the Credit Agreement, a
revolving credit facility for the purposes therein provided; and
2. Borrower requested and the Agents and the Banks, severally,
are willing to make certain amendments and modifications to the Credit
Agreement as hereinafter provided;
NOW THEREFORE, for and in consideration of the premises and the
promises herein, and for other good and valuable consideration, the receipt,
adequacy and reasonable equivalency of which are hereby acknowledged by each
party hereto, Borrower, each Bank and the Agent agree as follows:
AGREEMENTS
1. The definition of term "INDENTURE" contained in the
"Definition of Terms" portion of the Credit Agreement is hereby deleted in its
entirety and substituted in its place is the following:
""INDENTURE" means collectively (i) that certain Indenture
dated as of April 17, 1997, among Packaged Ice, Inc. as Issuer, the Subsidiary
Guarantors named therein and U.S. Trust Company of Texas, N.A. as Trustee
relating to $50,000,000 12% Series A Senior Notes due April 15, 2004 and 12%
Series B Senior Notes due April 15, 2004, (ii) any indenture having
substantially the same terms and governing not more than an additional
$25,000,000 of 12% Senior Notes (Series C and D) due April 15, 2004, and (iii)
any indenture having substantially the same terms, replacing the two aforesaid
indentures and governing not more than $75,000,000 of 12% Senior Notes due
April 15, 2004 (which 12% Senior Notes shall include Notes issued in exchange
for the 12% Series B Senior Notes), as each may be amended or supplemented from
time to time, to the extent such amendment is not prohibited hereunder".
<PAGE> 2
2. The final paragraph of SECTION 6.2 of the Credit Agreement is
hereby amended to read as follows:
"Notwithstanding the foregoing or any other provision hereof, at no time
during the term hereof shall the sum of all principal owed or available
for advance on the Indebtedness described in subsections (i), (iv) and
(v) of this SECTION 6.2 exceed, (i) prior to September 15, 1999,
$95,000,000 and (ii) after September 15, 1999, $95,000,000, minus any
reduction of the Commitments pursuant to SECTION 2.7."
3. SCHEDULE 6.2 to the Credit Agreement is hereby amended by
deleting the number "$65,000,000.00" and inserting in lieu thereof the number
"$75,000,000.00".
4. All terms not otherwise defined in this First Amendment shall
have the same meanings as are set forth in the Credit Agreement.
5. Except as specifically modified or amended herein, all terms,
provisions and requirements of the Credit Agreement shall remain as written, as
amended from time to time. Borrower reaffirm all covenants, conditions,
representations and warranties contained in the Credit Agreement, as amended.
NOTICE TO COMPLY WITH STATE LAW
For the purpose of this Notice, the term "WRITTEN AGREEMENT" shall
include the document set forth above, together with each and every other
document relating to and/or securing the same loan transaction, regardless of
the date of execution.
THIS WRITTEN LOAN AGREEMENT AND ALL OTHER LOAN PAPERS REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
COVERED HEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
2
<PAGE> 3
EXECUTED on this day of , 1997, to be effective the 16th
day of October, 1997. ------ ------
BORROWER:
--------
PACKAGED ICE, INC., a Texas corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
BANKS:
-----
THE FROST NATIONAL BANK, a national
banking association, Individually and
as the Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ZIONS FIRST NATIONAL BANK, a national
banking association
By:
---------------------------------
Name:
-------------------------------
Title:
3
<PAGE> 4
The Guarantors (as defined in the Credit Agreement) have executed this
First Amendment to grant their consent to the agreements evidenced hereby.
GUARANTORS:
----------
SOUTHWESTERN ICE, INC., a Texas
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
MISSION PARTY ICE, INC., a Texas
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PACKAGED ICE LEASING, INC.; a Texas
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SOUTHCO ICE, INC., a Texas corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SOUTHWEST TEXAS PACKAGED ICE, INC., a
Texas corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
4
<PAGE> 1
EXHIBIT 10.10
AGREEMENT
(PATENTS)
THIS AGREEMENT (PATENTS) (this "AGREEMENT"), dated as September 15,
1997, is made by PACKAGED ICE, INC., a Texas corporation ("GRANTOR"), in favor
of THE FROST NATIONAL BANK, a national banking association, as agent (in such
capacity, the "AGENT") for the Banks (defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of September 15,
1997 (together with all amendments and other modifications, if any, from time
to time thereafter made thereto, the "CREDIT AGREEMENT") by and among Grantor,
the various financial institutions (individually a "BANK" and collectively the
"BANKS") as are, or may from time to time become, parties thereto, and Agent,
the Banks have extended "Commitments" (as defined in the Credit Agreement) to
make "ADVANCES" (as defined in the Credit Agreement) to Grantor;
WHEREAS, in connection with the Credit Agreement, Grantor has executed
and delivered a Security Agreement dated as of the date hereof (together with
all amendments and other modifications, if any, from time to time thereafter
made thereto, the "SECURITY AGREEMENT");
WHEREAS, as a condition precedent to the making of Advances under the
Credit Agreement, Grantor is required to execute and deliver this Agreement and
to grant to Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure the Obligations; and
WHEREAS, Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to make Advances
to Grantor pursuant to the Credit Agreement, Grantor agrees, for the benefit of
each of the Bank, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided in the Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Obligations, Grantor does hereby mortgage, pledge and
hypothecate to Agent, and grant to Agent a security interest in, for its
benefit and the benefit of each of the Banks, all of the following property
(the "PATENT COLLATERAL"), whether now owned or hereafter acquired or existing:
(a) all patents (the "PATENTS"), now existing anywhere in the
world or hereafter acquired, whether currently in use or not, all
records thereof and all patent applications prepared now or hereafter,
including divisional, continuation, and continuation-in-part
applications, whether pending or in preparation for filing, including
applications in the United States
<PAGE> 2
Patent and Trademark Office or any foreign country, including, but not
limited to those referred to in ITEM A of SCHEDULE I attached hereto;
(b) all Patent licenses, including each Patent license referred to
in ITEM B of SCHEDULE I attached hereto;
(c) all reissues, extensions, or renewals of any of the items
described in clauses (a) and (b);
(d) all proceeds of, and rights associated with, the foregoing,
including any claim by Grantor against third parties for past, present
or future infringement of any Patent, whether owned by or licensed to
Grantor, and any violation or breach of any conditions of any Patent
license, including, but not limited to any Patent or Patent license
referred to in ITEM A and ITEM B of SCHEDULE I attached hereto.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by Grantor for the purpose of registering the security interest of
Agent in the Patent Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Agent for its benefit and the
benefit of each of the Banks under the Security Agreement. The Security
Agreement (and all rights and remedies of Agent and each of the Banks
thereunder) shall remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
Obligations and the termination of all Commitments, Agent shall, at Grantor's
expense, execute and deliver to Grantor all instruments and other documents as
may be necessary or proper to release the lien on and security interest in the
Patent Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Grantor does hereby further acknowledge
and affirm that the rights and remedies of Agent with respect to the security
interest in the Patent Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which (including the
remedies provided for therein) are incorporated by reference herein as if fully
set forth herein.
SECTION 6. Loan Paper, etc. This Agreement is a Loan Paper executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the day and year first above written.
PACKAGED ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
THE FROST NATIONAL BANK, a national
banking association
By:
----------------------------------------
Richard D. Young, Senior Vice President
PII Agreement (Patent)
2
<PAGE> 3
SCHEDULE I
TO
PATENT AGREEMENT
ITEM A.
REGISTERED PATENTS
<TABLE>
<CAPTION>
Country Patent Registration No. Registration Date
------- ------ ---------------- -----------------
<S> <C> <C> <C>
United States 1 5,109,651 10/05/90
Taiwan 1 UM-89642 10/15/91
Taiwan 1 UM-87144 10/15/91
Mexico 1 178614 10/04/91
Australia 1 646999 10/01/91
Brazil 1 9106944-0 10/01/91
United States 2 5,458,851 10/29/93
United States 3 5,630,310 10/10/95
United States 4 5,581,982 10/10/95
</TABLE>
PENDING PATENT APPLICATIONS
<TABLE>
<CAPTION>
Country Patent Serial No. Filing Date
------- ------ ---------- -----------
<S> <C> <C> <C>
China 1 91110837.8 10/05/91
India 1 1006/Del/91 10/22/91
Patent Cooperation 1 PCT/US91/07214 10/01/91
Treaty
Canada 1 2093337 10/01/91
European Patent Office 92900332.5 10/01/91
Japan 1 04-501236 10/01/91
Patent Cooperation Treaty 2, 3, & 4 PCT/US94/12478 10/01/91
China 2, 3, & 4 94 1 94331.3 10/29/94
Mexico 2, 3, & 4 94 8326 10/29/94
Brazil 2, 3, & 4 PI 9407927-7 10/29/94
Australia 2, 3, & 4 10850/95 10/29/94
Japan 2, 3, & 4 512884/95 10/29/94
United States 5 08/751,403 11/18/96
</TABLE>
1 Automatic Ice Bagger.
2 Automatic Ice Bagger with Self-Contained Sanitizing System.
3 Method for Automatically Bagging Ice Using a Timer and
Multi-Positional Electronic Scale.
4 Method for Automatically Bagging Ice Using a Timer and
Multi-Positional Electronic Scale.
5 Grip for a Grasping Device
PII Agreement (Patent)
----------------------
<PAGE> 4
PATENT APPLICATIONS IN PREPARATION
<TABLE>
<CAPTION>
Country Patent Docket No. Expected Filing Process/Machine
------- ------ ---------- Date ---------------
----
<S> <C> <C> <C> <C>
</TABLE>
NONE
ITEM B. PATENT LICENSES
<TABLE>
<CAPTION>
Country or Patent Licensor Licensee Effective Expiration
Territory ------ -------- -------- Date Date
--------- ---- ----
<S> <C> <C> <C> <C> <C>
United States 5,440,863 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
United States 5,473,865 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
United Kingdom 0 518 382 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.11
REVOLVING CREDIT NOTE
$10,000,000.00 September 15, 1997
1. FOR VALUE RECEIVED, PACKAGED ICE, INC., a Texas corporation
("BORROWER"), hereby unconditionally promises to pay to the order of THE FROST
NATIONAL BANK, a national banking association ("PAYEE"), at the Agent's Lending
Office (as defined in the Credit Agreement defined below), the sum of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) (or, if less, so much thereof as
may be advanced), in lawful money of the United States of America. Capitalized
terms not defined herein shall have the meaning assigned to those terms in the
Credit Agreement referred to below.
2. The unpaid principal amount of, and accrued unpaid interest
on, this Note is payable in accordance with the Credit Agreement (defined in
Section 5 below).
3. The unpaid principal balance advanced and outstanding
hereunder shall bear interest from the date of advance until maturity at the
rate per annum provided in the Credit Agreement that is selected by Borrower
pursuant to the Credit Agreement. The interest rate specified in this section
is subject to adjustment under the circumstances described in the Credit
Agreement. Interest shall be computed in the manner provided in the Credit
Agreement.
4. Notwithstanding any provision contained in this Note or any
other document executed or delivered in connection with this Note or in
connection with the Credit Agreement, Payee shall never be deemed to have
contracted for or be entitled to receive, collect or apply as interest on this
Note, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law, and, if Payee ever receives, collects or applies as
interest any such excess, then the amount that would be excessive interest
shall be applied to reduce the unpaid principal balance of this Note, and, if
the principal balance of this Note is paid in full by that application, then
any remaining excess shall promptly be paid to Borrower. In determining
whether the interest paid or payable under any specific contingency exceeds the
highest lawful rate, Borrower and Payee shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment (other than
payments expressly designated as interest payments hereunder) as an expense or
fee rather than as interest, (ii) exclude voluntary prepayments and the effect
thereof, and (iii) spread the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
that term.
5. This Note has been executed and delivered pursuant to that
certain Credit Agreement (the "CREDIT AGREEMENT"), dated as of September 15,
1997, executed by and between Borrower, The Frost National Bank, as Agent
("AGENT"), Payee, and the Banks defined therein, and is one of the "Revolving
Credit Notes" referred to therein, and the holder of this Note is entitled to
the benefits provided in the Credit Agreement. Reference is hereby made to the
Credit Agreement for a statement of (i) the obligation of Payee to advance
funds hereunder, (ii) the prepayment rights and obligations of Borrower, and
(iii) the events on which the maturity of this Note may be accelerated.
6. If the principal of, or any installment of interest on, this
Note becomes due and payable on a day other than a Business Day, then the
maturity thereof shall be extended to the next succeeding Business Day. If
this Note, or any installment or payment due hereunder, is not paid when due,
whether at maturity or by acceleration, or if it is collected through a
bankruptcy, probate or other court, whether before or after maturity, then
Borrower shall pay all costs of collection, including, but not limited to,
attorney's fees
FROST REVOLVING CREDIT NOTE
<PAGE> 2
incurred by the holder of this Note. All past due principal of, and to the
extent permitted by applicable law, interest on this Note shall bear interest
until paid at the rate provided in the Credit Agreement.
7. Borrower and all sureties, endorsers, guarantors and other
parties ever liable for payment of any sums payable pursuant to the terms of
this Note, jointly and severally waive demand, presentment for payment,
protest, notice of protest, notice of acceleration, notice of intent to
accelerate, diligence in collection, the bringing of any suit against any party
and any notice of or defense on account of any extensions, renewals, partial
payments or changes in any manner of or in this Note or in any of its terms,
provisions and covenants, or any releases or substitutions of any security, or
any delay, indulgence or other act of any trustee or any holder hereof, whether
before or after maturity.
8. All Advances made by Payee, the respective Interest Periods
thereof (if applicable), and all repayments of the principal thereof shall be
recorded by Payee and, before any transfer hereof, endorsed by Payee on the
schedule attached hereto, or on a continuation of the schedule attached to and
a part hereof, provided that the failure of Payee to record any endorsement
shall not affect the obligation of Borrower hereunder or under the Credit
Agreement.
9. This Note is being executed and delivered, and is intended to
be performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall cover the validity, construction, enforcement and interpretation
of this Note.
BORROWER:
PACKAGED ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
FROST REVOLVING CREDIT NOTE
2
<PAGE> 3
SCHEDULE
- --------------------------------------------------------------------------------
Date Advance Principal Payment Balance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3 FROST REVOLVING CREDIT NOTE
<PAGE> 1
EXHIBIT 10.12
REVOLVING CREDIT NOTE
$10,000,000.00 September 15, 1997
1. FOR VALUE RECEIVED, PACKAGED ICE, INC., a Texas corporation
("BORROWER"), hereby unconditionally promises to pay to the order of ZIONS
FIRST NATIONAL BANK, a national banking association ("PAYEE"), at the Agent's
Lending Office (as defined in the Credit Agreement defined below), the sum of
TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (or, if less, so much thereof
as may be advanced), in lawful money of the United States of America.
Capitalized terms not defined herein shall have the meaning assigned to those
terms in the Credit Agreement referred to below.
2. The unpaid principal amount of, and accrued unpaid interest
on, this Note is payable in accordance with the Credit Agreement (defined in
Section 5 below).
3. The unpaid principal balance advanced and outstanding
hereunder shall bear interest from the date of advance until maturity at the
rate per annum provided in the Credit Agreement that is selected by Borrower
pursuant to the Credit Agreement. The interest rate specified in this section
is subject to adjustment under the circumstances described in the Credit
Agreement. Interest shall be computed in the manner provided in the Credit
Agreement.
4. Notwithstanding any provision contained in this Note or any
other document executed or delivered in connection with this Note or in
connection with the Credit Agreement, Payee shall never be deemed to have
contracted for or be entitled to receive, collect or apply as interest on this
Note, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law, and, if Payee ever receives, collects or applies as
interest any such excess, then the amount that would be excessive interest
shall be applied to reduce the unpaid principal balance of this Note, and, if
the principal balance of this Note is paid in full by that application, then
any remaining excess shall promptly be paid to Borrower. In determining
whether the interest paid or payable under any specific contingency exceeds the
highest lawful rate, Borrower and Payee shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment (other than
payments expressly designated as interest payments hereunder) as an expense or
fee rather than as interest, (ii) exclude voluntary prepayments and the effect
thereof, and (iii) spread the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is uniform throughout
that term.
5. This Note has been executed and delivered pursuant to that
certain Credit Agreement (the "CREDIT AGREEMENT"), dated as of September 15,
1997, executed by and between Borrower, The Frost National Bank, as Agent
("AGENT"), Payee, and the Banks defined therein, and is one of the "Revolving
Credit Notes" referred to therein, and the holder of this Note is entitled to
the benefits provided in the Credit Agreement. Reference is hereby made to the
Credit Agreement for a statement of (i) the obligation of Payee to advance
funds hereunder, (ii) the prepayment rights and obligations of Borrower, and
(iii) the events on which the maturity of this Note may be accelerated.
6. If the principal of, or any installment of interest on, this
Note becomes due and payable on a day other than a Business Day, then the
maturity thereof shall be extended to the next succeeding Business Day. If
this Note, or any installment or payment due hereunder, is not paid when due,
whether at maturity or by acceleration, or if it is collected through a
bankruptcy, probate or other court, whether before or after maturity, then
Borrower shall pay all costs of collection, including, but not limited to,
attorney's fees
ZIONS REVOLVING CREDIT NOTE
<PAGE> 2
incurred by the holder of this Note. All past due principal of, and to the
extent permitted by applicable law, interest on this Note shall bear interest
until paid at the rate provided in the Credit Agreement.
7. Borrower and all sureties, endorsers, guarantors and other
parties ever liable for payment of any sums payable pursuant to the terms of
this Note, jointly and severally waive demand, presentment for payment,
protest, notice of protest, notice of acceleration, notice of intent to
accelerate, diligence in collection, the bringing of any suit against any party
and any notice of or defense on account of any extensions, renewals, partial
payments or changes in any manner of or in this Note or in any of its terms,
provisions and covenants, or any releases or substitutions of any security, or
any delay, indulgence or other act of any trustee or any holder hereof, whether
before or after maturity.
8. All Advances made by Payee, the respective Interest Periods
thereof (if applicable), and all repayments of the principal thereof shall be
recorded by Payee and, before any transfer hereof, endorsed by Payee on the
schedule attached hereto, or on a continuation of the schedule attached to and
a part hereof, provided that the failure of Payee to record any endorsement
shall not affect the obligation of Borrower hereunder or under the Credit
Agreement.
9. This Note is being executed and delivered, and is intended to
be performed in the State of Texas. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of Texas shall cover the validity, construction, enforcement and interpretation
of this Note.
BORROWER:
PACKAGED ICE, INC., a Texas corporation
By:
------------------------------------
James F. Stuart, Chief Executive Officer
2
ZIONS REVOLVING CREDIT NOTE
<PAGE> 3
SCHEDULE
- --------------------------------------------------------------------------------
Date Advance Principal Payment Balance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
ZIONS REVOLVING CREDIT NOTE
<PAGE> 1
EXHIBIT 10.13
SUBSIDIARY GUARANTY AGREEMENT
WHEREAS, PACKAGED ICE, INC., a Texas corporation ("BORROWER"), has
entered into a Credit Agreement of even date herewith with certain banks and
other lending institutions which are or may from time to time become
signatories thereto (each, a "BANK" and collectively, the "BANKS"), THE FROST
NATIONAL BANK, a national banking association, as documentation and
administrative agent for itself and the other Banks (in such capacity, together
with its successors in such capacity, the "AGENT"), pursuant to which the Banks
have agreed to make a revolving credit loan to Borrower with advances
thereunder not to exceed an aggregate principal amount of Twenty Million and
No/100 Dollars ($20,000,000.00) (such Credit Agreement, as same may be amended,
extended, restated, supplemented or modified from time to time, the "CREDIT
AGREEMENT"); terms defined in the Credit Agreement and not otherwise defined
herein are used herein as defined therein;
WHEREAS, Agent and the Banks have conditioned their obligations under
the Credit Agreement upon the execution and delivery by Guarantor (hereinafter
defined) of this Subsidiary Guaranty Agreement (this "GUARANTY");
NOW THEREFORE, for valuable consideration, including, without
limitation, $100,000.00 cash paid by Borrower to Guarantor; any commitment to
lend, extension of credit or other financial accommodation, whether heretofore
or hereafter made by the Banks to Borrower; any extension, renewal or
replacement of any Guaranteed Indebtedness, any forbearance with respect to any
Guaranteed Indebtedness or otherwise; or any other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the undersigned,
SOUTHWESTERN ICE, INC., a Texas corporation ("GUARANTOR"), hereby irrevocably
and unconditionally guarantees to Agent and to the Banks, the full and prompt
payment and performance of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty being upon the following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means all
of the Obligations and shall include any and all post-petition interest and
reasonable expenses (including reasonable attorneys' fees) whether or not
allowed under any bankruptcy, insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment, and not a guaranty of collection, and
Guarantor shall remain liable on its obligations hereunder until the payment in
full of the Guaranteed Indebtedness and termination of the Commitments. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent, any
Bank or any other party, or which Guarantor may have against Borrower or any
other party (other than Agent or any Bank), shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
3. It is the intention of Guarantor, Agents and the Banks that
the amount of the Guaranteed Indebtedness not exceed the maximum amount
permitted by applicable laws, including fraudulent conveyance, fraudulent
transfer or similar laws applicable to Guarantor. Accordingly, and
notwithstanding anything to the contrary in this Guaranty, any Loan Paper, or
any other agreement or instrument executed in connection with the payment of
any of the Guaranteed Indebtedness, if, after giving effect to this Guaranty
and applicable laws, the obligations of Guarantor under this Guaranty would
otherwise be set aside, terminated, annulled or avoided for such reason by a
court of competent jurisdiction in a proceeding
SWI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 2
actually pending before such court, the amount of the Guaranteed Indebtedness
shall be limited to the maximum amount permitted by applicable laws which would
not (a) render Guarantor insolvent, (b) result in the fair saleable value of
Guarantor's assets being less than the amount required to pay its debts and
other liabilities (including contingent liabilities) as they mature, or (c)
leave Guarantor with unreasonably small capital to carry out its business as
conducted prior to the execution of this Guaranty and as proposed to be
conducted, including its capital needs.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and the Banks hereunder shall be cumulative of
any and all other rights that Agent and the Banks may ever have against
Guarantor. The exercise by Agent or any Bank of any right or remedy hereunder
or under any other instrument, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent, for the benefit
of the Banks, upon written demand therefor delivered to Guarantor, in lawful
currency of the United States of America and it shall not be necessary for
Agent, in order to enforce such payment by Guarantor, first to institute suit
or exhaust its remedies against Borrower or others liable on such Guaranteed
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on written demand
therefor delivered to Guarantor by Agent.
7. Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower,
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed
Indebtedness or any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (e) any
adjustment, indulgence, forbearance, waiver, settlement, or compromise that may
be granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be
due or become due to Agent, any of the Banks or others; (g) the application of
any deposit balance, fund, payment, collections through process of law or
otherwise, or other collateral of Borrower to the satisfaction and liquidation
of the indebtedness or obligations of Borrower to Agent or any of the Banks, if
any, not guaranteed under this Guaranty; (h) the application of any sums paid
to Agent or any of the Banks by Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, Borrower or others to the
SWI SUBSIDIARY GUARANTY AGREEMENT
2
<PAGE> 3
Guaranteed Indebtedness in such order and manner as Agent may determine in
accordance with the Credit Agreement; (i) any neglect, delay, omission,
failure, or refusal of Agent or any Bank to take or prosecute any action for
the collection of any of the Guaranteed Indebtedness or to foreclose or take or
prosecute any action in connection with any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (j) the unenforceability or invalidity of any or all of the
Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to Agent or any
Bank is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason Agent or any Bank is required to
refund any payment or pay the amount thereof to someone else; (l) the
settlement or compromise of any of the Guaranteed Indebtedness; (m) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (n) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (o) the failure of Agent or any Bank to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (p) any change
in the corporate existence, structure, or ownership of Borrower; (q) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower; (r) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (s) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or (t)
the officers creating all or any part of the Guaranteed Indebtedness acted in
excess of their authority.
8. Guarantor hereby represents and warrants to Agent and the Banks
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and
is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such financial
condition or collateral as an inducement to enter into this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on Agent or the Banks to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver, and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, or (ii) to
the best of Guarantor's knowledge, any law, rule, regulation, or order
of any Governmental Authority to which Guarantor is subject.
(e) Neither Agent nor the Banks has made any representation,
warranty, or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to Agent or
any Bank are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no
SWI SUBSIDIARY GUARANTY AGREEMENT
3
<PAGE> 4
material adverse change has occurred in the financial condition of
Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty, including without limitation, all rights of contribution and
subrogation, and the obligations evidenced hereby, (i) Guarantor is
and will be solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) Guarantor is
and will continue to be able to pay its debts as they mature, and (iv)
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in the
Credit Agreement are true and correct.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any Commitment
under the Credit Agreement:
(a) Guarantor shall not, so long as its obligations under
this Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Agent at any time
and from time to time such financial statements and other financial
information as required by the Credit Agreement or as Agent may
otherwise reasonably require, in form and substance satisfactory to
Agent.
(c) Guarantor shall comply with all terms and provisions
of the Loan Papers that apply to Guarantor.
(d) Guarantor shall promptly inform Agent of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the Loan Papers, (ii) any material claim or controversy which might
become the subject of such litigation or governmental investigation,
and (iii) any material adverse change in the financial condition of
Guarantor.
10. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness, and
Guarantor hereby assigns the Subordinated Indebtedness to Agent, for the
benefit of the Banks, as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of Agent and shall forthwith be paid to Agent without affecting
the liability of Guarantor under this Guaranty and may be applied by Agent and
the Banks against the Guaranteed Indebtedness in such order and manner as Agent
and the Banks may determine in their sole discretion. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such documents
and instruments as Agent may reasonably request to perfect, preserve, and
enforce its rights hereunder. For purposes of this Guaranty, the term
"SUBORDINATED INDEBTEDNESS" means all indebtedness, liabilities, and
obligations of Borrower to Guarantor, whether such indebtedness, liabilities,
and obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect,
SWI SUBSIDIARY GUARANTY AGREEMENT
4
<PAGE> 5
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective of
the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Agent presently exist or are hereafter created or
attached. Without the prior written consent of the Banks, Guarantor shall not
(i) file suit against Borrower or exercise or enforce any other creditor's
right it may have against Borrower, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings, judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding, to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Agent shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments
made in respect of the Subordinated Indebtedness. Agent and the Banks may
apply any such dividends, distributions, and payments against the Guaranteed
Indebtedness in such order and manner as Agent and the Banks may determine in
their sole discretion.
(d) Guarantor agrees that all promissory notes or any other
document evidencing Subordinated Indebtedness shall contain a specific written
notice thereon that the indebtedness evidenced thereby is subordinated under
the terms of this Guaranty.
11. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by Agent, including without limitation, giving any
notice of default or any other notice to, or making any demand on, Borrower,
any other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
12. In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases all
claims, causes of action, defenses and offsets for any act or omission of
Agent, its directors, officers, employees, representatives or agents in
connection with Agent's administration of the Guaranteed Indebtedness, except
for Agent's willful misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by Agent or
any Bank upon the insolvency, bankruptcy, or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
SWI SUBSIDIARY GUARANTY AGREEMENT
5
<PAGE> 6
14. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
15. This Guaranty is for the benefit of Agent and the Banks and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
16. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty and the undertakings of Guarantor hereunder in making extensions
of credit to Borrower under the Credit Agreement and further recognizes that
the execution and delivery of this Guaranty is a material inducement to Agent
and the Banks in entering into the Credit Agreement. Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Banks in the
Credit Agreement.
18. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) any collateral securing all or any part of
the Guaranteed Indebtedness.
19. In the event that Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall
be deemed given when such notice is deposited in the United States mail,
postage prepaid, at the address for Guarantor set forth on the signature page
of this Guaranty, ten days prior to the date any public sale, or after which
any private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of Agent in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties
in accordance with the Credit Agreement, and then only in the specific instance
and for the purpose given.
21. Nothing contained herein shall be construed as an obligation
on the part of Agent or the Banks to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Indebtedness, Guarantor and Agent by its acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess
of
SWI SUBSIDIARY GUARANTY AGREEMENT
6
<PAGE> 7
the maximum nonusurious interest rate as may be authorized by applicable law
for the written contracts which constitute the Guaranteed Indebtedness. It is
the intention of Guarantor, Agent, and the Banks to conform strictly to the
applicable laws which limit interest rates, and any of the aforesaid contracts
for interest, if and to the extent payable by Guarantors, shall be held to be
subject to reduction to the maximum nonusurious interest rate allowed under
said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION CONSUMMATED AND PERFORMABLE IN THE STATE OF TEXAS AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
24. Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by Agent or any Bank in connection
with the enforcement or collection of this Guaranty.
25. THIS GUARANTY TOGETHER WITH THE OTHER LOAN PAPERS REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 15th day of September, 1997.
GUARANTOR:
SOUTHWESTERN ICE, INC., a Texas corporation
By:
------------------------------------------
James F. Stuart, Chief Executive Officer
Address for Notices:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A. J. Lewis, III
Fax Number: (713) 464-4681
Telephone Number: (713) 464-9384
SWI SUBSIDIARY GUARANTY AGREEMENT
7
<PAGE> 1
EXHIBIT 10.14
SUBSIDIARY GUARANTY AGREEMENT
WHEREAS, PACKAGED ICE, INC., a Texas corporation ("BORROWER"), has
entered into a Credit Agreement of even date herewith with certain banks and
other lending institutions which are or may from time to time become
signatories thereto (each, a "BANK" and collectively, the "BANKS"), THE
FROST NATIONAL BANK, a national banking association, as documentation and
administrative agent for itself and the other Banks (in such capacity,
together with its successors in such capacity, the "AGENT"), pursuant to
which the Banks have agreed to make a revolving credit loan to Borrower
with advances thereunder not to exceed an aggregate principal amount of
Twenty Million and No/100 Dollars ($20,000,000.00) (such Credit Agreement, as
same may be amended, extended, restated, supplemented or modified from time
to time, the "CREDIT AGREEMENT"); terms defined in the Credit Agreement and
not otherwise defined herein are used herein as defined therein;
WHEREAS, Agent and the Banks have conditioned their obligations
under the Credit Agreement upon the execution and delivery by Guarantor
(hereinafter defined) of this Subsidiary Guaranty Agreement (this
"Guaranty");
NOW THEREFORE, for valuable consideration, including, without
limitation, $100,000.00 cash paid by Borrower to Guarantor; any commitment
to lend, extension of credit or other financial accommodation, whether
heretofore or hereafter made by the Banks to Borrower; any extension,
renewal or replacement of any Guaranteed Indebtedness, any forbearance
with respect to any Guaranteed Indebtedness or otherwise; or any other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the undersigned, MISSION PARTY ICE, INC., a Texas corporation
("GUARANTOR"), hereby irrevocably and unconditionally guarantees to Agent and
to the Banks, the full and prompt payment and performance of the
Guaranteed Indebtedness (hereinafter defined), this Guaranty being upon the
following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means
all of the Obligations and shall include any and all post-petition interest
and reasonable expenses (including reasonable attorneys' fees) whether or
not allowed under any bankruptcy, insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment, and not a guaranty of collection, and
Guarantor shall remain liable on its obligations hereunder until the payment
in full of the Guaranteed Indebtedness and termination of the Commitments.
No set-off, counterclaim, recoupment, reduction, or diminution of any
obligation, or any defense of any kind or nature which Borrower may have
against Agent, any Bank or any other party, or which Guarantor may have
against Borrower or any other party (other than Agent or any Bank), shall be
available to, or shall be asserted by, Guarantor against Agent, any Bank or
any subsequent holder of the Guaranteed Indebtedness or any part thereof or
against payment of the Guaranteed Indebtedness or any part thereof.
3. It is the intention of Guarantor, Agents and the Banks that
the amount of the Guaranteed Indebtedness not exceed the maximum amount
permitted by applicable laws, including fraudulent conveyance, fraudulent
transfer or similar laws applicable to Guarantor. Accordingly, and
notwithstanding anything to the contrary in this Guaranty, any Loan Paper,
or any other agreement or instrument executed in connection with the payment
of any of the Guaranteed Indebtedness, if, after giving effect to this
Guaranty and applicable laws, the obligations of Guarantor under this
Guaranty would otherwise be set aside, terminated, annulled or avoided for
such reason by a court of competent jurisdiction in a proceeding
MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 2
actually pending before such court, the amount of the Guaranteed Indebtedness
shall be limited to the maximum amount permitted by applicable laws which
would not (a) render Guarantor insolvent, (b) result in the fair saleable
value of Guarantor's assets being less than the amount required to pay
its debts and other liabilities (including contingent liabilities) as they
mature, or (c) leave Guarantor with unreasonably small capital to carry out
its business as conducted prior to the execution of this Guaranty and as
proposed to be conducted, including its capital needs.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of Agent and the Banks hereunder shall be
cumulative of any and all other rights that Agent and the Banks may ever have
against Guarantor. The exercise by Agent or any Bank of any right or remedy
hereunder or under any other instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or
performance of the Guaranteed Indebtedness, or any part thereof, when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration,
or otherwise, Guarantor shall promptly pay the amount due thereon to Agent,
for the benefit of the Banks, upon written demand therefor delivered to
Guarantor, in lawful currency of the United States of America and it shall
not be necessary for Agent, in order to enforce such payment by Guarantor,
first to institute suit or exhaust its remedies against Borrower or others
liable on such Guaranteed Indebtedness, or to enforce any rights against any
collateral which shall ever have been given to secure such Guaranteed
Indebtedness.
6. If acceleration of the time for payment of any amount
payable by Borrower under the Guaranteed Indebtedness is stayed upon the
insolvency, bankruptcy, or reorganization of Borrower, all such amounts
otherwise subject to acceleration under the terms of the Guaranteed
Indebtedness shall nonetheless be payable by Guarantor hereunder forthwith on
written demand therefor delivered to Guarantor by Agent.
7. Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced,
or affected for any reason or by the occurrence of any event, including,
without limitation, one or more of the following events, whether or not
with notice to or the consent of Guarantor: (a) the taking or accepting of
collateral as security for any or all of the Guaranteed Indebtedness or the
sale, release, surrender, exchange, or subordination of any collateral now
or hereafter securing any or all of the Guaranteed Indebtedness; (b) any
partial release of the liability of Guarantor hereunder, or the full or
partial release of Borrower or any other guarantor from liability for any or
all of the Guaranteed Indebtedness; (c) the dissolution, insolvency, or
bankruptcy of Borrower, Guarantor, or any other party at any time liable for
the payment of any or all of the Guaranteed Indebtedness; (d) any renewal,
extension, modification, waiver, amendment, or rearrangement of any or all of
the Guaranteed Indebtedness or any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (e) any adjustment, indulgence, forbearance, waiver,
settlement, or compromise that may be granted or given by Agent or any Bank
to Borrower, Guarantor, or any other party ever liable for any or all of
the Guaranteed Indebtedness; (f) the subordination of the payment of all
or any part of the Guaranteed Indebtedness to the payment of any
obligations, indebtedness, or liabilities which may be due or become due to
Agent, any of the Banks or others; (g) the application of any deposit
balance, fund, payment, collections through process of law or otherwise, or
other collateral of Borrower to the satisfaction and liquidation of the
indebtedness or obligations of Borrower to Agent or any of the Banks, if
any, not guaranteed under this Guaranty; (h) the application of any sums
paid to Agent or any of the Banks by Guarantor, any other guarantor of all
or any part of the Guaranteed Indebtedness, Borrower or others to the
2 MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 3
Guaranteed Indebtedness in such order and manner as Agent may determine
in accordance with the Credit Agreement; (i) any neglect, delay, omission,
failure, or refusal of Agent or any Bank to take or prosecute any action
for the collection of any of the Guaranteed Indebtedness or to foreclose or
take or prosecute any action in connection with any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (j) the unenforceability or invalidity of any or all
of the Guaranteed Indebtedness or of any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
Guaranteed Indebtedness; (k) any payment by Borrower or any other party to
Agent or any Bank is held to constitute a preference under applicable
bankruptcy or insolvency law or if for any other reason Agent or any Bank is
required to refund any payment or pay the amount thereof to someone else;
(l) the settlement or compromise of any of the Guaranteed Indebtedness; (m)
the non-perfection of any security interest or lien securing any or all of
the Guaranteed Indebtedness; (n) any impairment of any collateral securing
any or all of the Guaranteed Indebtedness; (o) the failure of Agent or any
Bank to sell any collateral securing any or all of the Guaranteed
Indebtedness in a commercially reasonable manner or as otherwise required by
law; (p) any change in the corporate existence, structure, or ownership of
Borrower; (q) any other circumstance which might otherwise constitute a
defense available to, or discharge of, Borrower; (r) the unenforceability
of all or any part of the Guaranteed Indebtedness against Borrower by
reason of the fact that the Guaranteed Indebtedness exceeds the amount
permitted by law; (s) the act of creating all or any part of the Guaranteed
Indebtedness is ultra vires; or (t) the officers creating all or any part of
the Guaranteed Indebtedness acted in excess of their authority.
8. Guarantor hereby represents and warrants to Agent and the Banks
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Borrower
and is familiar with the value of any and all collateral intended to
be security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such
financial condition or collateral as an inducement to enter into
this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on Agent or the Banks to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith, and the execution, delivery,
and performance of this Guaranty and any other agreements
executed by Guarantor contemporaneously herewith do not and will
not violate (i) any agreement or instrument to which Guarantor is a
party, or (ii) to the best of Guarantor's knowledge, any law, rule,
regulation, or order of any Governmental Authority to which Guarantor
is subject.
(e) Neither Agent nor the Banks has made any representation,
warranty, or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to Agent or
any Bank are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no
3 MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 4
material adverse change has occurred in the financial condition of
Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to
this Guaranty, including without limitation, all rights of
contribution and subrogation, and the obligations evidenced hereby,
(i) Guarantor is and will be solvent (to the extent necessary,
taking into account any rights of contribution, reimbursement and
subrogation), (ii) the fair saleable value of Guarantor's assets
exceeds and will continue to exceed its liabilities (both fixed and
contingent), (iii) Guarantor is and will continue to be able to
pay its debts as they mature, and (iv) Guarantor has and will
continue to have sufficient capital to carry on its business and all
businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in
the Credit Agreement are true and correct.
9. Guarantor covenants and agrees that, as long as the
Guaranteed Indebtedness or any part thereof is outstanding or any Bank has
any Commitment under the Credit Agreement:
(a) Guarantor shall not, so long as its obligations
under this Guaranty continue, transfer or pledge any material
portion of its assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Agent at any
time and from time to time such financial statements and other
financial information as required by the Credit Agreement or as
Agent may otherwise reasonably require, in form and substance
satisfactory to Agent.
(c) Guarantor shall comply with all terms and provisions
of the Loan Papers that apply to Guarantor.
(d) Guarantor shall promptly inform Agent of (i)
any litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the Loan Papers, (ii) any material claim or controversy which
might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the
financial condition of Guarantor.
10. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in
right of payment to the prior payment in full of all Guaranteed
Indebtedness, and Guarantor hereby assigns the Subordinated Indebtedness to
Agent, for the benefit of the Banks, as security for the Guaranteed
Indebtedness. If any sums shall be paid to Guarantor by Borrower or any
other person or entity on account of the Subordinated Indebtedness, such sums
shall be held in trust by Guarantor for the benefit of Agent and shall
forthwith be paid to Agent without affecting the liability of Guarantor
under this Guaranty and may be applied by Agent and the Banks against the
Guaranteed Indebtedness in such order and manner as Agent and the Banks may
determine in their sole discretion. Upon the request of Agent, Guarantor
shall execute, deliver, and endorse to Agent such documents and instruments
as Agent may reasonably request to perfect, preserve, and enforce its rights
hereunder. For purposes of this Guaranty, the term "SUBORDINATED
INDEBTEDNESS" means all indebtedness, liabilities, and obligations of
Borrower to Guarantor, whether such indebtedness, liabilities, and
obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect,
4 MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 5
contingent, primary, secondary, several, joint and several, or otherwise,
and irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective
of the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be
acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's
assets securing payment of any Subordinated Indebtedness shall be and
remain inferior and subordinate to any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of the Guaranteed Indebtedness or any part thereof,
regardless of whether such encumbrances in favor of Guarantor or Agent
presently exist or are hereafter created or attached. Without the prior
written consent of the Banks, Guarantor shall not (i) file suit against
Borrower or exercise or enforce any other creditor's right it may have
against Borrower, or (ii) foreclose, repossess, sequester, or otherwise take
steps or institute any action or proceedings, judicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding, to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency
proceeding involving Borrower as debtor, Agent shall have the right to prove
and vote any claim under the Subordinated Indebtedness and to receive
directly from the receiver, trustee or other court custodian all
dividends, distributions, and payments made in respect of the
Subordinated Indebtedness. Agent and the Banks may apply any such
dividends, distributions, and payments against the Guaranteed Indebtedness
in such order and manner as Agent and the Banks may determine in
their sole discretion.
(d) Guarantor agrees that all promissory notes or any other
document evidencing Subordinated Indebtedness shall contain a specific
written notice thereon that the indebtedness evidenced thereby is
subordinated under the terms of this Guaranty.
11. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b)
the taking of any other action by Agent, including without limitation,
giving any notice of default or any other notice to, or making any demand
on, Borrower, any other guarantor of all or any part of the Guaranteed
Indebtedness or any other party.
12. In addition to any other waivers, agreements and covenants
of Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of Agent, its directors, officers, employees, representatives or agents
in connection with Agent's administration of the Guaranteed Indebtedness,
except for Agent's willful misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of all or any part
of the Guaranteed Indebtedness is rescinded or must otherwise be returned by
Agent or any Bank upon the insolvency, bankruptcy, or reorganization of
Borrower, Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
5 MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 6
14. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others
(including Guarantor), with respect to any of the Guaranteed Indebtedness
shall, if the statute of limitations in favor of Guarantor against Agent or
any Bank shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
15. This Guaranty is for the benefit of Agent and the Banks and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
16. Guarantor recognizes that Agent and the Banks are relying
upon this Guaranty and the undertakings of Guarantor hereunder in making
extensions of credit to Borrower under the Credit Agreement and further
recognizes that the execution and delivery of this Guaranty is a material
inducement to Agent and the Banks in entering into the Credit Agreement.
Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty
is subject to the applicable provisions of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if
set forth herein verbatim. Moreover, Guarantor acknowledges and agrees that
this Guaranty is subject to the offset provisions in favor of the Banks in the
Credit Agreement.
18. Guarantor expressly assumes all responsibilities to
remain informed of the financial condition of Borrower and any
circumstances affecting (a) Borrower's ability to perform under the Credit
Agreement and the other Loan Papers to which it is a party or (b) any
collateral securing all or any part of the Guaranteed Indebtedness.
19. In the event that Guarantor is entitled to receive any
notice under the Uniform Commercial Code, as it exists in the state governing
any such notice, of the sale or other disposition of any collateral securing
all or any part of the Guaranteed Indebtedness or this Guaranty, reasonable
notice shall be deemed given when such notice is deposited in the United
States mail, postage prepaid, at the address for Guarantor set forth on the
signature page of this Guaranty, ten days prior to the date any public sale,
or after which any private sale, of any such collateral is to be held;
provided, however, that notice given in any other reasonable manner or at any
other reasonable time shall be sufficient.
20. No delay on the part of Agent in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties
in accordance with the Credit Agreement, and then only in the specific instance
and for the purpose given.
21. Nothing contained herein shall be construed as an obligation
on the part of Agent or the Banks to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or
of any instrument or agreement evidencing, governing or securing all or any
part of the Guaranteed Indebtedness, Guarantor and Agent by its acceptance
hereof agree that Guarantor shall never be required or obligated to pay
interest in excess of
MPI SUBSIDIARY GUARANTY AGREEMENT
6
<PAGE> 7
the maximum nonusurious interest rate as may be authorized by applicable law
for the written contracts which constitute the Guaranteed Indebtedness. It
is the intention of Guarantor, Agent, and the Banks to conform strictly to
the applicable laws which limit interest rates, and any of the aforesaid
contracts for interest, if and to the extent payable by Guarantors, shall
be held to be subject to reduction to the maximum nonusurious interest
rate allowed under said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION CONSUMMATED AND PERFORMABLE IN THE STATE OF TEXAS AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS.
24. Guarantor shall pay on demand all reasonable attorneys'
fees and all other costs and expenses incurred by Agent or any Bank in
connection with the enforcement or collection of this Guaranty.
25. THIS GUARANTY TOGETHER WITH THE OTHER LOAN PAPERS REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 15th day of September, 1997.
GUARANTOR:
MISSION PARTY ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
Address for Notices:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A. J. Lewis, III
Fax Number: (713) 464-4681
Telephone Number: (713) 464-9384
7 MPI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 1
EXHIBIT 10.15
SUBSIDIARY GUARANTY AGREEMENT
WHEREAS, PACKAGED ICE, INC., a Texas corporation ("BORROWER"), has
entered into a Credit Agreement of even date herewith with certain banks and
other lending institutions which are or may from time to time become
signatories thereto (each, a "BANK" and collectively, the "BANKS"), THE FROST
NATIONAL BANK, a national banking association, as documentation and
administrative agent for itself and the other Banks (in such capacity, together
with its successors in such capacity, the "AGENT"), pursuant to which the Banks
have agreed to make a revolving credit loan to Borrower with advances
thereunder not to exceed an aggregate principal amount of Twenty Million and
No/100 Dollars ($20,000,000.00) (such Credit Agreement, as same may be amended,
extended, restated, supplemented or modified from time to time, the "CREDIT
AGREEMENT"); terms defined in the Credit Agreement and not otherwise defined
herein are used herein as defined therein;
WHEREAS, Agent and the Banks have conditioned their obligations under
the Credit Agreement upon the execution and delivery by Guarantor (hereinafter
defined) of this Subsidiary Guaranty Agreement (this "GUARANTY");
NOW THEREFORE, for valuable consideration, including, without
limitation, $100,000.00 cash paid by Borrower to Guarantor; any commitment to
lend, extension of credit or other financial accommodation, whether heretofore
or hereafter made by the Banks to Borrower; any extension, renewal or
replacement of any Guaranteed Indebtedness, any forbearance with respect to any
Guaranteed Indebtedness or otherwise; or any other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the undersigned,
PACKAGED ICE LEASING, INC., a Nevada corporation ("GUARANTOR"), hereby
irrevocably and unconditionally guarantees to Agent and to the Banks, the full
and prompt payment and performance of the Guaranteed Indebtedness (hereinafter
defined), this Guaranty being upon the following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means all
of the Obligations and shall include any and all post-petition interest and
reasonable expenses (including reasonable attorneys' fees) whether or not
allowed under any bankruptcy, insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment, and not a guaranty of collection, and
Guarantor shall remain liable on its obligations hereunder until the payment in
full of the Guaranteed Indebtedness and termination of the Commitments. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent, any
Bank or any other party, or which Guarantor may have against Borrower or any
other party (other than Agent or any Bank), shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
3. It is the intention of Guarantor, Agents and the Banks that
the amount of the Guaranteed Indebtedness not exceed the maximum amount
permitted by applicable laws, including fraudulent conveyance, fraudulent
transfer or similar laws applicable to Guarantor. Accordingly, and
notwithstanding anything to the contrary in this Guaranty, any Loan Paper, or
any other agreement or instrument executed in connection with the payment of
any of the Guaranteed Indebtedness, if, after giving effect to this Guaranty
and applicable laws, the obligations of Guarantor under this Guaranty would
otherwise be set aside, terminated, annulled or avoided for such reason by a
court of competent jurisdiction in a proceeding
PILI SUBSIDIARY GUARANTY AGREEMENT
<PAGE> 2
actually pending before such court, the amount of the Guaranteed Indebtedness
shall be limited to the maximum amount permitted by applicable laws which would
not (a) render Guarantor insolvent, (b) result in the fair saleable value of
Guarantor's assets being less than the amount required to pay its debts and
other liabilities (including contingent liabilities) as they mature, or (c)
leave Guarantor with unreasonably small capital to carry out its business as
conducted prior to the execution of this Guaranty and as proposed to be
conducted, including its capital needs.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and the Banks hereunder shall be cumulative of
any and all other rights that Agent and the Banks may ever have against
Guarantor. The exercise by Agent or any Bank of any right or remedy hereunder
or under any other instrument, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent, for the benefit
of the Banks, upon written demand therefor delivered to Guarantor, in lawful
currency of the United States of America and it shall not be necessary for
Agent, in order to enforce such payment by Guarantor, first to institute suit
or exhaust its remedies against Borrower or others liable on such Guaranteed
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on written demand
therefor delivered to Guarantor by Agent.
7. Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower,
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed
Indebtedness or any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (e) any
adjustment, indulgence, forbearance, waiver, settlement, or compromise that may
be granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be
due or become due to Agent, any of the Banks or others; (g) the application of
any deposit balance, fund, payment, collections through process of law or
otherwise, or other collateral of Borrower to the satisfaction and liquidation
of the indebtedness or obligations of Borrower to Agent or any of the Banks, if
any, not guaranteed under this Guaranty; (h) the application of any sums paid
to Agent or any of the Banks by Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, Borrower or others to the
PILI SUBSIDIARY GUARANTY AGREEMENT
2
<PAGE> 3
Guaranteed Indebtedness in such order and manner as Agent may determine in
accordance with the Credit Agreement; (i) any neglect, delay, omission,
failure, or refusal of Agent or any Bank to take or prosecute any action for
the collection of any of the Guaranteed Indebtedness or to foreclose or take or
prosecute any action in connection with any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (j) the unenforceability or invalidity of any or all of the
Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to Agent or any
Bank is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason Agent or any Bank is required to
refund any payment or pay the amount thereof to someone else; (l) the
settlement or compromise of any of the Guaranteed Indebtedness; (m) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (n) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (o) the failure of Agent or any Bank to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (p) any change
in the corporate existence, structure, or ownership of Borrower; (q) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower; (r) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (s) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or (t)
the officers creating all or any part of the Guaranteed Indebtedness acted in
excess of their authority.
8. Guarantor hereby represents and warrants to Agent and the Banks
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and
is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such financial
condition or collateral as an inducement to enter into this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on Agent or the Banks to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver, and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, or (ii) to
the best of Guarantor's knowledge, any law, rule, regulation, or order
of any Governmental Authority to which Guarantor is subject.
(e) Neither Agent nor the Banks has made any representation,
warranty, or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to Agent or
any Bank are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no
PILI SUBSIDIARY GUARANTY AGREEMENT
3
<PAGE> 4
material adverse change has occurred in the financial condition of
Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty, including without limitation, all rights of contribution and
subrogation, and the obligations evidenced hereby, (i) Guarantor is
and will be solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) Guarantor is
and will continue to be able to pay its debts as they mature, and (iv)
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in the
Credit Agreement are true and correct.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any Commitment
under the Credit Agreement:
(a) Guarantor shall not, so long as its obligations under
this Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Agent at any time
and from time to time such financial statements and other financial
information as required by the Credit Agreement or as Agent may
otherwise reasonably require, in form and substance satisfactory to
Agent.
(c) Guarantor shall comply with all terms and provisions
of the Loan Papers that apply to Guarantor.
(d) Guarantor shall promptly inform Agent of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the Loan Papers, (ii) any material claim or controversy which might
become the subject of such litigation or governmental investigation,
and (iii) any material adverse change in the financial condition of
Guarantor.
10. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness, and
Guarantor hereby assigns the Subordinated Indebtedness to Agent, for the
benefit of the Banks, as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of Agent and shall forthwith be paid to Agent without affecting
the liability of Guarantor under this Guaranty and may be applied by Agent and
the Banks against the Guaranteed Indebtedness in such order and manner as Agent
and the Banks may determine in their sole discretion. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such documents
and instruments as Agent may reasonably request to perfect, preserve, and
enforce its rights hereunder. For purposes of this Guaranty, the term
"SUBORDINATED INDEBTEDNESS" means all indebtedness, liabilities, and
obligations of Borrower to Guarantor, whether such indebtedness, liabilities,
and obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect,
PILI SUBSIDIARY GUARANTY AGREEMENT
4
<PAGE> 5
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective of
the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Agent presently exist or are hereafter created or
attached. Without the prior written consent of the Banks, Guarantor shall not
(i) file suit against Borrower or exercise or enforce any other creditor's
right it may have against Borrower, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings, judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding, to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Agent shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments
made in respect of the Subordinated Indebtedness. Agent and the Banks may
apply any such dividends, distributions, and payments against the Guaranteed
Indebtedness in such order and manner as Agent and the Banks may determine in
their sole discretion.
(d) Guarantor agrees that all promissory notes or any other
document evidencing Subordinated Indebtedness shall contain a specific written
notice thereon that the indebtedness evidenced thereby is subordinated under
the terms of this Guaranty.
11. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by Agent, including without limitation, giving any
notice of default or any other notice to, or making any demand on, Borrower,
any other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
12. In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases all
claims, causes of action, defenses and offsets for any act or omission of
Agent, its directors, officers, employees, representatives or agents in
connection with Agent's administration of the Guaranteed Indebtedness, except
for Agent's willful misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by Agent or
any Bank upon the insolvency, bankruptcy, or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
PILI SUBSIDIARY GUARANTY AGREEMENT
5
<PAGE> 6
14. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
15. This Guaranty is for the benefit of Agent and the Banks and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
16. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty and the undertakings of Guarantor hereunder in making extensions
of credit to Borrower under the Credit Agreement and further recognizes that
the execution and delivery of this Guaranty is a material inducement to Agent
and the Banks in entering into the Credit Agreement. Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Banks in the
Credit Agreement.
18. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) any collateral securing all or any part of
the Guaranteed Indebtedness.
19. In the event that Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall
be deemed given when such notice is deposited in the United States mail,
postage prepaid, at the address for Guarantor set forth on the signature page
of this Guaranty, ten days prior to the date any public sale, or after which
any private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of Agent in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties
in accordance with the Credit Agreement, and then only in the specific instance
and for the purpose given.
21. Nothing contained herein shall be construed as an obligation
on the part of Agent or the Banks to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Indebtedness, Guarantor and Agent by its acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess
of
PILI SUBSIDIARY GUARANTY AGREEMENT
6
<PAGE> 7
the maximum nonusurious interest rate as may be authorized by applicable law
for the written contracts which constitute the Guaranteed Indebtedness. It is
the intention of Guarantor, Agent, and the Banks to conform strictly to the
applicable laws which limit interest rates, and any of the aforesaid contracts
for interest, if and to the extent payable by Guarantors, shall be held to be
subject to reduction to the maximum nonusurious interest rate allowed under
said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION CONSUMMATED AND PERFORMABLE IN THE STATE OF TEXAS AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
24. Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by Agent or any Bank in connection
with the enforcement or collection of this Guaranty.
25. THIS GUARANTY TOGETHER WITH THE OTHER LOAN PAPERS REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 15th day of September, 1997.
GUARANTOR:
PACKAGED ICE LEASING, INC.,
a Nevada corporation
By:
-----------------------------------------
James F. Stuart, Chief Executive Officer
Address for Notices:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A. J. Lewis, III
Fax Number: (713) 464-4681
Telephone Number: (713) 464-9384
PILI SUBSIDIARY GUARANTY AGREEMENT
7
<PAGE> 1
EXHIBIT 10.16
SUBSIDIARY GUARANTY AGREEMENT
WHEREAS, PACKAGED ICE, INC., a Texas corporation ("BORROWER"), has
entered into a Credit Agreement of even date herewith with certain banks and
other lending institutions which are or may from time to time become
signatories thereto (each, a "BANK" and collectively, the "BANKS"), THE FROST
NATIONAL BANK, a national banking association, as documentation and
administrative agent for itself and the other Banks (in such capacity, together
with its successors in such capacity, the "AGENT"), pursuant to which the Banks
have agreed to make a revolving credit loan to Borrower with advances
thereunder not to exceed an aggregate principal amount of Twenty Million and
No/100 Dollars ($20,000,000.00) (such Credit Agreement, as same may be amended,
extended, restated, supplemented or modified from time to time, the "CREDIT
AGREEMENT"); terms defined in the Credit Agreement and not otherwise defined
herein are used herein as defined therein;
WHEREAS, Agent and the Banks have conditioned their obligations under
the Credit Agreement upon the execution and delivery by Guarantor (hereinafter
defined) of this Subsidiary Guaranty Agreement (this "GUARANTY");
NOW THEREFORE, for valuable consideration, including, without
limitation, $100,000.00 cash paid by Borrower to Guarantor; any commitment to
lend, extension of credit or other financial accommodation, whether heretofore
or hereafter made by the Banks to Borrower; any extension, renewal or
replacement of any Guaranteed Indebtedness, any forbearance with respect to any
Guaranteed Indebtedness or otherwise; or any other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the undersigned, SOUTHCO
ICE, INC., a Texas corporation ("GUARANTOR"), hereby irrevocably and
unconditionally guarantees to Agent and to the Banks, the full and prompt
payment and performance of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty being upon the following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means all
of the Obligations and shall include any and all post-petition interest and
reasonable expenses (including reasonable attorneys' fees) whether or not
allowed under any bankruptcy, insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment, and not a guaranty of collection, and
Guarantor shall remain liable on its obligations hereunder until the payment in
full of the Guaranteed Indebtedness and termination of the Commitments. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent, any
Bank or any other party, or which Guarantor may have against Borrower or any
other party (other than Agent or any Bank), shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
3. It is the intention of Guarantor, Agents and the Banks that
the amount of the Guaranteed Indebtedness not exceed the maximum amount
permitted by applicable laws, including fraudulent conveyance, fraudulent
transfer or similar laws applicable to Guarantor. Accordingly, and
notwithstanding anything to the contrary in this Guaranty, any Loan Paper, or
any other agreement or instrument executed in connection with the payment of
any of the Guaranteed Indebtedness, if, after giving effect to this Guaranty
and applicable laws, the obligations of Guarantor under this Guaranty would
otherwise be set aside, terminated, annulled or avoided for such reason by a
court of competent jurisdiction in a proceeding actually pending before such
court, the amount of the Guaranteed Indebtedness shall be limited to the
<PAGE> 2
maximum amount permitted by applicable laws which would not (a) render
Guarantor insolvent, (b) result in the fair saleable value of Guarantor's
assets being less than the amount required to pay its debts and other
liabilities (including contingent liabilities) as they mature, or (c) leave
Guarantor with unreasonably small capital to carry out its business as
conducted prior to the execution of this Guaranty and as proposed to be
conducted, including its capital needs.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and the Banks hereunder shall be cumulative of
any and all other rights that Agent and the Banks may ever have against
Guarantor. The exercise by Agent or any Bank of any right or remedy hereunder
or under any other instrument, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent, for the benefit
of the Banks, upon written demand therefor delivered to Guarantor, in lawful
currency of the United States of America and it shall not be necessary for
Agent, in order to enforce such payment by Guarantor, first to institute suit
or exhaust its remedies against Borrower or others liable on such Guaranteed
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on written demand
therefor delivered to Guarantor by Agent.
7. Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower,
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed
Indebtedness or any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (e) any
adjustment, indulgence, forbearance, waiver, settlement, or compromise that may
be granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be
due or become due to Agent, any of the Banks or others; (g) the application of
any deposit balance, fund, payment, collections through process of law or
otherwise, or other collateral of Borrower to the satisfaction and liquidation
of the indebtedness or obligations of Borrower to Agent or any of the Banks, if
any, not guaranteed under this Guaranty; (h) the application of any sums paid
to Agent or any of the Banks by Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, Borrower or others to the Guaranteed
Indebtedness in such order and manner as Agent may determine in accordance with
the Credit
SII SUBSIDIARY GUARANTY AGREEMENT
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Agreement; (i) any neglect, delay, omission, failure, or refusal of Agent or
any Bank to take or prosecute any action for the collection of any of the
Guaranteed Indebtedness or to foreclose or take or prosecute any action in
connection with any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (j) the
unenforceability or invalidity of any or all of the Guaranteed Indebtedness or
of any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (k) any payment by
Borrower or any other party to Agent or any Bank is held to constitute a
preference under applicable bankruptcy or insolvency law or if for any other
reason Agent or any Bank is required to refund any payment or pay the amount
thereof to someone else; (l) the settlement or compromise of any of the
Guaranteed Indebtedness; (m) the non-perfection of any security interest or
lien securing any or all of the Guaranteed Indebtedness; (n) any impairment of
any collateral securing any or all of the Guaranteed Indebtedness; (o) the
failure of Agent or any Bank to sell any collateral securing any or all of the
Guaranteed Indebtedness in a commercially reasonable manner or as otherwise
required by law; (p) any change in the corporate existence, structure, or
ownership of Borrower; (q) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower; (r) the
unenforceability of all or any part of the Guaranteed Indebtedness against
Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the
amount permitted by law; (s) the act of creating all or any part of the
Guaranteed Indebtedness is ultra vires; or (t) the officers creating all or any
part of the Guaranteed Indebtedness acted in excess of their authority.
8. Guarantor hereby represents and warrants to Agent and the Banks
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and
is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such financial
condition or collateral as an inducement to enter into this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on Agent or the Banks to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver, and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, or (ii) to
the best of Guarantor's knowledge, any law, rule, regulation, or order
of any Governmental Authority to which Guarantor is subject.
(e) Neither Agent nor the Banks has made any representation,
warranty, or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to Agent or
any Bank are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor as reflected in those financial disclosures.
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(g) As of the date hereof, and after giving effect to this
Guaranty, including without limitation, all rights of contribution and
subrogation, and the obligations evidenced hereby, (i) Guarantor is
and will be solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) Guarantor is
and will continue to be able to pay its debts as they mature, and (iv)
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in the
Credit Agreement are true and correct.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any Commitment
under the Credit Agreement:
(a) Guarantor shall not, so long as its obligations under
this Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Agent at any time
and from time to time such financial statements and other financial
information as required by the Credit Agreement or as Agent may
otherwise reasonably require, in form and substance satisfactory to
Agent.
(c) Guarantor shall comply with all terms and provisions
of the Loan Papers that apply to Guarantor.
(d) Guarantor shall promptly inform Agent of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the Loan Papers, (ii) any material claim or controversy which might
become the subject of such litigation or governmental investigation,
and (iii) any material adverse change in the financial condition of
Guarantor.
10. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness, and
Guarantor hereby assigns the Subordinated Indebtedness to Agent, for the
benefit of the Banks, as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of Agent and shall forthwith be paid to Agent without affecting
the liability of Guarantor under this Guaranty and may be applied by Agent and
the Banks against the Guaranteed Indebtedness in such order and manner as Agent
and the Banks may determine in their sole discretion. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such documents
and instruments as Agent may reasonably request to perfect, preserve, and
enforce its rights hereunder. For purposes of this Guaranty, the term
"SUBORDINATED INDEBTEDNESS" means all indebtedness, liabilities, and
obligations of Borrower to Guarantor, whether such indebtedness, liabilities,
and obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of
whether such indebtedness, liabilities, or obligations are evidenced by a note,
contract, open account, or otherwise, and
SII SUBSIDIARY GUARANTY AGREEMENT
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irrespective of the person or persons in whose favor such indebtedness,
obligations, or liabilities may, at their inception, have been, or may
hereafter be created, or the manner in which they have been or may hereafter be
acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Agent presently exist or are hereafter created or
attached. Without the prior written consent of the Banks, Guarantor shall not
(i) file suit against Borrower or exercise or enforce any other creditor's
right it may have against Borrower, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings, judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding, to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Agent shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments
made in respect of the Subordinated Indebtedness. Agent and the Banks may
apply any such dividends, distributions, and payments against the Guaranteed
Indebtedness in such order and manner as Agent and the Banks may determine in
their sole discretion.
(d) Guarantor agrees that all promissory notes or any other
document evidencing Subordinated Indebtedness shall contain a specific written
notice thereon that the indebtedness evidenced thereby is subordinated under
the terms of this Guaranty.
11. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by Agent, including without limitation, giving any
notice of default or any other notice to, or making any demand on, Borrower,
any other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
12. In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases all
claims, causes of action, defenses and offsets for any act or omission of
Agent, its directors, officers, employees, representatives or agents in
connection with Agent's administration of the Guaranteed Indebtedness, except
for Agent's willful misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by Agent or
any Bank upon the insolvency, bankruptcy, or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
SII SUBSIDIARY GUARANTY AGREEMENT
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14. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
15. This Guaranty is for the benefit of Agent and the Banks and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
16. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty and the undertakings of Guarantor hereunder in making extensions
of credit to Borrower under the Credit Agreement and further recognizes that
the execution and delivery of this Guaranty is a material inducement to Agent
and the Banks in entering into the Credit Agreement. Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Banks in the
Credit Agreement.
18. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) any collateral securing all or any part of
the Guaranteed Indebtedness.
19. In the event that Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall
be deemed given when such notice is deposited in the United States mail,
postage prepaid, at the address for Guarantor set forth on the signature page
of this Guaranty, ten days prior to the date any public sale, or after which
any private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of Agent in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties
in accordance with the Credit Agreement, and then only in the specific instance
and for the purpose given.
21. Nothing contained herein shall be construed as an obligation
on the part of Agent or the Banks to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Indebtedness, Guarantor and Agent by its acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess
of the maximum nonusurious interest rate as may be authorized by applicable law
for the written contracts
SII SUBSIDIARY GUARANTY AGREEMENT
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which constitute the Guaranteed Indebtedness. It is the intention of
Guarantor, Agent, and the Banks to conform strictly to the applicable laws
which limit interest rates, and any of the aforesaid contracts for interest, if
and to the extent payable by Guarantors, shall be held to be subject to
reduction to the maximum nonusurious interest rate allowed under said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION CONSUMMATED AND PERFORMABLE IN THE STATE OF TEXAS AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
24. Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by Agent or any Bank in connection
with the enforcement or collection of this Guaranty.
25. THIS GUARANTY TOGETHER WITH THE OTHER LOAN PAPERS REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 15th day of September, 1997.
GUARANTOR:
SOUTHCO ICE, INC., a Texas corporation
By:
----------------------------
James F. Stuart, Chief Executive Officer
Address for Notices:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A. J. Lewis, III
Fax Number: (713) 464-4681
Telephone Number: (713) 464-9384
SII SUBSIDIARY GUARANTY AGREEMENT
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EXHIBIT 10.17
SUBSIDIARY GUARANTY AGREEMENT
WHEREAS, PACKAGED ICE, INC., a Texas corporation ("BORROWER"), has
entered into a Credit Agreement of even date herewith with certain banks and
other lending institutions which are or may from time to time become
signatories thereto (each, a "BANK" and collectively, the "BANKS"), THE FROST
NATIONAL BANK, a national banking association, as documentation and
administrative agent for itself and the other Banks (in such capacity, together
with its successors in such capacity, the "AGENT"), pursuant to which the Banks
have agreed to make a revolving credit loan to Borrower with advances
thereunder not to exceed an aggregate principal amount of Twenty Million and
No/100 Dollars ($20,000,000.00) (such Credit Agreement, as same may be amended,
extended, restated, supplemented or modified from time to time, the "CREDIT
AGREEMENT"); terms defined in the Credit Agreement and not otherwise defined
herein are used herein as defined therein;
WHEREAS, Agent and the Banks have conditioned their obligations under
the Credit Agreement upon the execution and delivery by Guarantor (hereinafter
defined) of this Subsidiary Guaranty Agreement (this "GUARANTY");
NOW THEREFORE, for valuable consideration, including, without
limitation, $100,000.00 cash paid by Borrower to Guarantor; any commitment to
lend, extension of credit or other financial accommodation, whether heretofore
or hereafter made by the Banks to Borrower; any extension, renewal or
replacement of any Guaranteed Indebtedness, any forbearance with respect to any
Guaranteed Indebtedness or otherwise; or any other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the undersigned,
SOUTHWEST TEXAS PACKAGED ICE, INC., a Texas corporation ("GUARANTOR"), hereby
irrevocably and unconditionally guarantees to Agent and to the Banks, the full
and prompt payment and performance of the Guaranteed Indebtedness (hereinafter
defined), this Guaranty being upon the following terms:
1. The term "GUARANTEED INDEBTEDNESS", as used herein means all
of the Obligations and shall include any and all post-petition interest and
reasonable expenses (including reasonable attorneys' fees) whether or not
allowed under any bankruptcy, insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable,
and unconditional guaranty of payment, and not a guaranty of collection, and
Guarantor shall remain liable on its obligations hereunder until the payment in
full of the Guaranteed Indebtedness and termination of the Commitments. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent, any
Bank or any other party, or which Guarantor may have against Borrower or any
other party (other than Agent or any Bank), shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
3. It is the intention of Guarantor, Agents and the Banks that
the amount of the Guaranteed Indebtedness not exceed the maximum amount
permitted by applicable laws, including fraudulent conveyance, fraudulent
transfer or similar laws applicable to Guarantor. Accordingly, and
notwithstanding anything to the contrary in this Guaranty, any Loan Paper, or
any other agreement or instrument executed in connection with the payment of
any of the Guaranteed Indebtedness, if, after giving effect to this Guaranty
and applicable laws, the obligations of Guarantor under this Guaranty would
otherwise be set aside, terminated, annulled or avoided for such reason by a
court of competent jurisdiction in a proceeding
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actually pending before such court, the amount of the Guaranteed Indebtedness
shall be limited to the maximum amount permitted by applicable laws which would
not (a) render Guarantor insolvent, (b) result in the fair saleable value of
Guarantor's assets being less than the amount required to pay its debts and
other liabilities (including contingent liabilities) as they mature, or (c)
leave Guarantor with unreasonably small capital to carry out its business as
conducted prior to the execution of this Guaranty and as proposed to be
conducted, including its capital needs.
4. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or any Bank by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and the Banks hereunder shall be cumulative of
any and all other rights that Agent and the Banks may ever have against
Guarantor. The exercise by Agent or any Bank of any right or remedy hereunder
or under any other instrument, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance
of the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent, for the benefit
of the Banks, upon written demand therefor delivered to Guarantor, in lawful
currency of the United States of America and it shall not be necessary for
Agent, in order to enforce such payment by Guarantor, first to institute suit
or exhaust its remedies against Borrower or others liable on such Guaranteed
Indebtedness, or to enforce any rights against any collateral which shall ever
have been given to secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable
by Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on written demand
therefor delivered to Guarantor by Agent.
7. Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower,
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed
Indebtedness or any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the Guaranteed Indebtedness; (e) any
adjustment, indulgence, forbearance, waiver, settlement, or compromise that may
be granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be
due or become due to Agent, any of the Banks or others; (g) the application of
any deposit balance, fund, payment, collections through process of law or
otherwise, or other collateral of Borrower to the satisfaction and liquidation
of the indebtedness or obligations of Borrower to Agent or any of the Banks, if
any, not guaranteed under this Guaranty; (h) the application of any sums paid
to Agent or any of the Banks by Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, Borrower or others to the
STPI SUBSIDIARY GUARANTY AGREEMENT
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Guaranteed Indebtedness in such order and manner as Agent may determine in
accordance with the Credit Agreement; (i) any neglect, delay, omission,
failure, or refusal of Agent or any Bank to take or prosecute any action for
the collection of any of the Guaranteed Indebtedness or to foreclose or take or
prosecute any action in connection with any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (j) the unenforceability or invalidity of any or all of the
Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to Agent or any
Bank is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason Agent or any Bank is required to
refund any payment or pay the amount thereof to someone else; (l) the
settlement or compromise of any of the Guaranteed Indebtedness; (m) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (n) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (o) the failure of Agent or any Bank to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (p) any change
in the corporate existence, structure, or ownership of Borrower; (q) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower; (r) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (s) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or (t)
the officers creating all or any part of the Guaranteed Indebtedness acted in
excess of their authority.
8. Guarantor hereby represents and warrants to Agent and the Banks
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and
is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such financial
condition or collateral as an inducement to enter into this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on Agent or the Banks to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver, and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery, and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, or (ii) to
the best of Guarantor's knowledge, any law, rule, regulation, or order
of any Governmental Authority to which Guarantor is subject.
(e) Neither Agent nor the Banks has made any representation,
warranty, or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to Agent or
any Bank are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no
STPI SUBSIDIARY GUARANTY AGREEMENT
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material adverse change has occurred in the financial condition of
Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty, including without limitation, all rights of contribution and
subrogation, and the obligations evidenced hereby, (i) Guarantor is
and will be solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) Guarantor is
and will continue to be able to pay its debts as they mature, and (iv)
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in the
Credit Agreement are true and correct.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any Commitment
under the Credit Agreement:
(a) Guarantor shall not, so long as its obligations under
this Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Guarantor shall promptly furnish to Agent at any time
and from time to time such financial statements and other financial
information as required by the Credit Agreement or as Agent may
otherwise reasonably require, in form and substance satisfactory to
Agent.
(c) Guarantor shall comply with all terms and provisions
of the Loan Papers that apply to Guarantor.
(d) Guarantor shall promptly inform Agent of (i) any
litigation or governmental investigation against Guarantor or
affecting any security for all or any part of the Guaranteed
Indebtedness or this Guaranty which, if determined adversely, might
have a material adverse effect upon the financial condition of
Guarantor or upon such security or might cause a default under any of
the Loan Papers, (ii) any material claim or controversy which might
become the subject of such litigation or governmental investigation,
and (iii) any material adverse change in the financial condition of
Guarantor.
10. (a) Guarantor hereby agrees that the Subordinated
Indebtedness (hereinafter defined) shall be subordinate and junior in right of
payment to the prior payment in full of all Guaranteed Indebtedness, and
Guarantor hereby assigns the Subordinated Indebtedness to Agent, for the
benefit of the Banks, as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of Agent and shall forthwith be paid to Agent without affecting
the liability of Guarantor under this Guaranty and may be applied by Agent and
the Banks against the Guaranteed Indebtedness in such order and manner as Agent
and the Banks may determine in their sole discretion. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such documents
and instruments as Agent may reasonably request to perfect, preserve, and
enforce its rights hereunder. For purposes of this Guaranty, the term
"SUBORDINATED INDEBTEDNESS" means all indebtedness, liabilities, and
obligations of Borrower to Guarantor, whether such indebtedness, liabilities,
and obligations now exist or are hereafter incurred or arise, or whether the
obligations of Borrower thereon are direct, indirect,
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contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective of
the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security interests,
judgment liens, charges, or other encumbrances upon Borrower's assets securing
payment of any Subordinated Indebtedness shall be and remain inferior and
subordinate to any and all liens, security interests, judgment liens, charges,
or other encumbrances upon Borrower's assets securing payment of the Guaranteed
Indebtedness or any part thereof, regardless of whether such encumbrances in
favor of Guarantor or Agent presently exist or are hereafter created or
attached. Without the prior written consent of the Banks, Guarantor shall not
(i) file suit against Borrower or exercise or enforce any other creditor's
right it may have against Borrower, or (ii) foreclose, repossess, sequester, or
otherwise take steps or institute any action or proceedings, judicial or
otherwise, including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding, to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy, reorganization,
rearrangement, debtor's relief, or other insolvency proceeding involving
Borrower as debtor, Agent shall have the right to prove and vote any claim
under the Subordinated Indebtedness and to receive directly from the receiver,
trustee or other court custodian all dividends, distributions, and payments
made in respect of the Subordinated Indebtedness. Agent and the Banks may
apply any such dividends, distributions, and payments against the Guaranteed
Indebtedness in such order and manner as Agent and the Banks may determine in
their sole discretion.
(d) Guarantor agrees that all promissory notes or any other
document evidencing Subordinated Indebtedness shall contain a specific written
notice thereon that the indebtedness evidenced thereby is subordinated under
the terms of this Guaranty.
11. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice
of protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by Agent, including without limitation, giving any
notice of default or any other notice to, or making any demand on, Borrower,
any other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
12. In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases all
claims, causes of action, defenses and offsets for any act or omission of
Agent, its directors, officers, employees, representatives or agents in
connection with Agent's administration of the Guaranteed Indebtedness, except
for Agent's willful misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by Agent or
any Bank upon the insolvency, bankruptcy, or reorganization of Borrower,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
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14. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
15. This Guaranty is for the benefit of Agent and the Banks and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
16. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty and the undertakings of Guarantor hereunder in making extensions
of credit to Borrower under the Credit Agreement and further recognizes that
the execution and delivery of this Guaranty is a material inducement to Agent
and the Banks in entering into the Credit Agreement. Guarantor hereby
acknowledges that there are no conditions to the full effectiveness of this
Guaranty.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of the Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Banks in the
Credit Agreement.
18. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Credit Agreement and the other Loan
Papers to which it is a party or (b) any collateral securing all or any part of
the Guaranteed Indebtedness.
19. In the event that Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall
be deemed given when such notice is deposited in the United States mail,
postage prepaid, at the address for Guarantor set forth on the signature page
of this Guaranty, ten days prior to the date any public sale, or after which
any private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of Agent in exercising any right
hereunder or failure to exercise the same shall operate as a waiver of such
right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties
in accordance with the Credit Agreement, and then only in the specific instance
and for the purpose given.
21. Nothing contained herein shall be construed as an obligation
on the part of Agent or the Banks to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of
the Guaranteed Indebtedness, Guarantor and Agent by its acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess
of
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the maximum nonusurious interest rate as may be authorized by applicable law
for the written contracts which constitute the Guaranteed Indebtedness. It is
the intention of Guarantor, Agent, and the Banks to conform strictly to the
applicable laws which limit interest rates, and any of the aforesaid contracts
for interest, if and to the extent payable by Guarantors, shall be held to be
subject to reduction to the maximum nonusurious interest rate allowed under
said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A
LENDING TRANSACTION CONSUMMATED AND PERFORMABLE IN THE STATE OF TEXAS AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
24. Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by Agent or any Bank in connection
with the enforcement or collection of this Guaranty.
25. THIS GUARANTY TOGETHER WITH THE OTHER LOAN PAPERS REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the 15th day of September, 1997.
GUARANTOR:
SOUTHWEST TEXAS PACKAGED ICE, INC.,
a Texas corporation
By:
------------------------------------------
James F. Stuart, Chief Executive Officer
Address for Notices:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A. J. Lewis, III
Fax Number: (713) 464-4681
Telephone Number: (713) 464-9384
STPI SUBSIDIARY GUARANTY AGREEMENT
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EXHIBIT 10.18
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "SECURITY AGREEMENT"),
dated as of September 15, 1997, is made by PACKAGED ICE, INC., a Texas
corporation ("GRANTOR"), in favor of THE FROST NATIONAL BANK, a national
banking association, as agent (in such capacity, the "AGENT") for each of the
Banks under the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Grantor, the Agent, and certain other financial
institutions who from time to time are parties thereto (the "BANKS"), the Banks
have extended Commitments to make Revolving Credit Loans to the Grantor (the
"BORROWER");
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Revolving Commitments to the Borrower pursuant to the Credit Agreement, the
Grantor agrees, for the benefit of each of the Banks, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COLLATERAL" is defined in Section 2.1.
"COLLATERAL ACCOUNT" is defined in Section 6.2.
"COPYRIGHT COLLATERAL" means all copyrights of Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of Grantor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in ITEM A of SCHEDULE V attached hereto,
and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in ITEM B of SCHEDULE V attached
hereto, the right to sue for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, including and
without limitation, the right to distribute copies or phonograph records of the
copyrighted matter to the public by
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sales, lease, lending, rental or other transfer of ownership; the right to
reproduce as copies or phonorecords; the right to prepare derivative works; the
right to perform or display the copyrighted material publicly; any and all
moral rights in the copyrighted matter; and all extensions and renewals of any
thereof and all proceeds of the foregoing, including, without limitation,
income from licenses, royalties, sales, lease, lending, payments, claims,
damages and proceeds of suit.
"DEPOSIT ACCOUNTS" is defined in clause (t) of Section 2.1.
"EQUIPMENT" is defined in clause (a) of Section 2.1.
"EVENT OF DEFAULT" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall
occur and be continuing;
(b) The failure to pay, when due, any portion of the
Secured Indebtedness, subject to applicable notice and cure
periods, if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the
Collateral, except for Inventory sold in the ordinary course
of business or as permitted under Section 4.1.3 hereof, or any
legal or equitable interest therein, becomes vested in a
person or entity other than Grantor.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.
"INVENTORY" is defined in clause (b) of Section 2.1.
"LENDER PARTY" means, as the context may require, Agent, each Bank,
and each of their respective successors, transferees and assigns.
"PATENT COLLATERAL" means:
(a) all patents (the "PATENTS"), now existing anywhere in
the world or hereafter acquired, whether currently in use or
not, all records thereof and all patent applications prepared
now or hereafter, including divisional, continuation, and
continuation-in-part applications, whether pending or in
preparation for filing, including applications in the United
States Patent and Trademark Office or any foreign country,
including, but not limited to those referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all Patent licenses, including each Patent license
referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b); and
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(d) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement of any
Patent, whether owned by or licensed to Grantor, and any
violation or breach of the conditions of any Patent license,
including any Patent or Patent license referred to in ITEM A
and ITEM B of SCHEDULE II attached hereto.
"RECEIVABLES" is defined in clause (c) of Section 2.1.
"RELATED CONTRACTS" is defined in clause (c) of Section 2.1.
"SECURED INDEBTEDNESS" is defined in Section 2.2.
"THIRD PARTY" is defined in clause (a) of Section 3.1.3.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks,
logos, other source of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs
and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all
registrations and records thereof and all applications in
connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in
ITEM A of SCHEDULE III attached hereto;
(b) all Trademark licenses, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b);
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in, clauses
(a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, including any Trademark referred to in ITEM
A and ITEM B of SCHEDULE III attached hereto, or for any
injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark
license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of Grantor (all of the foregoing being collectively called a "TRADE
SECRET"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including
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each Trade Secret license referred to in SCHEDULE IV attached hereto, and
including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Lender Parties, and hereby
grants to Agent, for its benefit and the benefit of each of the Lender Parties,
a security interest in all of the following, whether now or hereafter existing
or acquired (the "COLLATERAL"):
(a) all equipment in all of its forms of Grantor,
wherever located, including all machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly
systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, trade fixtures, and other tangible personal
property (other than Inventory), and all parts thereof and all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being
the "EQUIPMENT");
(b) all inventory in all of its forms of Grantor,
wherever located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or
repossessed by Grantor;
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and all accessions thereto, products thereof and documents therefore
(any and all such inventory, materials, goods, accessions, products
and documents being the "INVENTORY");
(c) all accounts, contracts, contract rights, chattel
paper, documents, instruments and general intangibles of Grantor,
whether or not arising out of or in connection with the sale or lease
or other disposition of goods or the rendering of services, and all
rights of Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents and instruments (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "RECEIVABLES", and any and all such
security agreements, guaranties, leases and other contracts being the
"RELATED CONTRACTS");
(d) all Intellectual Property Collateral of Grantor;
(e) in addition to general intangibles which may be
included within Receivables or Intellectual Property Collateral, all
contracts, contract rights and general intangibles of Grantor,
including without limitation, all tax refunds, claims, causes of
action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "GENERAL
INTANGIBLES");
(f) all of Grantor's right, title and interest in and to
any and all depository, savings, or custodial, or other accounts
maintained by Grantor with any of the Lender Parties, all sums now or
at any time hereafter on deposit therein, credited thereto, or payable
thereon and all instruments, documents and other writings evidencing
any of the foregoing accounts (such accounts collectively referred to
herein as the "DEPOSIT ACCOUNTS");
(g) all investment property of Grantor (except the
capital stock of Southco Ice, Inc., a Texas corporation), including,
without limitation, all of the capital stock of Packaged Ice Leasing,
Inc., a Nevada corporation, Southwestern Ice, Inc., a Texas
corporation, Mission Party Ice, Inc., a Texas corporation, and
Southwest Texas Packaged Ice, Inc., a Texas corporation;
(h) all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every
kind and description and interests therein; and
(j) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i),
proceeds deposited from time to time in the Deposit Accounts and in
any lock boxes of Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "COLLATERAL" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a violation of a
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valid and enforceable restriction on such grant, unless and until any required
consents shall have been obtained. Grantor agrees to use its best efforts to
obtain any such required consent.
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan Papers
to which Grantor is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Sections 502(b) and 506(b)) (all of the foregoing, together with all renewals,
extensions and modifications of all or any part thereof, being the "SECURED
INDEBTEDNESS").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full
of the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees
and assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Paper (including this Security Agreement), or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under
any such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have
any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor
shall Agent or any other Lender Party be obligated to perform any of
the obligations or duties of Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified
in ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which
is subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of
Agent provide Agent with the name and address of each lessor, sublessor,
lessee, sublessee and/or mortgagee (other than Grantor) with respect to any or
all such locations. All of the lock boxes of Grantor are located at the places
specified in ITEM B of SCHEDULE I hereto. The place(s) of business and chief
executive office of Grantor and the office(s) where Grantor keeps its records
concerning the Receivables, are located at the addresses specified in ITEM C of
SCHEDULE I hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor
has no trade names. Grantor has not been known by any legal name different
from the one set forth on the signature page hereto. Except as previously
disclosed to Agent in writing, Grantor has not been the subject of any merger
or other corporate reorganization. If the Collateral includes any Inventory
located in the State of California, Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code - Secured
Transactions of the State of California. Grantor is not a party to any
Federal, state or local government contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial
owner of the Collateral and owns the Collateral free and clear of any Lien,
security interest, charge or encumbrance except for the security interest
created by this Security Agreement and except as permitted by the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of Agent relating to this
Security Agreement, and except as permitted by the Credit Agreement.
SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "THIRD PARTY") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A
of SCHEDULE I hereto, together with the address of the location where
such Inventory or Equipment is or may be held. Except as otherwise
indicated in ITEM A of SCHEDULE I hereto, no Person (other than a
Person identified in ITEM A of SCHEDULE I thereto as being a
consignee) in possession of any of the Inventory or Equipment conducts
a business at the location of such Inventory or Equipment other than a
business in the nature of warehousing or
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transporting goods for others. In the event that any Inventory
is in the possession of a Third Party, such Inventory is not evidenced
by a negotiable instrument or document.
(b) Except as indicated in clause (a) of this Section,
Grantor has exclusive possession and control of the Equipment and
Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral, other than Intellectual Property Collateral
with negligible economic value:
(a) such Intellectual Property Collateral is valid and
subsisting and has not been adjudged invalid or unenforceable, in
whole or in part;
(b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world (where appropriate), and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world (where appropriate);
(c) Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(d) Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every item of Intellectual Property
Collateral in full force and effect throughout the world, as
applicable.
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a
valid security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either:
(a) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(b) for the filing required for perfection of or the
exercise by Agent of its rights and remedies hereunder.
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SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
SECTION 3.1.9. TAXES. All taxes, assessments and other charges
levied against the Collateral have been paid in full, other than taxes,
assessments and charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than
Inventory in transit and Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1.1 or, upon
30 days' prior written notice to Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.1.6) shall be true and correct, and
all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any material loss or damage
to any of the Equipment, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end; and promptly furnish to Agent a
statement respecting any loss or damage to any of the Equipment within
ten (10) business days after Grantor obtains knowledge of any such
loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
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SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all chattel paper
which evidence Receivables, located at the addresses set forth in ITEM C of
SCHEDULE I hereto, or, upon 30 days' prior written notice to Agent at such
other locations in a jurisdiction where all actions required by the first
sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice to
Agent; hold and preserve such records and chattel paper; and permit
representatives of Agent, at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of
such power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in
process or materials normally held by Grantor or any Third Party for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally
held by Grantor for such purpose, (ii) will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with
respect to such collection as Agent may reasonably request or, in the
absence of such request, as Grantor may deem advisable, and (iii) may
grant,in the ordinary course of business, to any party obligated on
any of the Collateral, 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 Collateral. Agent however, may, at any time after
the occurrence of an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the
Secured Indebtedness, notify any parties obligated on any of the
Collateral to make payment to Agent of any amounts due or to become
due thereunder and enforce collection of any of the Collateral 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. Upon the written request of Agent after the
occurrence of an Event of Default, Grantor will, at its own expense,
within five (5) days after receipt of such request, notify any parties
obligated on any of the Collateral to make payment to Agent of any
amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Agent representing any
payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, and Grantor shall not permit any
of its licensees to, unless Grantor shall reasonably and in good faith
determine (and notice of such determination shall have been delivered
to Agent) that any of the Patent Collateral and/or Trademark
Collateral is of negligible economic value to Grantor:
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(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use;
(ii) fail to employ all of the Patent Collateral
and Trademark Collateral registered with any Federal or state
or foreign authority with an appropriate notice of such
registration;
(iii) use any of the Trademark Collateral
registered with any Federal or state or foreign authority
except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made;
or
(iv) do or permit any act or knowingly omit to do
any act whereby any of the Patent Collateral or Trademark
Collateral may lapse or become invalid or unenforceable.
(b) Grantor shall not, unless Grantor shall either
reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the
Copyright Collateral or any of the Trade Secrets Collateral is of
negligible economic value to Grantor, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
the rights thereto become unenforceable or be placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(c) Grantor shall notify Agent within ten (10) business
days after it receives notice that any application or registration
relating to any material item of the Intellectual Property Collateral
may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse
determination (including the institution of, or any such determination
or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign
counterpart thereof or any court) regarding Grantor's ownership of any
of the Intellectual Property Collateral, its right to register the
same or to keep and maintain and enforce the same.
(d) In no event shall Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright
Office, or any similar office or agency in any other country or any
political subdivision thereof, unless it informs Agent of all such
additional filings within 30 days thereafter (or at any other time
upon the request of Agent), and upon written request of Agent executes
and delivers any and all agreements, instruments, documents and papers
as Agent may reasonably request to evidence Agent's security interests
in such Intellectual Property Collateral and the goodwill and general
intangibles of Grantor relating thereto or represented thereby.
(e) Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and the payment
of fees and taxes(except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b) and
(c).
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(f) Grantor shall promptly execute and deliver to Agent
any documents required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each
of its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall
be in an amount not less than the fair market value of the Equipment and
Inventory and shall be against such casualties, with such deductible amounts as
Agent shall reasonably approve. All insurance policies shall be written for
the benefit of Grantor and Agent, as their interest may appear, payable to
Agent as loss payee, or in other forms satisfactory to Agent, and such policies
or certificates evidencing the same shall be furnished to Agent. All policies
of insurance shall provide for written notice to Agent at least thirty (30)
days prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from
time to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, mark conspicuously
each document included in the Inventory, each chattel paper included
in the Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable
shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, and Grantor shall deliver and
pledge to Agent hereunder such promissory note, instrument, negotiable
document or chattel paper, duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or amended version thereof or any
regulation promulgated under or pursuant to any version thereof), as
may be reasonably necessary or desirable, or as Agent may reasonably
request, in order to perfect
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and preserve the security interests and other rights granted or
purported to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's
written request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as Agent may reasonably request, all in reasonable
detail; and
(e) furnish to Agent on a reasonable good faith efforts
basis such landlord estoppel and waiver agreements for properties
leased by Grantor (or properties where Grantor maintains inventory or
equipment) as shall be requested by Agent (all in form and substance
acceptable to Agent).
With respect to the foregoing and the grant of the security interests
hereunder, Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute
any proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.3.
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SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Lender Parties) in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Agent shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as Grantor reasonably requests in writing at
times other than upon the occurrence and during the continuance of any Event of
Default, but failure of Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice
to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at
any time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to the Receivables, Related Contracts, and General
Intangibles) to make all payments due or to become due thereon
directly to Agent or such other person or officer as Agent may
require, whereupon the power and authority of Grantor to
collect the same in the ordinary course of its business shall
be deemed to be immediately revoked and terminated. With or
without
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such general notification, Agent may take or bring in
Grantor's name or that of the Agent all steps, actions, suits
or proceedings deemed by Agent reasonably necessary or
desirable to effect possession or collection of the
Collateral, including sums due or paid thereon, may complete
any contract or agreement of Grantor in any way related to any
of the Collateral, may make allowances or adjustments related
to the Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however,
Agent shall never be liable for its failure to collect or for
its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the
Collateral or sums due or paid thereon, nor shall it be under
any obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents, agreements or items on behalf of Grantor, after the
occurrence of an Event of Default, as shall be deemed by Agent
to be necessary or advisable, in the sole discretion of Agent,
to protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of
Agent under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the
Lender Parties against, all or any part of the Secured Indebtedness in
such order as provided in the Credit Agreement or as Agent shall
elect. Any surplus of such cash or cash proceeds held by Agent and
remaining after payment in full of all the Secured Indebtedness shall
be paid over to Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 6.2. COLLATERAL ACCOUNT.
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(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"COLLATERAL ACCOUNT") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No
funds other than proceeds of Collateral will be deposited in the
Collateral Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of
any of Agent's rights under this Section.
SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against
any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from Agent's gross negligence or willful
misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Agent may incur in connection with:
(i) the administration of this Security
Agreement;
(ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Lender Parties hereunder; or
(iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
SECTION 6.5. LOUISIANA REMEDIES. With respect to Collateral located
in the State of Louisiana, Agent will be entitled to foreclose under this
Security Agreement under ordinary or executory process
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procedures, and to cause the Collateral to be immediately seized, wherever
found, and sold with or without appraisal, in regular session of court or in
vacation, in accordance with applicable Louisiana law, without the necessity of
further demanding payment from Grantor, notifying Grantor, or placing Grantor
in default. For purposes of foreclosure under Louisiana executory process
procedures, Grantor confesses judgment and acknowledges to be indebted to the
Lender Parties up to the full amount of the Secured Indebtedness. To the
extent permitted under applicable Louisiana law, Grantor additionally waives:
(a) the benefit of appraisal as provided for under 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 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 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. Grantor further acknowledges that any declaration of fact made by
authentic act before a Notary Public and two witnesses by a person declaring
that such facts are within his or her knowledge shall constitute authentic
evidence of such facts for purposes of foreclosure under applicable Louisiana
law. Grantor further agrees that Agent may appoint a keeper of the Collateral
in the event of foreclosure.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN PAPER. This Security Agreement is a Loan Paper
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to
PII SECURITY AGREEMENT
17
<PAGE> 18
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Security
Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in
this Security Agreement, the Credit Agreement, the Notes, or any other
evidences of the Secured Indebtedness, or other instruments executed or
delivered in connection therewith, neither Agent nor any Lender Party shall
ever be entitled to receive, collect or apply, as interest on the Secured
Indebtedness, any amount in excess of the highest lawful rate and, in the event
that Agent or any Lender Party ever receives, collects or applies, as interest,
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of the Secured Indebtedness,
and if the principal balance of the Secured Indebtedness is paid in full, any
remaining excess shall be forthwith paid to Grantor. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, Grantor, Agent, and the Lender Parties shall, to the
maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Credit Agreement and
the Notes so that the interest rate is uniform throughout the entire term of
the Credit Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the
Agent hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Papers or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
any or all of the Obligation, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the
Loan Papers;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of
the Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is
binding upon and shall inure to the benefit of Grantor, Agent, and the Lender
Parties, their respective heirs, executors, representatives, administrators,
successors and assigns; provided, however, that Grantor may not, without the
prior written consent of Agent, assign any rights, powers, duties or
obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS.
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18
<PAGE> 19
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
PACKAGED ICE, INC., a Texas corporation
By:
-----------------------------------
James F. Stuart, Chief Executive Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Facsimile No.: (713) 464-9384
PII SECURITY AGREEMENT
19
<PAGE> 20
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
SEE ATTACHED LIST
PII SECURITY AGREEMENT
<PAGE> 21
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM B. LOCATION OF LOCK BOXES
NONE
PII SECURITY AGREEMENT
<PAGE> 22
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
8572 Katy Freeway, Suite 101
Houston, Texas 77024
PII SECURITY AGREEMENT
<PAGE> 23
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM D. TRADE NAMES
(1) Packaged Ice, Inc.
(2) First Ice Company
(3) Codorus Leasing Company
PII SECURITY AGREEMENT
<PAGE> 24
SCHEDULE II
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED PATENTS
------------------
<TABLE>
<CAPTION>
Country Patent Registration No. Registration Date
------- ------ ---------------- -----------------
<S> <C> <C> <C>
United States 1 5,109,651 10/05/90
Taiwan 1 UM-89642 10/15/91
Taiwan 1 UM-87144 10/15/91
Mexico 1 178614 10/04/91
Australia 1 646999 10/01/91
Brazil 1 9106944-0 10/01/91
United States 2 5,458,851 10/29/93
United States 3 5,630,310 10/10/95
United States 4 5,581,982 10/10/95
</TABLE>
PENDING PATENT APPLICATIONS
---------------------------
<TABLE>
<CAPTION>
Country Patent Serial No. Filing Date
------- ------ ---------- -----------
<S> <C> <C> <C> <C>
China 1 91110837.8 10/05/91
India 1 1006/Del/91 10/22/91
Patent Cooperation Treaty 1 PCT/US91/07214 10/01/91
Canada 1 2093337 10/01/91
European Patent Office 92900332.5 10/01/91
Japan 1 04-501236 10/01/91
Patent Cooperation Treaty 2, 3, & 4 PCT/US94/12478 10/01/91
China 2, 3, & 4 94 1 94331.3 10/29/94
Mexico 2, 3, & 4 94 8326 10/29/94
Brazil 2, 3, & 4 PI 9407927-7 10/29/94
Australia 2, 3, & 4 10850/95 10/29/94
Japan 2, 3, & 4 512884/95 10/29/94
United States 5 08/751,403 11/18/96
</TABLE>
1 Automatic Ice Bagger.
2 Automatic Ice Bagger with Self-Contained Sanitizing System.
3 Method for Automatically Bagging Ice Using a Timer and Multi-
Positional Electronic Scale.
4 Method for Automatically Bagging Ice Using a Timer and Multi-
Positional Electronic Scale.
5 Grip for a Grasping Device.
PII SECURITY AGREEMENT
<PAGE> 25
PATENT APPLICATIONS IN PREPARATION
----------------------------------
Country Patent Docket No. Expected Filing Process/Machine
------- ------ ---------- Date ---------------
----
NONE
ITEM B. PATENT LICENSES
---------------
<TABLE>
<CAPTION>
Country or Patent Licensor Licensee Effective Expiration
Territory ------ -------- -------- --------- ----------
--------- Date Date
---- ----
<S> <C> <C> <C> <C> <C>
United States 5,440,863 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
United States 5,473,865 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
United Kingdom 0 518 382 Hoshizaki Electric Packaged Ice, Inc. 5/28/93 Perpetual
Co., Ltd. and
Hoshizaki America,
Inc.
</TABLE>
PII SECURITY AGREEMENT
25
<PAGE> 26
SCHEDULE III
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED TRADEMARKS
---------------------
Country Trademark Registration No. Registration Date
------- --------- ---------------- -----------------
NONE
PENDING TRADEMARK APPLICATIONS
------------------------------
<TABLE>
<CAPTION>
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
<S> <C> <C> <C>
United States Packaged Ice, Inc. 74/695,059 6/26/96
United States Packaged Ice, Inc. (plus design) 74/703,747 7/20/95
</TABLE>
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Country Trademark Docket No. Expected Filing Products/Services
------- --------- ---------- Date -----------------
----
NONE
ITEM B. TRADEMARK LICENSES
------------------
Country or Trademark Licensor Licensee Effective Date Expiration
Territory --------- -------- -------- -------------- Date
--------- ----
NONE
PII SECURITY AGREEMENT
<PAGE> 27
SCHEDULE IV
TO
SECURITY AGREEMENT
Intellectual Property Licenses
Trade Secret and Know-How Licenses
<TABLE>
<CAPTION>
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory(1) -------- -------- -------------- Date --------------
--------- -----
<S> <C> <C> <C> <C> <C>
Worldwide Hoshizaki Packaged Ice, 5/28/93 Perpetual Know-how
Electric Co., Inc. relating to U.S.
Ltd. and Patent Nos.
Hoshizaki 5,440,863 and
America, Inc. 5,473,865; and
U.K. Patent No.
0,518,382
</TABLE>
__________________________________
(1) List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in alphabetical
order by country name.
PII SECURITY AGREEMENT
<PAGE> 28
SCHEDULE V
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED COPYRIGHTS/MASK WORKS
--------------------------------
Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
NONE
COPYRIGHTS/MASK WORKS PENDING REGISTRATION APPLICATIONS
-------------------------------------------------------
Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
NONE
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
-------------------------------------------------
Country Docket No. Expected Filing Author(s) Title
------- ---------- Date --------- -----
----
NONE
ITEM B. COPYRIGHT/MASK WORKS LICENSES
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory -------- -------- -------------- Date --------------
--------- ----
NONE
PII SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.19
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "SECURITY AGREEMENT"),
dated as of September 15, 1997, is made by SOUTHWEST TEXAS PACKAGED ICE, INC.,
a Texas corporation ("GRANTOR"), in favor of THE FROST NATIONAL BANK, a
national banking association, as agent (in such capacity, the "AGENT") for each
of the Banks under the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Packaged Ice, Inc., a Texas corporation, the
Agent, and certain other financial institutions who from time to time are
parties thereto (the "BANKS"), the Banks have extended Commitments to make
Revolving Credit Loans to Packaged Ice, Inc., a Texas corporation (the
"BORROWER");
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Revolving Commitments to the Borrower pursuant to the Credit Agreement, the
Grantor agrees, for the benefit of each of the Banks, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COLLATERAL" is defined in Section 2.1.
"COLLATERAL ACCOUNT" is defined in Section 6.2.
"COPYRIGHT COLLATERAL" means all copyrights of Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of Grantor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in ITEM A of SCHEDULE V attached hereto,
and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in ITEM B of SCHEDULE V attached
hereto, the right to sue for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, including and
without
STPI SECURITY AGREEMENT
<PAGE> 2
limitation, the right to distribute copies or phonograph records of the
copyrighted matter to the public by sales, lease, lending, rental or other
transfer of ownership; the right to reproduce as copies or phonorecords; the
right to prepare derivative works; the right to perform or display the
copyrighted material publicly; any and all moral rights in the copyrighted
matter; and all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, income from licenses, royalties,
sales, lease, lending, payments, claims, damages and proceeds of suit.
"DEPOSIT ACCOUNTS" is defined in clause (t) of Section 2.1.
"EQUIPMENT" is defined in clause (a) of Section 2.1.
"EVENT OF DEFAULT" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall
occur and be continuing;
(b) The failure to pay, when due, any portion of the
Secured Indebtedness, subject to applicable notice and cure
periods, if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the
Collateral, except for Inventory sold in the ordinary course
of business or as permitted under Section 4.1.3 hereof, or any
legal or equitable interest therein, becomes vested in a
person or entity other than Grantor.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.
"INVENTORY" is defined in clause (b) of Section 2.1.
"LENDER PARTY" means, as the context may require, Agent, each Bank,
and each of their respective successors, transferees and assigns.
"PATENT COLLATERAL" means:
(a) all patents (the "PATENTS"), now existing anywhere in
the world or hereafter acquired, whether currently in use or
not, all records thereof and all patent applications prepared
now or hereafter, including divisional, continuation, and
continuation-in-part applications, whether pending or in
preparation for filing, including applications in the United
States Patent and Trademark Office or any foreign country,
including, but not limited to those referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all Patent licenses, including each Patent license
referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b); and
STPI SECURITY AGREEMENT
2
<PAGE> 3
(d) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement of any
Patent, whether owned by or licensed to Grantor, and any
violation or breach of the conditions of any Patent license,
including any Patent or Patent license referred to in ITEM A
and ITEM B of SCHEDULE II attached hereto.
"RECEIVABLES" is defined in clause (c) of Section 2.1.
"RELATED CONTRACTS" is defined in clause (c) of Section 2.1.
"SECURED INDEBTEDNESS" is defined in Section 2.2.
"THIRD PARTY" is defined in clause (a) of Section 3.1.3.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks,
logos, other source of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs
and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all
registrations and records thereof and all applications in
connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in
ITEM A of SCHEDULE III attached hereto;
(b) all Trademark licenses, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto;
(c) all reissues, extensions or renewals of any of the
items described in clauses (a) and (b);
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in, clauses
(a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, including any Trademark referred to in ITEM
A and ITEM B of SCHEDULE III attached hereto, or for any
injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark
license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of Grantor (all of the foregoing being collectively called a "TRADE
SECRET"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including each
STPI SECURITY AGREEMENT
3
<PAGE> 4
Trade Secret license referred to in SCHEDULE IV attached hereto, and including
the right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Lender Parties, and hereby
grants to Agent, for its benefit and the benefit of each of the Lender Parties,
a security interest in all of the following, whether now or hereafter existing
or acquired (the "COLLATERAL"):
(a) all equipment in all of its forms of Grantor,
wherever located, including all machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly
systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, trade fixtures, and other tangible personal
property (other than Inventory), and all parts thereof and all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being
the "EQUIPMENT");
(b) all inventory in all of its forms of Grantor,
wherever located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or
repossessed by Grantor;
STPI SECURITY AGREEMENT
4
<PAGE> 5
and all accessions thereto, products thereof and documents
therefore (any and all such inventory, materials, goods,
accessions, products and documents being the "INVENTORY");
(c) all accounts, contracts, contract rights, chattel
paper, documents, instruments and general intangibles of Grantor,
whether or not arising out of or in connection with the sale or lease
or other disposition of goods or the rendering of services, and all
rights of Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents and instruments (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "RECEIVABLES", and any and all such
security agreements, guaranties, leases and other contracts being the
"RELATED CONTRACTS");
(d) all Intellectual Property Collateral of Grantor;
(e) in addition to general intangibles which may be
included within Receivables or Intellectual Property Collateral, all
contracts, contract rights and general intangibles of Grantor,
including without limitation, all tax refunds, claims, causes of
action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "GENERAL
INTANGIBLES");
(f) all of Grantor's right, title and interest in and to
any and all depository, savings, or custodial, or other accounts
maintained by Grantor with any of the Lender Parties, all sums now or
at any time hereafter on deposit therein, credited thereto, or payable
thereon and all instruments, documents and other writings evidencing
any of the foregoing accounts (such accounts collectively referred to
herein as the "DEPOSIT ACCOUNTS");
(g) all investment property of Grantor;
(h) all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every
kind and description and interests therein; and
(j) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i),
proceeds deposited from time to time in the Deposit Accounts and in
any lock boxes of Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "COLLATERAL" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a violation of a valid and
enforceable restriction on such grant, unless and until any required consents
shall have been obtained. Grantor agrees to use its best efforts to obtain any
such required consent.
STPI SECURITY AGREEMENT
5
<PAGE> 6
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan Papers
to which Grantor is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Sections 502(b) and 506(b)) (all of the foregoing, together with all renewals,
extensions and modifications of all or any part thereof, being the "SECURED
INDEBTEDNESS").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full
of the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees
and assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Paper (including this Security Agreement), or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under
any such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have
any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor
shall Agent or any other Lender Party be obligated to perform any of
the obligations or duties of Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
STPI SECURITY AGREEMENT
6
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified
in ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which
is subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of
Agent provide Agent with the name and address of each lessor, sublessor,
lessee, sublessee and/or mortgagee (other than Grantor) with respect to any or
all such locations. All of the lock boxes of Grantor are located at the places
specified in ITEM B of SCHEDULE I hereto. The place(s) of business and chief
executive office of Grantor and the office(s) where Grantor keeps its records
concerning the Receivables, are located at the addresses specified in ITEM C of
SCHEDULE I hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor
has no trade names. Grantor has not been known by any legal name different
from the one set forth on the signature page hereto. Except as previously
disclosed to Agent in writing, Grantor has not been the subject of any merger
or other corporate reorganization. If the Collateral includes any Inventory
located in the State of California, Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code - Secured
Transactions of the State of California. Grantor is not a party to any
Federal, state or local government contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial
owner of the Collateral and owns the Collateral free and clear of any Lien,
security interest, charge or encumbrance except for the security interest
created by this Security Agreement and except as permitted by the Credit
Agreement and except as set forth on Schedule 4.5 of the Credit Agreement. No
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office, except
such as may have been filed in favor of Agent relating to this Security
Agreement, and except as permitted by the Credit Agreement.
SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "THIRD PARTY") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A
of SCHEDULE I hereto, together with the address of the location where
such Inventory or Equipment is or may be held. Except as otherwise
indicated in ITEM A of SCHEDULE I hereto, no Person (other than a
Person identified in ITEM A of SCHEDULE I thereto as being a
consignee) in possession of any of the Inventory or Equipment conducts
a business at the location of such Inventory or Equipment other than a
business in the nature of warehousing or transporting goods for
others. In the event that any Inventory is in the possession of a
Third Party, such Inventory is not evidenced by a negotiable
instrument or document.
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(b) Except as indicated in clause (a) of this Section,
Grantor has exclusive possession and control of the Equipment and
Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral, other than Intellectual Property Collateral
with negligible economic value:
(a) such Intellectual Property Collateral is valid and
subsisting and has not been adjudged invalid or unenforceable, in
whole or in part;
(b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world (where appropriate), and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world (where appropriate);
(c) Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(d) Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every item of Intellectual Property
Collateral in full force and effect throughout the world, as
applicable.
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a
valid security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either:
(a) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(b) for the filing required for perfection of or the
exercise by Agent of its rights and remedies hereunder.
SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
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adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
SECTION 3.1.9. TAXES. All taxes, assessments and other charges
levied against the Collateral have been paid in full, other than taxes,
assessments and charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than
Inventory in transit and Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1.1 or, upon
30 days' prior written notice to Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.1.6) shall be true and correct, and
all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any material loss or damage
to any of the Equipment, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end; and promptly furnish to Agent a
statement respecting any loss or damage to any of the Equipment within
ten (10) business days after Grantor obtains knowledge of any such
loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all chattel
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paper which evidence Receivables, located at the addresses set forth in ITEM C
of SCHEDULE I hereto, or, upon 30 days' prior written notice to Agent at such
other locations in a jurisdiction where all actions required by the first
sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice to
Agent; hold and preserve such records and chattel paper; and permit
representatives of Agent, at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of
such power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in
process or materials normally held by Grantor or any Third Party for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally
held by Grantor for such purpose, (ii) will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with
respect to such collection as Agent may reasonably request or, in the
absence of such request, as Grantor may deem advisable, and (iii) may
grant, in the ordinary course of business, to any party obligated on
any of the Collateral, 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 Collateral. Agent however, may, at any time after
the occurrence of an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the
Secured Indebtedness, notify any parties obligated on any of the
Collateral to make payment to Agent of any amounts due or to become
due thereunder and enforce collection of any of the Collateral 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. Upon the written request of Agent after the
occurrence of an Event of Default, Grantor will, at its own expense,
within five (5) days after receipt of such request, notify any parties
obligated on any of the Collateral to make payment to Agent of any
amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Agent representing any
payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, and Grantor shall not permit any
of its licensees to, unless Grantor shall reasonably and in good faith
determine (and notice of such determination shall have
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been delivered to Agent) that any of the Patent Collateral and/or
Trademark Collateral is of negligible economic value to Grantor:
(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use;
(ii) fail to employ all of the Patent Collateral
and Trademark Collateral registered with any Federal or state
or foreign authority with an appropriate notice of such
registration;
(iii) use any of the Trademark Collateral
registered with any Federal or state or foreign authority
except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made;
or
(iv) do or permit any act or knowingly omit to do
any act whereby any of the Patent Collateral or Trademark
Collateral may lapse or become invalid or unenforceable.
(b) Grantor shall not, unless Grantor shall either
reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the
Copyright Collateral or any of the Trade Secrets Collateral is of
negligible economic value to Grantor, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
the rights thereto become unenforceable or be placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(c) Grantor shall notify Agent within ten (10) business
days after it receives notice that any application or registration
relating to any material item of the Intellectual Property Collateral
may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse
determination (including the institution of, or any such determination
or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign
counterpart thereof or any court) regarding Grantor's ownership of any
of the Intellectual Property Collateral, its right to register the
same or to keep and maintain and enforce the same.
(d) In no event shall Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright
Office, or any similar office or agency in any other country or any
political subdivision thereof, unless it informs Agent of all such
additional filings within 30 days thereafter (or at any other time
upon the request of Agent), and upon written request of Agent executes
and delivers any and all agreements, instruments, documents and papers
as Agent may reasonably request to evidence Agent's security interests
in such Intellectual Property Collateral and the goodwill and general
intangibles of Grantor relating thereto or represented thereby.
(e) Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal,
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affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and
taxes (except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b) and
(c).
(f) Grantor shall promptly execute and deliver to Agent
any documents required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each
of its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall
be in an amount not less than the fair market value of the Equipment and
Inventory and shall be against such casualties, with such deductible amounts as
Agent shall reasonably approve. All insurance policies shall be written for
the benefit of Grantor and Agent, as their interest may appear, payable to
Agent as loss payee, or in other forms satisfactory to Agent, and such policies
or certificates evidencing the same shall be furnished to Agent. All policies
of insurance shall provide for written notice to Agent at least thirty (30)
days prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from
time to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, mark conspicuously
each document included in the Inventory, each chattel paper included
in the Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable
shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, and Grantor shall deliver and
pledge to Agent hereunder such promissory note, instrument, negotiable
document or chattel paper, duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or
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amended version thereof or any regulation promulgated under or
pursuant to any version thereof), as may be reasonably necessary or
desirable, or as Agent may reasonably request, in order to perfect and
preserve the security interests and other rights granted or purported
to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's
written request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as Agent may reasonably request, all in reasonable
detail; and
(e) furnish to Agent on a reasonable good faith efforts
basis such landlord estoppel and waiver agreements for properties
leased by Grantor (or properties where Grantor maintains inventory or
equipment) as shall be requested by Agent (all in form and substance
acceptable to Agent).
With respect to the foregoing and the grant of the security interests
hereunder, Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute
any proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.3.
SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Lender Parties) in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Agent shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as Grantor reasonably requests in writing at
times other than upon the occurrence and during the continuance of any Event of
Default, but failure of Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice
to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at
any time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to
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the Receivables, Related Contracts, and General Intangibles)
to make all payments due or to become due thereon directly to
Agent or such other person or officer as Agent may require,
whereupon the power and authority of Grantor to collect the
same in the ordinary course of its business shall be deemed to
be immediately revoked and terminated. With or without such
general notification, Agent may take or bring in Grantor's
name or that of the Agent all steps, actions, suits or
proceedings deemed by Agent reasonably necessary or desirable
to effect possession or collection of the Collateral,
including sums due or paid thereon, may complete any contract
or agreement of Grantor in any way related to any of the
Collateral, may make allowances or adjustments related to the
Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however,
Agent shall never be liable for its failure to collect or for
its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the
Collateral or sums due or paid thereon, nor shall it be under
any obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents, agreements or items on behalf of Grantor, after the
occurrence of an Event of Default, as shall be deemed by Agent
to be necessary or advisable, in the sole discretion of Agent,
to protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of
Agent under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the
Lender Parties against, all or any part of the Secured Indebtedness in
such order as provided in the Credit Agreement or as Agent shall
elect. Any surplus of such cash or cash proceeds held by Agent and
remaining after payment in full of all the Secured Indebtedness shall
be paid over to Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
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SECTION 6.2. COLLATERAL ACCOUNT.
(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"COLLATERAL ACCOUNT") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No
funds other than proceeds of Collateral will be deposited in the
Collateral Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of
any of Agent's rights under this Section.
SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against
any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from Agent's gross negligence or willful
misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Agent may incur in connection with:
(i) the administration of this Security
Agreement;
(ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Lender Parties hereunder; or
(iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
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SECTION 6.5. LOUISIANA REMEDIES. With respect to Collateral located
in the State of Louisiana, Agent will be entitled to foreclose under this
Security Agreement under ordinary or executory process procedures, and to cause
the Collateral to be immediately seized, wherever found, and sold with or
without appraisal, in regular session of court or in vacation, in accordance
with applicable Louisiana law, without the necessity of further demanding
payment from Grantor, notifying Grantor, or placing Grantor in default. For
purposes of foreclosure under Louisiana executory process procedures, Grantor
confesses judgment and acknowledges to be indebted to the Lender Parties up to
the full amount of the Secured Indebtedness. To the extent permitted under
applicable Louisiana law, Grantor additionally waives: (a) the benefit of
appraisal as provided for under 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 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 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. Grantor
further acknowledges that any declaration of fact made by authentic act before
a Notary Public and two witnesses by a person declaring that such facts are
within his or her knowledge shall constitute authentic evidence of such facts
for purposes of foreclosure under applicable Louisiana law. Grantor further
agrees that Agent may appoint a keeper of the Collateral in the event of
foreclosure.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN PAPER. This Security Agreement is a Loan Paper
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
STPI SECURITY AGREEMENT
17
<PAGE> 18
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in
this Security Agreement, the Credit Agreement, the Notes, or any other
evidences of the Secured Indebtedness, or other instruments executed or
delivered in connection therewith, neither Agent nor any Lender Party shall
ever be entitled to receive, collect or apply, as interest on the Secured
Indebtedness, any amount in excess of the highest lawful rate and, in the event
that Agent or any Lender Party ever receives, collects or applies, as interest,
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of the Secured Indebtedness,
and if the principal balance of the Secured Indebtedness is paid in full, any
remaining excess shall be forthwith paid to Grantor. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, Grantor, Agent, and the Lender Parties shall, to the
maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Credit Agreement and
the Notes so that the interest rate is uniform throughout the entire term of
the Credit Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the
Agent hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Papers or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
any or all of the Obligation, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the
Loan Papers;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of
the Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is
binding upon and shall inure to the benefit of Grantor, Agent, and the Lender
Parties, their respective heirs, executors, representatives, administrators,
successors and assigns; provided, however, that Grantor may not, without the
prior written consent of Agent, assign any rights, powers, duties or
obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
STPI SECURITY AGREEMENT
18
<PAGE> 19
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS.
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
SOUTHWEST TEXAS PACKAGED ICE, INC.,
a Texas corporation
By:
---------------------------------
James F. Stuart, Chief Executive
Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis. III
Facsimile No.: (713) 464-9384
STPI SECURITY AGREEMENT
19
<PAGE> 20
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
SEE ATTACHED LIST
STPI SECURITY AGREEMENT
<PAGE> 21
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM B. LOCATION OF LOCK BOXES
NONE
STPI SECURITY AGREEMENT
<PAGE> 22
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
1106 E. Durango
San Antonio, Texas 78210
STPI SECURITY AGREEMENT
<PAGE> 23
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM D. TRADE NAMES
Southwest Texas Packaged Ice, Inc.
STPI SECURITY AGREEMENT
<PAGE> 24
SCHEDULE II
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED PATENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Country Patent Registration No. Registration Date
------- ------ ---------------- -----------------
</TABLE>
NONE
PENDING PATENT APPLICATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Country Patent Serial No. Filing Date
------- ------ ---------- -----------
</TABLE>
NONE
PATENT APPLICATIONS IN PREPARATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expected Filing
Country Patent Docket No. Date Process/Machine
------- ------ ---------- ---- ---------------
</TABLE>
NONE
ITEM B. PATENT LICENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Country or Expiration
Territory Patent Licensor Licensee Effective Date Date
---------- ------ -------- -------- -------------- ----
</TABLE>
NONE
STPI SECURITY AGREEMENT
<PAGE> 25
SCHEDULE III
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED TRADEMARKS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Country Trademark Registration No. Registration Date
------- --------- ---------------- -----------------
</TABLE>
NONE
PENDING TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
</TABLE>
NONE
TRADEMARK APPLICATIONS IN PREPARATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expected Filing
Country Trademark Docket No. Date Products/Services
------- --------- ---------- ---- -----------------
</TABLE>
NONE
ITEM B. TRADEMARK LICENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Country or Expiration
Territory Trademark Licensor Licensee Effective Date Date
---------- --------- -------- -------- -------------- ----
</TABLE>
NONE
STPI SECURITY AGREEMENT
<PAGE> 26
SCHEDULE IV
TO
SECURITY AGREEMENT
Intellectual Property Licenses
Trade Secret and Know-How Licenses
<TABLE>
<S> <C> <C> <C> <C> <C>
Country or Expiration
Territory(1) Licensor Licensee Effective Date Date Subject Matter
- ------------ -------- -------- -------------- ---- --------------
</TABLE>
NONE
- --------------------
(1) List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
STPI SECURITY AGREEMENT
<PAGE> 27
SCHEDULE V
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED COPYRIGHTS/MASK WORKS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Country Registration No. Registration Date Author(s) Title
------- ---------------- ----------------- --------- -----
</TABLE>
NONE
COPYRIGHTS/MASK WORKS PENDING REGISTRATION APPLICATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
</TABLE>
NONE
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expected Filing
Country Docket No. Date Author(s) Title
------- ---------- ---- --------- -----
</TABLE>
NONE
ITEM B. COPYRIGHT/MASK WORKS LICENSES
<TABLE>
<S> <C> <C> <C> <C> <C>
Country or Expiration
Territory Licensor Licensee Effective Date Date Subject Matter
--------- -------- -------- -------------- ---- --------------
</TABLE>
NONE
STPI SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.20
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "SECURITY AGREEMENT"),
dated as of September 15, 1997, is made by SOUTHWESTERN ICE, INC., a Texas
corporation ("GRANTOR"), in favor of THE FROST NATIONAL BANK, a national
banking association, as agent (in such capacity, the "AGENT") for each of the
Banks under the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Packaged Ice, Inc., a Texas corporation, the
Agent, and certain other financial institutions who from time to time are
parties thereto (the "BANKS"), the Banks have extended Commitments to make
Revolving Credit Loans to Packaged Ice, Inc., a Texas corporation (the
"BORROWER");
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Revolving Commitments to the Borrower pursuant to the Credit Agreement, the
Grantor agrees, for the benefit of each of the Banks, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COLLATERAL" is defined in Section 2.1.
"COLLATERAL ACCOUNT" is defined in Section 6.2.
"COPYRIGHT COLLATERAL" means all copyrights of Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of Grantor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in ITEM A of SCHEDULE V attached hereto,
and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in ITEM B of SCHEDULE V attached
hereto, the right to sue for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, including and
without
SWI SECURITY AGREEMENT
<PAGE> 2
limitation, the right to distribute copies or phonograph records of the
copyrighted matter to the public by sales, lease, lending, rental or other
transfer of ownership; the right to reproduce as copies or phonorecords; the
right to prepare derivative works; the right to perform or display the
copyrighted material publicly; any and all moral rights in the copyrighted
matter; and all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, income from licenses, royalties,
sales, lease, lending, payments, claims, damages and proceeds of suit.
"DEPOSIT ACCOUNTS" is defined in clause (t) of Section 2.1.
"EQUIPMENT" is defined in clause (a) of Section 2.1.
"EVENT OF DEFAULT" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall
occur and be continuing;
(b) The failure to pay, when due, any portion of the
Secured Indebtedness, subject to applicable notice and cure
periods, if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the
Collateral, except for Inventory sold in the ordinary course
of business or as permitted under Section 4.1.3 hereof, or any
legal or equitable interest therein, becomes vested in a
person or entity other than Grantor.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.
"INVENTORY" is defined in clause (b) of Section 2.1.
"LENDER PARTY" means, as the context may require, Agent, each Bank,
and each of their respective successors, transferees and assigns.
"PATENT COLLATERAL" means:
(a) all patents (the "PATENTS"), now existing anywhere in
the world or hereafter acquired, whether currently in use or
not, all records thereof and all patent applications prepared
now or hereafter, including divisional, continuation, and
continuation-in-part applications, whether pending or in
preparation for filing, including applications in the United
States Patent and Trademark Office or any foreign country,
including, but not limited to those referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all Patent licenses, including each Patent license
referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b); and
2 SWI SECURITY AGREEMENT
<PAGE> 3
(d) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement of any
Patent, whether owned by or licensed to Grantor, and any
violation or breach of the conditions of any Patent license,
including any Patent or Patent license referred to in ITEM A
and ITEM B of SCHEDULE II attached hereto.
"RECEIVABLES" is defined in clause (c) of Section 2.1.
"RELATED CONTRACTS" is defined in clause (c) of Section 2.1.
"SECURED INDEBTEDNESS" is defined in Section 2.2.
"THIRD PARTY" is defined in clause (a) of Section 3.1.3.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks,
logos, other source of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs
and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all
registrations and records thereof and all applications in
connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in
ITEM A of SCHEDULE III attached hereto;
(b) all Trademark licenses, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto;
(c) all reissues, extensions or renewals of any of the
items described in clauses (a) and (b);
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in, clauses
(a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, including any Trademark referred to in ITEM
A and ITEM B of SCHEDULE III attached hereto, or for any
injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark
license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of Grantor (all of the foregoing being collectively called a "TRADE
SECRET"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including
3 SWI SECURITY AGREEMENT
<PAGE> 4
each Trade Secret license referred to in SCHEDULE IV attached hereto, and
including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Lender Parties, and hereby
grants to Agent, for its benefit and the benefit of each of the Lender Parties,
a security interest in all of the following, whether now or hereafter existing
or acquired (the "COLLATERAL"):
(a) all equipment in all of its forms of Grantor,
wherever located, including all machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly
systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, trade fixtures, and other tangible personal
property (other than Inventory), and all parts thereof and all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being
the "EQUIPMENT");
(b) all inventory in all of its forms of Grantor,
wherever located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or
repossessed by Grantor;
4 SWI SECURITY AGREEMENT
<PAGE> 5
and all accessions thereto, products thereof and documents therefore
(any and all such inventory, materials, goods, accessions, products
and documents being the "INVENTORY");
(c) all accounts, contracts, contract rights, chattel
paper, documents, instruments and general intangibles of Grantor,
whether or not arising out of or in connection with the sale or lease
or other disposition of goods or the rendering of services, and all
rights of Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents and instruments (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "RECEIVABLES", and any and all such
security agreements, guaranties, leases and other contracts being the
"RELATED CONTRACTS");
(d) all Intellectual Property Collateral of Grantor;
(e) in addition to general intangibles which may be
included within Receivables or Intellectual Property Collateral, all
contracts, contract rights and general intangibles of Grantor,
including without limitation, all tax refunds, claims, causes of
action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "GENERAL
INTANGIBLES");
(f) all of Grantor's right, title and interest in and to
any and all depository, savings, or custodial, or other accounts
maintained by Grantor with any of the Lender Parties, all sums now or
at any time hereafter on deposit therein, credited thereto, or payable
thereon and all instruments, documents and other writings evidencing
any of the foregoing accounts (such accounts collectively referred to
herein as the "DEPOSIT ACCOUNTS");
(g) all investment property of Grantor;
(h) all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every
kind and description and interests therein; and
(j) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i),
proceeds deposited from time to time in the Deposit Accounts and in
any lock boxes of Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "COLLATERAL" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a violation of a valid and
enforceable restriction on such grant, unless and until any required consents
shall have been obtained. Grantor agrees to use its best efforts to obtain any
such required consent.
5 SWI SECURITY AGREEMENT
<PAGE> 6
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan Papers
to which Grantor is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Sections 502(b) and 506(b)) (all of the foregoing, together with all renewals,
extensions and modifications of all or any part thereof, being the "SECURED
INDEBTEDNESS").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full
of the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees
and assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Paper (including this Security Agreement), or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under
any such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have
any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor
shall Agent or any other Lender Party be obligated to perform any of
the obligations or duties of Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
6 SWI SECURITY AGREEMENT
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified
in ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which
is subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of
Agent provide Agent with the name and address of each lessor, sublessor,
lessee, sublessee and/or mortgagee (other than Grantor) with respect to any or
all such locations. All of the lock boxes of Grantor are located at the places
specified in ITEM B of SCHEDULE I hereto. The place(s) of business and chief
executive office of Grantor and the office(s) where Grantor keeps its records
concerning the Receivables, are located at the addresses specified in ITEM C of
SCHEDULE I hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor
has no trade names. Grantor has not been known by any legal name different
from the one set forth on the signature page hereto. Except as previously
disclosed to Agent in writing, Grantor has not been the subject of any merger
or other corporate reorganization. If the Collateral includes any Inventory
located in the State of California, Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code - Secured
Transactions of the State of California. Grantor is not a party to any
Federal, state or local government contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial
owner of the Collateral and owns the Collateral free and clear of any Lien,
security interest, charge or encumbrance except for the security interest
created by this Security Agreement and except as permitted by the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of Agent relating to this
Security Agreement, and except as permitted by the Credit Agreement.
SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "THIRD PARTY") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A
of SCHEDULE I hereto, together with the address of the location where
such Inventory or Equipment is or may be held. Except as otherwise
indicated in ITEM A of SCHEDULE I hereto, no Person (other than a
Person identified in ITEM A of SCHEDULE I thereto as being a
consignee) in possession of any of the Inventory or Equipment conducts
a business at the location of such Inventory or Equipment other than a
business in the nature of warehousing or transporting goods for
others. In the event that any Inventory is in the possession of a
Third Party, such Inventory is not evidenced by a negotiable
instrument or document.
7 SWI SECURITY AGREEMENT
<PAGE> 8
(b) Except as indicated in clause (a) of this Section,
Grantor has exclusive possession and control of the Equipment and
Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral, other than Intellectual Property Collateral
with negligible economic value:
(a) such Intellectual Property Collateral is valid and
subsisting and has not been adjudged invalid or unenforceable, in
whole or in part;
(b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world (where appropriate), and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world (where appropriate);
(c) Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(d) Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every item of Intellectual Property
Collateral in full force and effect throughout the world, as
applicable.
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a
valid security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either:
(a) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(b) for the filing required for perfection of or the
exercise by Agent of its rights and remedies hereunder.
SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
8 SWI SECURITY AGREEMENT
<PAGE> 9
adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
SECTION 3.1.9. TAXES. All taxes, assessments and other charges
levied against the Collateral have been paid in full, other than taxes,
assessments and charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than
Inventory in transit and Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1.1 or, upon
30 days' prior written notice to Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.1.6) shall be true and correct, and
all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any material loss or damage
to any of the Equipment, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end; and promptly furnish to Agent a
statement respecting any loss or damage to any of the Equipment within
ten (10) business days after Grantor obtains knowledge of any such
loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all chattel
9 SWI SECURITY AGREEMENT
<PAGE> 10
paper which evidence Receivables, located at the addresses set forth in ITEM C
of SCHEDULE I hereto, or, upon 30 days' prior written notice to Agent at such
other locations in a jurisdiction where all actions required by the first
sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice to
Agent; hold and preserve such records and chattel paper; and permit
representatives of Agent, at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of
such power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in
process or materials normally held by Grantor or any Third Party for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally
held by Grantor for such purpose, (ii) will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with
respect to such collection as Agent may reasonably request or, in the
absence of such request, as Grantor may deem advisable, and (iii) may
grant, in the ordinary course of business, to any party obligated on
any of the Collateral, 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 Collateral. Agent however, may, at any time after
the occurrence of an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the
Secured Indebtedness, notify any parties obligated on any of the
Collateral to make payment to Agent of any amounts due or to become
due thereunder and enforce collection of any of the Collateral 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. Upon the written request of Agent after the
occurrence of an Event of Default, Grantor will, at its own expense,
within five (5) days after receipt of such request, notify any parties
obligated on any of the Collateral to make payment to Agent of any
amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Agent representing any
payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, and Grantor shall not permit any
of its licensees to, unless Grantor shall reasonably and in good faith
determine (and notice of such determination shall have
10 SWI SECURITY AGREEMENT
<PAGE> 11
been delivered to Agent) that any of the Patent Collateral and/or
Trademark Collateral is of negligible economic value to Grantor:
(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use;
(ii) fail to employ all of the Patent Collateral
and Trademark Collateral registered with any Federal or state
or foreign authority with an appropriate notice of such
registration;
(iii) use any of the Trademark Collateral
registered with any Federal or state or foreign authority
except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made;
or
(iv) do or permit any act or knowingly omit to do
any act whereby any of the Patent Collateral or Trademark
Collateral may lapse or become invalid or unenforceable.
(b) Grantor shall not, unless Grantor shall either
reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the
Copyright Collateral or any of the Trade Secrets Collateral is of
negligible economic value to Grantor, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
the rights thereto become unenforceable or be placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(c) Grantor shall notify Agent within ten (10) business
days after it receives notice that any application or registration
relating to any material item of the Intellectual Property Collateral
may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse
determination (including the institution of, or any such determination
or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign
counterpart thereof or any court) regarding Grantor's ownership of any
of the Intellectual Property Collateral, its right to register the
same or to keep and maintain and enforce the same.
(d) In no event shall Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright
Office, or any similar office or agency in any other country or any
political subdivision thereof, unless it informs Agent of all such
additional filings within 30 days thereafter (or at any other time
upon the request of Agent), and upon written request of Agent executes
and delivers any and all agreements, instruments, documents and papers
as Agent may reasonably request to evidence Agent's security interests
in such Intellectual Property Collateral and the goodwill and general
intangibles of Grantor relating thereto or represented thereby.
(e) Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal,
11 SWI SECURITY AGREEMENT
<PAGE> 12
affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and
taxes (except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b) and
(c).
(f) Grantor shall promptly execute and deliver to Agent
any documents required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each
of its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall
be in an amount not less than the fair market value of the Equipment and
Inventory and shall be against such casualties, with such deductible amounts as
Agent shall reasonably approve. All insurance policies shall be written for
the benefit of Grantor and Agent, as their interest may appear, payable to
Agent as loss payee, or in other forms satisfactory to Agent, and such policies
or certificates evidencing the same shall be furnished to Agent. All policies
of insurance shall provide for written notice to Agent at least thirty (30)
days prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from
time to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, mark conspicuously
each document included in the Inventory, each chattel paper included
in the Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable
shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, and Grantor shall deliver and
pledge to Agent hereunder such promissory note, instrument, negotiable
document or chattel paper, duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or
12 SWI SECURITY AGREEMENT
<PAGE> 13
amended version thereof or any regulation promulgated under or
pursuant to any version thereof), as may be reasonably necessary or
desirable, or as Agent may reasonably request, in order to perfect and
preserve the security interests and other rights granted or purported
to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's
written request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as Agent may reasonably request, all in reasonable
detail; and
(e) furnish to Agent on a reasonable good faith efforts
basis such landlord estoppel and waiver agreements for properties
leased by Grantor (or properties where Grantor maintains inventory or
equipment) as shall be requested by Agent (all in form and substance
acceptable to Agent).
With respect to the foregoing and the grant of the security interests
hereunder, Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute
any proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
13 SWI SECURITY AGREEMENT
<PAGE> 14
SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.3.
SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Lender Parties) in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Agent shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as Grantor reasonably requests in writing at
times other than upon the occurrence and during the continuance of any Event of
Default, but failure of Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice
to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at
any time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to
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<PAGE> 15
the Receivables, Related Contracts, and General Intangibles)
to make all payments due or to become due thereon directly to
Agent or such other person or officer as Agent may require,
whereupon the power and authority of Grantor to collect the
same in the ordinary course of its business shall be deemed to
be immediately revoked and terminated. With or without such
general notification, Agent may take or bring in Grantor's
name or that of the Agent all steps, actions, suits or
proceedings deemed by Agent reasonably necessary or desirable
to effect possession or collection of the Collateral,
including sums due or paid thereon, may complete any contract
or agreement of Grantor in any way related to any of the
Collateral, may make allowances or adjustments related to the
Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however,
Agent shall never be liable for its failure to collect or for
its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the
Collateral or sums due or paid thereon, nor shall it be under
any obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents, agreements or items on behalf of Grantor, after the
occurrence of an Event of Default, as shall be deemed by Agent
to be necessary or advisable, in the sole discretion of Agent,
to protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of
Agent under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the
Lender Parties against, all or any part of the Secured Indebtedness in
such order as provided in the Credit Agreement or as Agent shall
elect. Any surplus of such cash or cash proceeds held by Agent and
remaining after payment in full of all the Secured Indebtedness shall
be paid over to Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
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<PAGE> 16
SECTION 6.2. COLLATERAL ACCOUNT.
(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"COLLATERAL ACCOUNT") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No
funds other than proceeds of Collateral will be deposited in the
Collateral Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of
any of Agent's rights under this Section.
SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against
any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from Agent's gross negligence or willful
misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Agent may incur in connection with:
(i) the administration of this Security
Agreement;
(ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Lender Parties hereunder; or
(iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
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<PAGE> 17
SECTION 6.5. LOUISIANA REMEDIES. With respect to Collateral located
in the State of Louisiana, Agent will be entitled to foreclose under this
Security Agreement under ordinary or executory process procedures, and to cause
the Collateral to be immediately seized, wherever found, and sold with or
without appraisal, in regular session of court or in vacation, in accordance
with applicable Louisiana law, without the necessity of further demanding
payment from Grantor, notifying Grantor, or placing Grantor in default. For
purposes of foreclosure under Louisiana executory process procedures, Grantor
confesses judgment and acknowledges to be indebted to the Lender Parties up to
the full amount of the Secured Indebtedness. To the extent permitted under
applicable Louisiana law, Grantor additionally waives: (a) the benefit of
appraisal as provided for under 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 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 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. Grantor
further acknowledges that any declaration of fact made by authentic act before
a Notary Public and two witnesses by a person declaring that such facts are
within his or her knowledge shall constitute authentic evidence of such facts
for purposes of foreclosure under applicable Louisiana law. Grantor further
agrees that Agent may appoint a keeper of the Collateral in the event of
foreclosure.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN PAPER. This Security Agreement is a Loan Paper
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
17 SWI SECURITY AGREEMENT
<PAGE> 18
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in
this Security Agreement, the Credit Agreement, the Notes, or any other
evidences of the Secured Indebtedness, or other instruments executed or
delivered in connection therewith, neither Agent nor any Lender Party shall
ever be entitled to receive, collect or apply, as interest on the Secured
Indebtedness, any amount in excess of the highest lawful rate and, in the event
that Agent or any Lender Party ever receives, collects or applies, as interest,
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of the Secured Indebtedness,
and if the principal balance of the Secured Indebtedness is paid in full, any
remaining excess shall be forthwith paid to Grantor. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, Grantor, Agent, and the Lender Parties shall, to the
maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Credit Agreement and
the Notes so that the interest rate is uniform throughout the entire term of
the Credit Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the
Agent hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Papers or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
any or all of the Obligation, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the
Loan Papers;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of
the Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is
binding upon and shall inure to the benefit of Grantor, Agent, and the Lender
Parties, their respective heirs, executors, representatives, administrators,
successors and assigns; provided, however, that Grantor may not, without the
prior written consent of Agent, assign any rights, powers, duties or
obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
18 SWI SECURITY AGREEMENT
<PAGE> 19
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS.
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
SOUTHWESTERN ICE, INC., a Texas corporation
By:
------------------------------------------
James F. Stuart, Chief Executive Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Facsimile No.: (713) 464-9384
19 SWI SECURITY AGREEMENT
<PAGE> 20
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
SEE ATTACHED LIST
SWI SECURITY AGREEMENT
<PAGE> 21
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM B. LOCATION OF LOCK BOXES
NONE
SWI SECURITY AGREEMENT
<PAGE> 22
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
(1) 4425 W. Olive, Ste. 310
Glendale, Arizona 85302
(2) 1335 Memphis St.
Harlingen, Texas 78553
SWI SECURITY AGREEMENT
<PAGE> 23
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM D. TRADE NAMES
(1) Southwestern Ice, Inc.
(2) Crystal Ice & Cold Storage
(3) Miramar Cold Storage
(4) Pure Flo Package Water & Ice Co.
(5) Shippers Ice
(6) Arizona Ice
SWI SECURITY AGREEMENT
<PAGE> 24
SCHEDULE II
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED PATENTS
------------------
Country Patent Registration No. Registration Date
- ------- ------ ---------------- -----------------
NONE
PENDING PATENT APPLICATIONS
---------------------------
Country Patent Serial No. Filing Date
- ------- ------ ---------- -----------
NONE
PATENT APPLICATIONS IN PREPARATION
----------------------------------
Country Patent Docket No. Expected Filing Process/Machine
- ------- ------ ---------- Date ---------------
----
NONE
ITEM B. PATENT LICENSES
---------------
Country or Patent Licensor Licensee Effective Date Expiration
Territory ------ -------- -------- -------------- Date
- --------- ----
NONE
SWI SECURITY AGREEMENT
<PAGE> 25
SCHEDULE III
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED TRADEMARKS
---------------------
Country/State Trademark Registration No. Registration Date
- ------------- --------- ---------------- -----------------
United States/Arizona Penguin Figure 017669 5/9/92
PENDING TRADEMARK APPLICATIONS
------------------------------
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
NONE
TRADEMARK APPLICATIONS IN PREPARATION
-------------------------------------
Country Trademark Docket No. Expected Filing Products/Services
- ------- --------- ---------- Date -----------------
----
NONE
ITEM B. TRADEMARK LICENSES
------------------
Country or Trademark Licensor Licensee Effective Date Expiration
Territory --------- -------- -------- -------------- Date
- --------- ----
NONE
SWI SECURITY AGREEMENT
<PAGE> 26
SCHEDULE IV
TO
SECURITY AGREEMENT
Intellectual Property Licenses
------------------------------
Trade Secret and Know-How Licenses
----------------------------------
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory(1) -------- -------- -------------- Date --------------
- --------- ----
NONE
- ------------------------
(1) List items related to the United States first for ease of recordation. List
items related to other countries next, grouped by country and in alphabetical
order by country name.
SWI SECURITY AGREEMENT
<PAGE> 27
SCHEDULE V
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED COPYRIGHTS/MASK WORKS
--------------------------------
Country Registration No. Registration Date Author(s) Title
- ------- ---------------- ----------------- --------- -----
NONE
COPYRIGHTS/MASK WORKS PENDING REGISTRATION APPLICATIONS
-------------------------------------------------------
Country Docket No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- -----
NONE
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
-------------------------------------------------
Country Docket No. Expected Filing Author(s) Title
- ------- ---------- Date --------- -----
NONE
ITEM B. COPYRIGHT/MASK WORKS LICENSES
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory -------- -------- -------------- Date --------------
- --------- ----
NONE
SWI SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.21
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "SECURITY AGREEMENT"),
dated as of September 15, 1997, is made by MISSION PARTY ICE, INC., a Texas
corporation ("GRANTOR"), in favor of THE FROST NATIONAL BANK, a national
banking association, as agent (in such capacity, the "AGENT") for each of the
Banks under the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Packaged Ice, Inc., a Texas corporation, the
Agent, and certain other financial institutions who from time to time are
parties thereto (the "BANKS"), the Banks have extended Commitments to make
Revolving Credit Loans to Packaged Ice, Inc., a Texas corporation (the
"BORROWER");
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Revolving Commitments to the Borrower pursuant to the Credit Agreement, the
Grantor agrees, for the benefit of each of the Banks, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COLLATERAL" is defined in Section 2.1.
"COLLATERAL ACCOUNT" is defined in Section 6.2.
"COPYRIGHT COLLATERAL" means all copyrights of Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of Grantor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in ITEM A of SCHEDULE V attached hereto,
and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in ITEM B of SCHEDULE V attached
hereto, the right to sue for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, including and
without
MPI SECURITY AGREEMENT
<PAGE> 2
limitation, the right to distribute copies or phonograph records of the
copyrighted matter to the public by sales, lease, lending, rental or other
transfer of ownership; the right to reproduce as copies or phonorecords; the
right to prepare derivative works; the right to perform or display the
copyrighted material publicly; any and all moral rights in the copyrighted
matter; and all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, income from licenses, royalties,
sales, lease, lending, payments, claims, damages and proceeds of suit.
"DEPOSIT ACCOUNTS" is defined in clause (t) of Section 2.1.
"EQUIPMENT" is defined in clause (a) of Section 2.1.
"EVENT OF DEFAULT" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall
occur and be continuing;
(b) The failure to pay, when due, any portion of the
Secured Indebtedness, subject to applicable notice and cure
periods, if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the
Collateral, except for Inventory sold in the ordinary course
of business or as permitted under Section 4.1.3 hereof, or any
legal or equitable interest therein, becomes vested in a
person or entity other than Grantor.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.
"INVENTORY" is defined in clause (b) of Section 2.1.
"LENDER PARTY" means, as the context may require, Agent, each Bank,
and each of their respective successors, transferees and assigns.
"PATENT COLLATERAL" means:
(a) all patents (the "PATENTS"), now existing anywhere in
the world or hereafter acquired, whether currently in use or
not, all records thereof and all patent applications prepared
now or hereafter, including divisional, continuation, and
continuation-in-part applications, whether pending or in
preparation for filing, including applications in the United
States Patent and Trademark Office or any foreign country,
including, but not limited to those referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all Patent licenses, including each Patent license
referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b); and
2 MPI SECURITY AGREEMENT
<PAGE> 3
(d) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement of any
Patent, whether owned by or licensed to Grantor, and any
violation or breach of the conditions of any Patent license,
including any Patent or Patent license referred to in ITEM A
and ITEM B of SCHEDULE II attached hereto.
"RECEIVABLES" is defined in clause (c) of Section 2.1.
"RELATED CONTRACTS" is defined in clause (c) of Section 2.1.
"SECURED INDEBTEDNESS" is defined in Section 2.2.
"THIRD PARTY" is defined in clause (a) of Section 3.1.3.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks,
logos, other source of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs
and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all
registrations and records thereof and all applications in
connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in
ITEM A of SCHEDULE III attached hereto;
(b) all Trademark licenses, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto;
(c) all reissues, extensions or renewals of any of the
items described in clauses (a) and (b);
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in, clauses
(a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, including any Trademark referred to in ITEM
A and ITEM B of SCHEDULE III attached hereto, or for any
injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark
license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of Grantor (all of the foregoing being collectively called a "TRADE
SECRET"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including
3 MPI SECURITY AGREEMENT
<PAGE> 4
each Trade Secret license referred to in SCHEDULE IV attached hereto, and
including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Lender Parties, and hereby
grants to Agent, for its benefit and the benefit of each of the Lender Parties,
a security interest in all of the following, whether now or hereafter existing
or acquired (the "COLLATERAL"):
(a) all equipment in all of its forms of Grantor,
wherever located, including all machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly
systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, trade fixtures, and other tangible personal
property (other than Inventory), and all parts thereof and all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being
the "EQUIPMENT");
(b) all inventory in all of its forms of Grantor,
wherever located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or
repossessed by Grantor;
4 MPI SECURITY AGREEMENT
<PAGE> 5
and all accessions thereto, products thereof and documents therefore
(any and all such inventory, materials, goods, accessions, products
and documents being the "INVENTORY");
(c) all accounts, contracts, contract rights, chattel
paper, documents, instruments and general intangibles of Grantor,
whether or not arising out of or in connection with the sale or lease
or other disposition of goods or the rendering of services, and all
rights of Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents and instruments (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "RECEIVABLES", and any and all such
security agreements, guaranties, leases and other contracts being the
"RELATED CONTRACTS");
(d) all Intellectual Property Collateral of Grantor;
(e) in addition to general intangibles which may be
included within Receivables or Intellectual Property Collateral, all
contracts, contract rights and general intangibles of Grantor,
including without limitation, all tax refunds, claims, causes of
action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "GENERAL
INTANGIBLES");
(f) all of Grantor's right, title and interest in and to
any and all depository, savings, or custodial, or other accounts
maintained by Grantor with any of the Lender Parties, all sums now or
at any time hereafter on deposit therein, credited thereto, or payable
thereon and all instruments, documents and other writings evidencing
any of the foregoing accounts (such accounts collectively referred to
herein as the "DEPOSIT ACCOUNTS");
(g) all investment property of Grantor;
(h) all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every
kind and description and interests therein; and
(j) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i),
proceeds deposited from time to time in the Deposit Accounts and in
any lock boxes of Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "COLLATERAL" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a violation of a valid and
enforceable restriction on such grant, unless and until any required consents
shall have been obtained. Grantor agrees to use its best efforts to obtain any
such required consent.
5 MPI SECURITY AGREEMENT
<PAGE> 6
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan Papers
to which Grantor is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Sections 502(b) and 506(b)) (all of the foregoing, together with all renewals,
extensions and modifications of all or any part thereof, being the "SECURED
INDEBTEDNESS").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full
of the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees
and assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Paper (including this Security Agreement), or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under
any such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have
any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor
shall Agent or any other Lender Party be obligated to perform any of
the obligations or duties of Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
6 MPI SECURITY AGREEMENT
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified
in ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which
is subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of
Agent provide Agent with the name and address of each lessor, sublessor,
lessee, sublessee and/or mortgagee (other than Grantor) with respect to any or
all such locations. All of the lock boxes of Grantor are located at the places
specified in ITEM B of SCHEDULE I hereto. The place(s) of business and chief
executive office of Grantor and the office(s) where Grantor keeps its records
concerning the Receivables, are located at the addresses specified in ITEM C of
SCHEDULE I hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor
has no trade names. Grantor has not been known by any legal name different
from the one set forth on the signature page hereto. Except as previously
disclosed to Agent in writing, Grantor has not been the subject of any merger
or other corporate reorganization. If the Collateral includes any Inventory
located in the State of California, Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code - Secured
Transactions of the State of California. Grantor is not a party to any
Federal, state or local government contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial
owner of the Collateral and owns the Collateral free and clear of any Lien,
security interest, charge or encumbrance except for the security interest
created by this Security Agreement and except as permitted by the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of Agent relating to this
Security Agreement, and except as permitted by the Credit Agreement.
SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "THIRD PARTY") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A
of SCHEDULE I hereto, together with the address of the location where
such Inventory or Equipment is or may be held. Except as otherwise
indicated in ITEM A of SCHEDULE I hereto, no Person (other than a
Person identified in ITEM A of SCHEDULE I thereto as being a
consignee) in possession of any of the Inventory or Equipment conducts
a business at the location of such Inventory or Equipment other than a
business in the nature of warehousing or transporting goods for
others. In the event that any Inventory is in the possession of a
Third Party, such Inventory is not evidenced by a negotiable
instrument or document.
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(b) Except as indicated in clause (a) of this Section,
Grantor has exclusive possession and control of the Equipment and
Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral, other than Intellectual Property Collateral
with negligible economic value:
(a) such Intellectual Property Collateral is valid and
subsisting and has not been adjudged invalid or unenforceable, in
whole or in part;
(b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world (where appropriate), and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world (where appropriate);
(c) Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(d) Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every item of Intellectual Property
Collateral in full force and effect throughout the world, as
applicable.
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a
valid security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either:
(a) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(b) for the filing required for perfection of or the
exercise by Agent of its rights and remedies hereunder.
SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
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adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
SECTION 3.1.9. TAXES. All taxes, assessments and other charges
levied against the Collateral have been paid in full, other than taxes,
assessments and charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than
Inventory in transit and Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1.1 or, upon
30 days' prior written notice to Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.1.6) shall be true and correct, and
all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any material loss or damage
to any of the Equipment, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end; and promptly furnish to Agent a
statement respecting any loss or damage to any of the Equipment within
ten (10) business days after Grantor obtains knowledge of any such
loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all chattel
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paper which evidence Receivables, located at the addresses set forth in ITEM C
of SCHEDULE I hereto, or, upon 30 days' prior written notice to Agent at such
other locations in a jurisdiction where all actions required by the first
sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice to
Agent; hold and preserve such records and chattel paper; and permit
representatives of Agent, at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of
such power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in
process or materials normally held by Grantor or any Third Party for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally
held by Grantor for such purpose, (ii) will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with
respect to such collection as Agent may reasonably request or, in the
absence of such request, as Grantor may deem advisable, and (iii) may
grant, in the ordinary course of business, to any party obligated on
any of the Collateral, 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 Collateral. Agent however, may, at any time after
the occurrence of an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the
Secured Indebtedness, notify any parties obligated on any of the
Collateral to make payment to Agent of any amounts due or to become
due thereunder and enforce collection of any of the Collateral 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. Upon the written request of Agent after the
occurrence of an Event of Default, Grantor will, at its own expense,
within five (5) days after receipt of such request, notify any parties
obligated on any of the Collateral to make payment to Agent of any
amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Agent representing any
payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, and Grantor shall not permit any
of its licensees to, unless Grantor shall reasonably and in good faith
determine (and notice of such determination shall have
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<PAGE> 11
been delivered to Agent) that any of the Patent Collateral and/or
Trademark Collateral is of negligible economic value to Grantor:
(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use;
(ii) fail to employ all of the Patent Collateral
and Trademark Collateral registered with any Federal or state
or foreign authority with an appropriate notice of such
registration;
(iii) use any of the Trademark Collateral
registered with any Federal or state or foreign authority
except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made;
or
(iv) do or permit any act or knowingly omit to do
any act whereby any of the Patent Collateral or Trademark
Collateral may lapse or become invalid or unenforceable.
(b) Grantor shall not, unless Grantor shall either
reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the
Copyright Collateral or any of the Trade Secrets Collateral is of
negligible economic value to Grantor, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
the rights thereto become unenforceable or be placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(c) Grantor shall notify Agent within ten (10) business
days after it receives notice that any application or registration
relating to any material item of the Intellectual Property Collateral
may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse
determination (including the institution of, or any such determination
or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign
counterpart thereof or any court) regarding Grantor's ownership of any
of the Intellectual Property Collateral, its right to register the
same or to keep and maintain and enforce the same.
(d) In no event shall Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright
Office, or any similar office or agency in any other country or any
political subdivision thereof, unless it informs Agent of all such
additional filings within 30 days thereafter (or at any other time
upon the request of Agent), and upon written request of Agent executes
and delivers any and all agreements, instruments, documents and papers
as Agent may reasonably request to evidence Agent's security interests
in such Intellectual Property Collateral and the goodwill and general
intangibles of Grantor relating thereto or represented thereby.
(e) Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal,
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affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and
taxes (except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b) and
(c).
(f) Grantor shall promptly execute and deliver to Agent
any documents required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each
of its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall
be in an amount not less than the fair market value of the Equipment and
Inventory and shall be against such casualties, with such deductible amounts as
Agent shall reasonably approve. All insurance policies shall be written for
the benefit of Grantor and Agent, as their interest may appear, payable to
Agent as loss payee, or in other forms satisfactory to Agent, and such policies
or certificates evidencing the same shall be furnished to Agent. All policies
of insurance shall provide for written notice to Agent at least thirty (30)
days prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from
time to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, mark conspicuously
each document included in the Inventory, each chattel paper included
in the Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable
shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, and Grantor shall deliver and
pledge to Agent hereunder such promissory note, instrument, negotiable
document or chattel paper, duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or
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<PAGE> 13
amended version thereof or any regulation promulgated under or
pursuant to any version thereof), as may be reasonably necessary or
desirable, or as Agent may reasonably request, in order to perfect and
preserve the security interests and other rights granted or purported
to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's
written request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as Agent may reasonably request, all in reasonable
detail; and
(e) furnish to Agent on a reasonable good faith efforts
basis such landlord estoppel and waiver agreements for properties
leased by Grantor (or properties where Grantor maintains inventory or
equipment) as shall be requested by Agent (all in form and substance
acceptable to Agent).
With respect to the foregoing and the grant of the security interests
hereunder, Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute
any proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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<PAGE> 14
SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.3.
SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Lender Parties) in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Agent shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as Grantor reasonably requests in writing at
times other than upon the occurrence and during the continuance of any Event of
Default, but failure of Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice
to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at
any time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to
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<PAGE> 15
the Receivables, Related Contracts, and General Intangibles)
to make all payments due or to become due thereon directly to
Agent or such other person or officer as Agent may require,
whereupon the power and authority of Grantor to collect the
same in the ordinary course of its business shall be deemed to
be immediately revoked and terminated. With or without such
general notification, Agent may take or bring in Grantor's
name or that of the Agent all steps, actions, suits or
proceedings deemed by Agent reasonably necessary or desirable
to effect possession or collection of the Collateral,
including sums due or paid thereon, may complete any contract
or agreement of Grantor in any way related to any of the
Collateral, may make allowances or adjustments related to the
Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however,
Agent shall never be liable for its failure to collect or for
its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the
Collateral or sums due or paid thereon, nor shall it be under
any obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents, agreements or items on behalf of Grantor, after the
occurrence of an Event of Default, as shall be deemed by Agent
to be necessary or advisable, in the sole discretion of Agent,
to protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of
Agent under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the
Lender Parties against, all or any part of the Secured Indebtedness in
such order as provided in the Credit Agreement or as Agent shall
elect. Any surplus of such cash or cash proceeds held by Agent and
remaining after payment in full of all the Secured Indebtedness shall
be paid over to Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
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<PAGE> 16
SECTION 6.2. COLLATERAL ACCOUNT.
(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"COLLATERAL ACCOUNT") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No
funds other than proceeds of Collateral will be deposited in the
Collateral Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of
any of Agent's rights under this Section.
SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against
any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from Agent's gross negligence or willful
misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Agent may incur in connection with:
(i) the administration of this Security
Agreement;
(ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Lender Parties hereunder; or
(iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
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SECTION 6.5. LOUISIANA REMEDIES. With respect to Collateral located
in the State of Louisiana, Agent will be entitled to foreclose under this
Security Agreement under ordinary or executory process procedures, and to cause
the Collateral to be immediately seized, wherever found, and sold with or
without appraisal, in regular session of court or in vacation, in accordance
with applicable Louisiana law, without the necessity of further demanding
payment from Grantor, notifying Grantor, or placing Grantor in default. For
purposes of foreclosure under Louisiana executory process procedures, Grantor
confesses judgment and acknowledges to be indebted to the Lender Parties up to
the full amount of the Secured Indebtedness. To the extent permitted under
applicable Louisiana law, Grantor additionally waives: (a) the benefit of
appraisal as provided for under 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 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 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. Grantor
further acknowledges that any declaration of fact made by authentic act before
a Notary Public and two witnesses by a person declaring that such facts are
within his or her knowledge shall constitute authentic evidence of such facts
for purposes of foreclosure under applicable Louisiana law. Grantor further
agrees that Agent may appoint a keeper of the Collateral in the event of
foreclosure.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN PAPER. This Security Agreement is a Loan Paper
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
17 MPI SECURITY AGREEMENT
<PAGE> 18
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in
this Security Agreement, the Credit Agreement, the Notes, or any other
evidences of the Secured Indebtedness, or other instruments executed or
delivered in connection therewith, neither Agent nor any Lender Party shall
ever be entitled to receive, collect or apply, as interest on the Secured
Indebtedness, any amount in excess of the highest lawful rate and, in the event
that Agent or any Lender Party ever receives, collects or applies, as interest,
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of the Secured Indebtedness,
and if the principal balance of the Secured Indebtedness is paid in full, any
remaining excess shall be forthwith paid to Grantor. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, Grantor, Agent, and the Lender Parties shall, to the
maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Credit Agreement and
the Notes so that the interest rate is uniform throughout the entire term of
the Credit Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the
Agent hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Papers or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
any or all of the Obligation, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the
Loan Papers;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of
the Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is
binding upon and shall inure to the benefit of Grantor, Agent, and the Lender
Parties, their respective heirs, executors, representatives, administrators,
successors and assigns; provided, however, that Grantor may not, without the
prior written consent of Agent, assign any rights, powers, duties or
obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
18 MPI SECURITY AGREEMENT
<PAGE> 19
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS.
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
MISSION PARTY ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Facsimile No.: (713) 464-9384
19
MPI SECURITY AGREEMENT
<PAGE> 20
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
SEE ATTACHED LIST
MPI SECURITY AGREEMENT
<PAGE> 21
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM B. LOCATION OF LOCK BOXES
NONE
MPI SECURITY AGREEMENT
<PAGE> 22
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
1106 E. Durango
San Antonio, Texas 78210
MPI SECURITY AGREEMENT
<PAGE> 23
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM D. TRADE NAMES
(1) Mission Party Ice, Inc.
(2) Mission Ice Company
(3) Mission Ice and Fuel Company
(4) Apache Ice Company
(5) Apache Ice, Inc.
MPI SECURITY AGREEMENT
<PAGE> 24
SCHEDULE II
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED PATENTS
Country Patent Registration No. Registration Date
- ------- ------ ---------------- -----------------
NONE
PENDING PATENT APPLICATIONS
Country Patent Serial No. Filing Date
- ------- ------ ---------- -----------
NONE
PATENT APPLICATIONS IN PREPARATION
Country Patent Docket No. Expected Filing Process/Machine
- ------- ------ ---------- Date ---------------
----
NONE
ITEM B. PATENT LICENSES
Country or Patent Licensor Licensee Effective Date Expiration
Territory ------ -------- -------- -------------- Date
- --------- ----
NONE
MPI SECURITY AGREEMENT
<PAGE> 25
SCHEDULE III
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED TRADEMARKS
Country Trademark Registration No. Registration Date
- ------- --------- ---------------- -----------------
NONE
PENDING TRADEMARK APPLICATIONS
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
NONE
TRADEMARK APPLICATIONS IN PREPARATION
Country Trademark Docket No. Expected Filing Products/Services
- ------- --------- ---------- Date -----------------
----
NONE
ITEM B. TRADEMARK LICENSES
Country or Trademark Licensor Licensee Effective Date Expiration
Territory --------- -------- -------- -------------- Date
- --------- ----
NONE
MPI SECURITY AGREEMENT
<PAGE> 26
SCHEDULE IV
TO
SECURITY AGREEMENT
Intellectual Property Licenses
Trade Secret and Know-How Licenses
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory(1) -------- -------- -------------- Date --------------
- --------- ----
NONE
__________________________________
1 List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
MPI SECURITY AGREEMENT
<PAGE> 27
SCHEDULE V
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED COPYRIGHTS/MASK WORKS
Country Registration No. Registration Date Author(s) Title
- ------- ---------------- ----------------- --------- -----
NONE
COPYRIGHTS/MASK WORKS PENDING REGISTRATION APPLICATIONS
Country Docket No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- -----
NONE
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
Country Docket No. Expected Filing Author(s) Title
- ------- ---------- Date --------- -----
----
NONE
ITEM B. COPYRIGHT/MASK WORKS LICENSES
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory -------- -------- -------------- Date --------------
- --------- ----
NONE
MPI SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.22
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "SECURITY AGREEMENT"),
dated as of September 15, 1997, is made by PACKAGED ICE LEASING, INC., a Nevada
corporation ("GRANTOR"), in favor of THE FROST NATIONAL BANK, a national
banking association, as agent (in such capacity, the "AGENT") for each of the
Banks under the Credit Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Packaged Ice, Inc., a Texas corporation, the
Agent, and certain other financial institutions who from time to time are
parties thereto (the "BANKS"), the Banks have extended Commitments to make
Revolving Credit Loans to Packaged Ice, Inc., a Texas corporation (the
"BORROWER");
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Grantor is required to execute and deliver this
Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Revolving Commitments to the Borrower pursuant to the Credit Agreement, the
Grantor agrees, for the benefit of each of the Banks, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN TERMS. The following terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"COLLATERAL" is defined in Section 2.1.
"COLLATERAL ACCOUNT" is defined in Section 6.2.
"COPYRIGHT COLLATERAL" means all copyrights of Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of Grantor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in ITEM A of SCHEDULE V attached hereto,
and all applications for registration thereof, all copyright licenses,
including each copyright license referred to in ITEM B of SCHEDULE V attached
hereto, the right to sue for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, including and
without
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<PAGE> 2
limitation, the right to distribute copies or phonograph records of the
copyrighted matter to the public by sales, lease, lending, rental or other
transfer of ownership; the right to reproduce as copies or phonorecords; the
right to prepare derivative works; the right to perform or display the
copyrighted material publicly; any and all moral rights in the copyrighted
matter; and all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, income from licenses, royalties,
sales, lease, lending, payments, claims, damages and proceeds of suit.
"DEPOSIT ACCOUNTS" is defined in clause (t) of Section 2.1.
"EQUIPMENT" is defined in clause (a) of Section 2.1.
"EVENT OF DEFAULT" means the occurrence of any of the following events
or conditions:
(a) An Event of Default under the Credit Agreement shall
occur and be continuing;
(b) The failure to pay, when due, any portion of the
Secured Indebtedness, subject to applicable notice and cure
periods, if any;
(c) The failure of Grantor to observe any of the terms,
conditions or covenants contained in this Security Agreement,
subject to applicable notice and cure periods, if any; or
(d) The ownership of the Collateral or any of the
Collateral, except for Inventory sold in the ordinary course
of business or as permitted under Section 4.1.3 hereof, or any
legal or equitable interest therein, becomes vested in a
person or entity other than Grantor.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Copyright
Collateral, the Patent Collateral, the Trademark Collateral and the Trade
Secrets Collateral.
"INVENTORY" is defined in clause (b) of Section 2.1.
"LENDER PARTY" means, as the context may require, Agent, each Bank,
and each of their respective successors, transferees and assigns.
"PATENT COLLATERAL" means:
(a) all patents (the "PATENTS"), now existing anywhere in
the world or hereafter acquired, whether currently in use or
not, all records thereof and all patent applications prepared
now or hereafter, including divisional, continuation, and
continuation-in-part applications, whether pending or in
preparation for filing, including applications in the United
States Patent and Trademark Office or any foreign country,
including, but not limited to those referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all Patent licenses, including each Patent license
referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, extensions, or renewals of any of the
items described in clauses (a) and (b); and
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2
<PAGE> 3
(d) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement of any
Patent, whether owned by or licensed to Grantor, and any
violation or breach of the conditions of any Patent license,
including any Patent or Patent license referred to in ITEM A
and ITEM B of SCHEDULE II attached hereto.
"RECEIVABLES" is defined in clause (c) of Section 2.1.
"RELATED CONTRACTS" is defined in clause (c) of Section 2.1.
"SECURED INDEBTEDNESS" is defined in Section 2.2.
"THIRD PARTY" is defined in clause (a) of Section 3.1.3.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade
styles, service marks, certification marks, collective marks,
logos, other source of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs
and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"TRADEMARK"), now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all
registrations and records thereof and all applications in
connection therewith, whether pending or in preparation for
filing, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State
thereof or any foreign country, including those referred to in
ITEM A of SCHEDULE III attached hereto;
(b) all Trademark licenses, including each Trademark
license referred to in ITEM B of SCHEDULE III attached hereto;
(c) all reissues, extensions or renewals of any of the
items described in clauses (a) and (b);
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in, clauses
(a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, including any Trademark referred to in ITEM
A and ITEM B of SCHEDULE III attached hereto, or for any
injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark
license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of Grantor (all of the foregoing being collectively called a "TRADE
SECRET"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade Secret
licenses, including
PILI SECURITY AGREEMENT
3
<PAGE> 4
each Trade Secret license referred to in SCHEDULE IV attached hereto, and
including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect in the State
of Texas.
SECTION 1.2. CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. GRANT OF SECURITY. Grantor hereby assigns and pledges to
Agent for its benefit and the benefit of each of the Lender Parties, and hereby
grants to Agent, for its benefit and the benefit of each of the Lender Parties,
a security interest in all of the following, whether now or hereafter existing
or acquired (the "COLLATERAL"):
(a) all equipment in all of its forms of Grantor,
wherever located, including all machinery, manufacturing,
distribution, selling, data processing and office equipment, assembly
systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, trade fixtures, and other tangible personal
property (other than Inventory), and all parts thereof and all
accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor (any and all of the foregoing being
the "EQUIPMENT");
(b) all inventory in all of its forms of Grantor,
wherever located, including:
(i) all goods, merchandise and other personal
property furnished or to be furnished under any contract of
service or intended for sale or lease, all consigned goods and
other items which have previously constituted Equipment but
are then currently being held for sale or lease in the
ordinary course of Grantor's business, all raw materials and
work in process therefor, finished goods thereof, and all
other materials and supplies of any kind, nature or
description used or consumed in the manufacture, production,
packing, shipping, advertising, finishing or sale thereof;
(ii) all goods in which Grantor has an interest in
mass or a joint or other interest or right of any kind
(including goods in which Grantor has an interest or right as
consignee); and
(iii) all goods which are returned to or
repossessed by Grantor;
PILI SECURITY AGREEMENT
4
<PAGE> 5
and all accessions thereto, products thereof and documents therefore
(any and all such inventory, materials, goods, accessions, products
and documents being the "INVENTORY");
(c) all accounts, contracts, contract rights, chattel
paper, documents, instruments and general intangibles of Grantor,
whether or not arising out of or in connection with the sale or lease
or other disposition of goods or the rendering of services, and all
rights of Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents and instruments (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "RECEIVABLES", and any and all such
security agreements, guaranties, leases and other contracts being the
"RELATED CONTRACTS");
(d) all Intellectual Property Collateral of Grantor;
(e) in addition to general intangibles which may be
included within Receivables or Intellectual Property Collateral, all
contracts, contract rights and general intangibles of Grantor,
including without limitation, all tax refunds, claims, causes of
action, judgments, franchises, permits, licenses, supply contracts,
purchase contracts, and agreements (collectively, "GENERAL
INTANGIBLES");
(f) all of Grantor's right, title and interest in and to
any and all depository, savings, or custodial, or other accounts
maintained by Grantor with any of the Lender Parties, all sums now or
at any time hereafter on deposit therein, credited thereto, or payable
thereon and all instruments, documents and other writings evidencing
any of the foregoing accounts (such accounts collectively referred to
herein as the "DEPOSIT ACCOUNTS");
(g) all investment property of Grantor;
(h) all books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 2.1.;
(i) all of Grantor's other property and rights of every
kind and description and interests therein; and
(j) all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in clauses (a), (b), (c), (d), (e), (f), (g), (h), and (i),
proceeds deposited from time to time in the Deposit Accounts and in
any lock boxes of Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral.
Notwithstanding the foregoing, "COLLATERAL" shall not include any General
Intangibles as to which, or other rights arising under contracts as to which,
the grant of a security interest would constitute a violation of a valid and
enforceable restriction on such grant, unless and until any required consents
shall have been obtained. Grantor agrees to use its best efforts to obtain any
such required consent.
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5
<PAGE> 6
SECTION 2.2. SECURITY FOR THE OBLIGATION. This Security Agreement
secures the payment and performance of the Obligation, including, without
limitation, all obligations now or hereafter existing under the Credit
Agreement, the Notes, this Security Agreement and each of the other Loan Papers
to which Grantor is or may become a party, whether for principal, interest,
costs, fees, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
Sections 502(b) and 506(b)) (all of the foregoing, together with all renewals,
extensions and modifications of all or any part thereof, being the "SECURED
INDEBTEDNESS").
SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Security Agreement shall create a continuing security interest in the
Collateral and shall:
(a) remain in full force and effect until payment in full
of the Secured Indebtedness and the termination of all Commitments;
(b) be binding upon Grantor, its successors, transferees
and assigns; and
(c) inure, together with the rights and remedies of Agent
hereunder, to the benefit of Agent and each other Lender Party.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer (in whole or in part) any note held by it to
any other Person or entity, and such other Person or entity shall thereupon
become vested with all the rights and benefits in respect thereof granted to
such Lender Party under any Loan Paper (including this Security Agreement), or
otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of the Credit Agreement. Upon the payment in
full of the Secured Indebtedness and the termination of all Commitments, the
security interest granted herein shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, Agent will, at
Grantor's sole expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Security
Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under
any such contracts or agreements included in the Collateral; and
(c) neither Agent nor any other Lender Party shall have
any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor
shall Agent or any other Lender Party be obligated to perform any of
the obligations or duties of Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
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6
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment and
Inventory of Grantor is located at the places specified in ITEM A of SCHEDULE I
hereto, except for Inventory in transit in the ordinary course of Grantor's
business; provided, however, that Inventory and Equipment may be moved to other
locations in accordance with clause (a) of Section 4.1.1. All of the Inventory
which is imported from a location outside the United States arrives at one of
the ports or locations specified in ITEM A of SCHEDULE I hereto. None of the
Equipment and Inventory has, within the four months preceding the date of this
Security Agreement, been located at any place other than the places specified
in ITEM A of SCHEDULE I hereto. Each location of Equipment or Inventory which
is subject to a lease, sublease, mortgage or similar instrument is described as
such in ITEM A of SCHEDULE I hereto and Grantor shall, upon the request of
Agent provide Agent with the name and address of each lessor, sublessor,
lessee, sublessee and/or mortgagee (other than Grantor) with respect to any or
all such locations. All of the lock boxes of Grantor are located at the places
specified in ITEM B of SCHEDULE I hereto. The place(s) of business and chief
executive office of Grantor and the office(s) where Grantor keeps its records
concerning the Receivables, are located at the addresses specified in ITEM C of
SCHEDULE I hereto. Except as set forth on ITEM D of SCHEDULE I hereto, Grantor
has no trade names. Grantor has not been known by any legal name different
from the one set forth on the signature page hereto. Except as previously
disclosed to Agent in writing, Grantor has not been the subject of any merger
or other corporate reorganization. If the Collateral includes any Inventory
located in the State of California, Grantor is not a "retail merchant" within
the meaning of Section 9102 of the Uniform Commercial Code - Secured
Transactions of the State of California. Grantor is not a party to any
Federal, state or local government contract.
SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. Grantor has good and
marketable title to the Collateral and Grantor is the legal and beneficial
owner of the Collateral and owns the Collateral free and clear of any Lien,
security interest, charge or encumbrance except for the security interest
created by this Security Agreement and except as permitted by the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of Agent relating to this
Security Agreement, and except as permitted by the Credit Agreement.
SECTION 3.1.3. POSSESSION AND CONTROL.
(a) The name and address of each bailee, processor,
warehouseman, consignee or other Person in possession of any of the
Inventory or Equipment (each such Person being a "THIRD PARTY") on the
date hereof, other than carriers and shippers of Inventory in transit
in the ordinary course of Grantor's business, is set forth in ITEM A
of SCHEDULE I hereto, together with the address of the location where
such Inventory or Equipment is or may be held. Except as otherwise
indicated in ITEM A of SCHEDULE I hereto, no Person (other than a
Person identified in ITEM A of SCHEDULE I thereto as being a
consignee) in possession of any of the Inventory or Equipment conducts
a business at the location of such Inventory or Equipment other than a
business in the nature of warehousing or transporting goods for
others. In the event that any Inventory is in the possession of a
Third Party, such Inventory is not evidenced by a negotiable
instrument or document.
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(b) Except as indicated in clause (a) of this Section,
Grantor has exclusive possession and control of the Equipment and
Inventory.
SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER.
Grantor has, contemporaneously herewith, delivered to Agent possession of all
originals of all negotiable documents, instruments and chattel paper currently
owned or held by Grantor (duly endorsed in blank, if requested by Agent).
SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any
Intellectual Property Collateral, other than Intellectual Property Collateral
with negligible economic value:
(a) such Intellectual Property Collateral is valid and
subsisting and has not been adjudged invalid or unenforceable, in
whole or in part;
(b) Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property
Collateral, including, without limitation, recordations of all of its
interests in the Patent Collateral and Trademark Collateral in the
United States Patent and Trademark Office and in corresponding offices
throughout the world (where appropriate), and its claims to the
Copyright Collateral in the United States Copyright Office and in
corresponding offices throughout the world (where appropriate);
(c) Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property Collateral and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted
rights of any third party; and
(d) Grantor has performed and will continue to perform
all acts and has paid and will continue to pay all required fees and
taxes to maintain each and every item of Intellectual Property
Collateral in full force and effect throughout the world, as
applicable.
SECTION 3.1.6. VALIDITY, ETC. This Security Agreement creates a
valid security interest in the Collateral, securing the payment of the Secured
Indebtedness, which security interest is a first priority security interest in
the Collateral except to the extent previously disclosed to Agent in writing,
and all filings and other actions necessary or desirable to perfect and protect
such security interest will be duly made or taken.
SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either:
(a) for the grant by Grantor of the security interest
granted hereby or for the execution, delivery and performance of this
Security Agreement by Grantor; or
(b) for the filing required for perfection of or the
exercise by Agent of its rights and remedies hereunder.
SECTION 3.1.8. COMPLIANCE WITH LAWS. Grantor is in compliance with
the requirements of all applicable laws (including, without limitation, the
provisions of the Fair Labor Standards Act), rules, regulations and orders of
every Governmental Authority, the non-compliance with which might materially
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adversely affect the business, properties, assets, operations, condition
(financial or otherwise) or prospects of Grantor or the value of the Collateral
or the worth of the Collateral as collateral security.
SECTION 3.1.9. TAXES. All taxes, assessments and other charges
levied against the Collateral have been paid in full, other than taxes,
assessments and charges not yet due and payable.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN COVENANTS. Grantor covenants and agrees that, so
long as any portion of the Secured Indebtedness shall remain unpaid, and until
the termination of the Commitments, Grantor will, unless the Required Banks
under the Credit Agreement shall otherwise consent in writing, perform the
obligations set forth in this Section.
SECTION 4.1.1. AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees
that it shall:
(a) keep all the Equipment and Inventory (other than
Inventory in transit and Inventory sold in the ordinary course of
business) at the places therefor specified in Section 3.1.1 or, upon
30 days' prior written notice to Agent, at such other places in a
jurisdiction where all representations and warranties set forth in
Article III (including Section 3.1.6) shall be true and correct, and
all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory;
(b) with respect to any Equipment or Inventory in the
possession or control of any Third Party or any of Grantor's agents,
notify such Third Party or agent of Agent's security interest in such
Equipment or Inventory and, upon Agent's request following the
occurrence and during the continuance of an Event of Default, direct
such Third Party or agent to hold all such Equipment or Inventory for
Agent's account and subject to Agent's instructions;
(c) cause the Equipment to be maintained and preserved in
the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's
manual; and forthwith, or in the case of any material loss or damage
to any of the Equipment, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are
necessary or desirable to such end; and promptly furnish to Agent a
statement respecting any loss or damage to any of the Equipment within
ten (10) business days after Grantor obtains knowledge of any such
loss or damage; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with Generally Accepted
Accounting Principles have been set aside.
SECTION 4.1.2. AS TO RECEIVABLES. Grantor shall keep its place(s) of
business and chief executive office and the office(s) where it keeps its
records concerning the Receivables, and all originals of all chattel
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paper which evidence Receivables, located at the addresses set forth in ITEM C
of SCHEDULE I hereto, or, upon 30 days' prior written notice to Agent at such
other locations in a jurisdiction where all actions required by the first
sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice to
Agent; hold and preserve such records and chattel paper; and permit
representatives of Agent, at any time during normal business hours to inspect
and make abstracts from such records and chattel paper.
SECTION 4.1.3. AS TO ALL COLLATERAL.
(a) Grantor shall not permit the ownership of any of the
Collateral, or any legal or equitable interest therein, to become
vested in any other person or entity unless otherwise permitted under
or pursuant to the terms of the Credit Agreement; provided, however,
until such time as Agent shall notify Grantor of the revocation of
such power and authority Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the
contracts of service any of the Inventory and Equipment normally held
by Grantor or any Third Party for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in
process or materials normally held by Grantor or any Third Party for
such purpose, and use and consume, in the ordinary course of its
business, any raw materials, work in process or materials normally
held by Grantor for such purpose, (ii) will, at its own expense,
endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with
respect to such collection as Agent may reasonably request or, in the
absence of such request, as Grantor may deem advisable, and (iii) may
grant, in the ordinary course of business, to any party obligated on
any of the Collateral, 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 Collateral. Agent however, may, at any time after
the occurrence of an Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the
Secured Indebtedness, notify any parties obligated on any of the
Collateral to make payment to Agent of any amounts due or to become
due thereunder and enforce collection of any of the Collateral 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. Upon the written request of Agent after the
occurrence of an Event of Default, Grantor will, at its own expense,
within five (5) days after receipt of such request, notify any parties
obligated on any of the Collateral to make payment to Agent of any
amounts due or to become due thereunder.
(b) Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Agent representing any
payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, and Grantor shall not permit any
of its licensees to, unless Grantor shall reasonably and in good faith
determine (and notice of such determination shall have
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been delivered to Agent) that any of the Patent Collateral and/or
Trademark Collateral is of negligible economic value to Grantor:
(i) fail to continue to use any of the Trademark
Collateral in order to maintain all of the Trademark
Collateral in full force free from any claim of abandonment
for non-use;
(ii) fail to employ all of the Patent Collateral
and Trademark Collateral registered with any Federal or state
or foreign authority with an appropriate notice of such
registration;
(iii) use any of the Trademark Collateral
registered with any Federal or state or foreign authority
except for the uses for which registration or application for
registration of all of the Trademark Collateral has been made;
or
(iv) do or permit any act or knowingly omit to do
any act whereby any of the Patent Collateral or Trademark
Collateral may lapse or become invalid or unenforceable.
(b) Grantor shall not, unless Grantor shall either
reasonably and in good faith determine (and notice of such
determination shall have been delivered to Agent) that any of the
Copyright Collateral or any of the Trade Secrets Collateral is of
negligible economic value to Grantor, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral
or any of the Trade Secrets Collateral may lapse or become invalid or
the rights thereto become unenforceable or be placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(c) Grantor shall notify Agent within ten (10) business
days after it receives notice that any application or registration
relating to any material item of the Intellectual Property Collateral
may become abandoned or dedicated to the public or placed in the
public domain or invalid or unenforceable, or of any adverse
determination (including the institution of, or any such determination
or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign
counterpart thereof or any court) regarding Grantor's ownership of any
of the Intellectual Property Collateral, its right to register the
same or to keep and maintain and enforce the same.
(d) In no event shall Grantor or any of its agents,
employees, designees or licensees file an application for the
registration of any Intellectual Property Collateral with the United
States Patent and Trademark Office, the United States Copyright
Office, or any similar office or agency in any other country or any
political subdivision thereof, unless it informs Agent of all such
additional filings within 30 days thereafter (or at any other time
upon the request of Agent), and upon written request of Agent executes
and delivers any and all agreements, instruments, documents and papers
as Agent may reasonably request to evidence Agent's security interests
in such Intellectual Property Collateral and the goodwill and general
intangibles of Grantor relating thereto or represented thereby.
(e) Grantor shall take all necessary steps, including in
any proceeding before the United States Patent and Trademark Office,
the United States Copyright Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain
and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, the
Intellectual Property Collateral, including the filing of applications
for renewal,
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affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees and
taxes (except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b) and
(c).
(f) Grantor shall promptly execute and deliver to Agent
any documents required to acknowledge or register or perfect Agent's
interest in any part of the Intellectual Property Collateral.
SECTION 4.1.5. INSURANCE. Grantor will maintain, and will cause each
of its Subsidiaries to maintain, insurance with respect to the Equipment and
Inventory with companies reasonably acceptable to Agent. Such insurance shall
be in an amount not less than the fair market value of the Equipment and
Inventory and shall be against such casualties, with such deductible amounts as
Agent shall reasonably approve. All insurance policies shall be written for
the benefit of Grantor and Agent, as their interest may appear, payable to
Agent as loss payee, or in other forms satisfactory to Agent, and such policies
or certificates evidencing the same shall be furnished to Agent. All policies
of insurance shall provide for written notice to Agent at least thirty (30)
days prior to cancellation.
SECTION 4.1.6. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
Indebtedness of any Person or entity, except for the security interest
created by this Security Agreement and except as permitted by the
Credit Agreement.
SECTION 4.1.7. FURTHER ASSURANCES, ETC. Grantor agrees that, from
time to time at its own expense, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or desirable, or that Agent may reasonably request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce their
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Grantor will
(a) upon the written request of Agent, mark conspicuously
each document included in the Inventory, each chattel paper included
in the Receivables and each Related Contract and each of its records
pertaining to the Collateral with a legend, in form and substance
satisfactory to Agent indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest
granted hereby;
(b) upon the written request of Agent, any Receivable
shall be evidenced by a promissory note or other instrument,
negotiable document or chattel paper, and Grantor shall deliver and
pledge to Agent hereunder such promissory note, instrument, negotiable
document or chattel paper, duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent;
(c) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or
notices (including, without limitation, any assignment of claim form
under or pursuant to the federal assignment of claims statute, 31
U.S.C. Section 3726, any successor or
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amended version thereof or any regulation promulgated under or
pursuant to any version thereof), as may be reasonably necessary or
desirable, or as Agent may reasonably request, in order to perfect and
preserve the security interests and other rights granted or purported
to be granted to Agent hereby;
(d) furnish to Agent, from time to time upon Agent's
written request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with
the Collateral as Agent may reasonably request, all in reasonable
detail; and
(e) furnish to Agent on a reasonable good faith efforts
basis such landlord estoppel and waiver agreements for properties
leased by Grantor (or properties where Grantor maintains inventory or
equipment) as shall be requested by Agent (all in form and substance
acceptable to Agent).
With respect to the foregoing and the grant of the security interests
hereunder, Grantor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
AGENT
SECTION 5.1. AGENT APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Agent as Grantor's attorney-in-fact, with full authority
in the place and stead of Grantor and in the name of Grantor or otherwise, from
time to time in Agent's discretion, to take any action and to execute any
instruments which Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) above;
(c) to file any claims or take any action or institute
any proceedings which Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor
hereunder (including all obligations of Grantor pursuant to Section
4.1.7).
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
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SECTION 5.2. AGENT MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Agent may perform, or cause performance of, such
agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable by Grantor pursuant to Section 6.3.
SECTION 5.3. AGENT HAS NO DUTY. In addition to, and not in limitation
of, Section 2.4, the powers conferred on Agent hereunder are solely to protect
their interests (on behalf of the Lender Parties) in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Agent shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as Grantor reasonably requests in writing at
times other than upon the occurrence and during the continuance of any Event of
Default, but failure of Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may:
(i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Agent,
forthwith, assemble all or part of the Collateral as directed
by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to all
parties;
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Agent's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Agent may deem commercially
reasonable. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice
to Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. Agent shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned; and
(iii) in its own name or the name of Grantor, at
any time, to notify any account debtor or obligor or any party
obligated on any of the Collateral (including, but not limited
to
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the Receivables, Related Contracts, and General Intangibles)
to make all payments due or to become due thereon directly to
Agent or such other person or officer as Agent may require,
whereupon the power and authority of Grantor to collect the
same in the ordinary course of its business shall be deemed to
be immediately revoked and terminated. With or without such
general notification, Agent may take or bring in Grantor's
name or that of the Agent all steps, actions, suits or
proceedings deemed by Agent reasonably necessary or desirable
to effect possession or collection of the Collateral,
including sums due or paid thereon, may complete any contract
or agreement of Grantor in any way related to any of the
Collateral, may make allowances or adjustments related to the
Collateral, may compromise any claims related to the
Collateral, may issue credit in its own name or the name of
Grantor, may remove from Grantor's premises all documents,
instruments, records, files or other items relating to the
Collateral. Regardless of any provision hereof, however,
Agent shall never be liable for its failure to collect or for
its failure to exercise diligence in the collection,
possession, or any transaction concerning, all or part of the
Collateral or sums due or paid thereon, nor shall it be under
any obligation whatsoever to anyone by virtue of this Security
Agreement, except to account for the funds that it shall
actually receive hereunder.
Each account debtor and obligor making payment to
Agent hereunder shall be fully protected in relying on the
written statement of Agent that it then holds a security
interest which entitles it to receive such payments, and the
receipt of Agent for such payment shall be full acquittance
therefor to the one making such payment.
Issuance by Agent of a receipt to any person, firm,
corporation or other entity obligated to pay any amounts to
Grantor shall be a full and complete release, discharge and
acquittance to such person, firm, corporation or other entity
to the extent of any amount so paid to Agent. Agent is hereby
authorized and empowered on behalf of the Grantor to endorse
the name of Grantor upon any check, draft, instrument,
receipt, instruction or other document or items, including,
but not limited to, all items evidencing payment upon any
indebtedness of any person, firm, corporation or other entity
to Grantor coming into Agent's possession, and to receive and
apply the proceeds therefrom in accordance with the terms
hereof. Agent is hereby granted an irrevocable power of
attorney, which is coupled with an interest, to execute all
checks, drafts, receipts, instruments, instructions or other
documents, agreements or items on behalf of Grantor, after the
occurrence of an Event of Default, as shall be deemed by Agent
to be necessary or advisable, in the sole discretion of Agent,
to protect their security interests in the Collateral or the
repayment of the indebtedness secured hereby, and Agent shall
not incur any liability in connection with or arising from its
exercise of such power of attorney, except in the event of
Agent's willful misconduct or gross negligence.
(b) In addition to and without limiting the rights of
Agent under Section 6.2. below, all cash proceeds received by Agent in
respect of any sale of, collection from, or other realization upon all
or any part of the Collateral may, in the discretion of Agent, be held
by Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to Agent pursuant to
Section 6.2) in whole or in part by Agent for the benefit of the
Lender Parties against, all or any part of the Secured Indebtedness in
such order as provided in the Credit Agreement or as Agent shall
elect. Any surplus of such cash or cash proceeds held by Agent and
remaining after payment in full of all the Secured Indebtedness shall
be paid over to Grantor or to whomsoever may be lawfully entitled to
receive such surplus.
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SECTION 6.2. COLLATERAL ACCOUNT.
(a) If an Event of Default shall have occurred and be
continuing, upon written notice by Agent to Grantor pursuant to this
clause, all proceeds of Collateral received by Grantor shall be
delivered in kind to Agent for deposit to a deposit account (the
"COLLATERAL ACCOUNT") of Grantor maintained with Agent, and Grantor
shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for
the benefit of Agent until delivery thereof is made to Agent. No
funds other than proceeds of Collateral will be deposited in the
Collateral Account.
(b) Agent shall have the right to apply any amount in the
Collateral Account to the payment of any of the Secured Indebtedness
that is due and payable or payable upon demand, or to the payment of
any of the Secured Indebtedness at any time that an Event of Default
shall have occurred and be continuing. Agent may at any time transfer
to Grantor's general demand deposit accounts any or all of the
collected funds in the Collateral Account; provided, however, that any
such transfer shall not be deemed to be a waiver or modification of
any of Agent's rights under this Section.
SECTION 6.3. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Agent from and against
any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including, without limitation,
enforcement of this Security Agreement), except claims, losses or
liabilities resulting from Agent's gross negligence or willful
misconduct.
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART
ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH INDEMNIFIED
PERSON.
(b) Grantor will upon demand pay to Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Agent may incur in connection with:
(i) the administration of this Security
Agreement;
(ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization
upon, any of the Collateral;
(iii) the exercise or enforcement of any of the
rights of Agent or the Lender Parties hereunder; or
(iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 6.4. RIGHTS CUMULATIVE. The rights, titles, interests, liens
and securities of Agent hereunder shall be cumulative of all of the securities,
rights, titles, interests or liens which Agent may now or at any time hereafter
hold securing the payment of the Secured Indebtedness, or any part thereof.
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SECTION 6.5. LOUISIANA REMEDIES. With respect to Collateral located
in the State of Louisiana, Agent will be entitled to foreclose under this
Security Agreement under ordinary or executory process procedures, and to cause
the Collateral to be immediately seized, wherever found, and sold with or
without appraisal, in regular session of court or in vacation, in accordance
with applicable Louisiana law, without the necessity of further demanding
payment from Grantor, notifying Grantor, or placing Grantor in default. For
purposes of foreclosure under Louisiana executory process procedures, Grantor
confesses judgment and acknowledges to be indebted to the Lender Parties up to
the full amount of the Secured Indebtedness. To the extent permitted under
applicable Louisiana law, Grantor additionally waives: (a) the benefit of
appraisal as provided for under 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 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 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. Grantor
further acknowledges that any declaration of fact made by authentic act before
a Notary Public and two witnesses by a person declaring that such facts are
within his or her knowledge shall constitute authentic evidence of such facts
for purposes of foreclosure under applicable Louisiana law. Grantor further
agrees that Agent may appoint a keeper of the Collateral in the event of
foreclosure.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. LOAN PAPER. This Security Agreement is a Loan Paper
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing or by facsimile and,
if to Grantor, mailed, delivered or transmitted to it at the address or
facsimile number set forth below its signature hereto, if to Agent, mailed,
delivered or transmitted to it at the address or facsimile number of Agent
specified in the Credit Agreement, or as to either party at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by prepaid courier service,
shall be deemed given when received; and all such notices and other
communications, if transmitted by facsimile, shall be deemed given when
transmitted (upon receipt of electronic confirmation of transmission).
SECTION 7.4. SECTION CAPTIONS. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
PILI SECURITY AGREEMENT
17
<PAGE> 18
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
SECTION 7.6. LIMITATION. Regardless of any provisions contained in
this Security Agreement, the Credit Agreement, the Notes, or any other
evidences of the Secured Indebtedness, or other instruments executed or
delivered in connection therewith, neither Agent nor any Lender Party shall
ever be entitled to receive, collect or apply, as interest on the Secured
Indebtedness, any amount in excess of the highest lawful rate and, in the event
that Agent or any Lender Party ever receives, collects or applies, as interest,
any such excess, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance of the Secured Indebtedness,
and if the principal balance of the Secured Indebtedness is paid in full, any
remaining excess shall be forthwith paid to Grantor. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, Grantor, Agent, and the Lender Parties shall, to the
maximum extent permitted under applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Credit Agreement and
the Notes so that the interest rate is uniform throughout the entire term of
the Credit Agreement and the Notes.
SECTION 7.7 OBLIGATIONS ABSOLUTE. All rights and remedies of the
Agent hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit
Agreement or any of the other Loan Papers or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
any or all of the Obligation, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement or any of the
Loan Papers;
(c) any exchange, release, or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to any
departure from any guaranty, for all or any of the Secured
Indebtedness; or
(d) any other circumstance (other than payment in full of
the Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Grantor.
SECTION 7.8. SUCCESSORS AND ASSIGNS. This Security Agreement is
binding upon and shall inure to the benefit of Grantor, Agent, and the Lender
Parties, their respective heirs, executors, representatives, administrators,
successors and assigns; provided, however, that Grantor may not, without the
prior written consent of Agent, assign any rights, powers, duties or
obligations hereunder.
SECTION 7.9. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
PILI SECURITY AGREEMENT
18
<PAGE> 19
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS.
SECTION 7.10. FINAL AGREEMENT. THIS SECURITY AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
GRANTOR:
PACKAGED ICE LEASING, INC., a Nevada
corporation
By:
------------------------------------------
James F. Stuart, Chief Executive Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Facsimile No.: (713) 464-9384
PILI SECURITY AGREEMENT
19
<PAGE> 20
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM A. LOCATION OF EQUIPMENT AND INVENTORY
SEE ATTACHED LIST
PILI SECURITY AGREEMENT
<PAGE> 21
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM B. LOCATION OF LOCK BOXES
NONE
PILI SECURITY AGREEMENT
<PAGE> 22
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM C. LOCATION OF RECORDS CONCERNING RECEIVABLES
8572 Katy Freeway, Suite 101
Houston, Texas 77024
PILI SECURITY AGREEMENT
<PAGE> 23
SCHEDULE I
TO
SECURITY AGREEMENT
ITEM D. TRADE NAMES
Packaged Ice Leasing, Inc.
PILI SECURITY AGREEMENT
<PAGE> 24
SCHEDULE II
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED PATENTS
Country Patent Registration No. Registration Date
- ------- ------ ---------------- -----------------
NONE
PENDING PATENT APPLICATIONS
Country Patent Serial No. Filing Date
- ------- ------ ---------- -----------
NONE
PATENT APPLICATIONS IN PREPARATION
Country Patent Docket No. Expected Filing Process/Machine
- ------- ------ ---------- Date ---------------
----
NONE
ITEM B. PATENT LICENSES
Country or Patent Licensor Licensee Effective Date Expiration
Territory ------ -------- -------- -------------- Date
- --------- ----
NONE
PILI SECURITY AGREEMENT
<PAGE> 25
SCHEDULE III
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED TRADEMARKS
Country Trademark Registration No. Registration Date
- ------- --------- ---------------- -----------------
NONE
PENDING TRADEMARK APPLICATIONS
Country Trademark Serial No. Filing Date
- ------- --------- ---------- -----------
NONE
TRADEMARK APPLICATIONS IN PREPARATION
Country Trademark Docket No. Expected Filing Products/Services
- ------- --------- ---------- Date -----------------
----
NONE
ITEM B. TRADEMARK LICENSES
Country or Trademark Licensor Licensee Effective Date Expiration
Territory --------- -------- -------- -------------- Date
- --------- ----
NONE
PILI SECURITY AGREEMENT
<PAGE> 26
SCHEDULE IV
TO
SECURITY AGREEMENT
Intellectual Property Licenses
Trade Secret and Know-How Licenses
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory(1) -------- -------- -------------- Date --------------
- --------- ----
NONE
- -----------------------
(1) List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
PILI SECURITY AGREEMENT
<PAGE> 27
SCHEDULE V
TO
SECURITY AGREEMENT
ITEM A.
REGISTERED COPYRIGHTS/MASK WORKS
Country Registration No. Registration Date Author(s) Title
- ------- ---------------- ----------------- --------- -----
NONE
COPYRIGHTS/MASK WORKS PENDING REGISTRATION APPLICATIONS
Country Docket No. Filing Date Author(s) Title
- ------- ---------- ----------- --------- -----
NONE
COPYRIGHTS/MASK WORKS APPLICATIONS IN PREPARATION
Country Docket No. Expected Filing Author(s) Title
- ------- ---------- Date --------- -----
NONE
ITEM B. COPYRIGHT/MASK WORKS LICENSES
Country or Licensor Licensee Effective Date Expiration Subject Matter
Territory -------- -------- -------------- Date --------------
- --------- ----
NONE
PILI SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.23
RECORDED AT THE REQUEST OF AND
WHEN RECORDED MAIL TO:
The Frost National Bank
P.O. Box 1600
San Antonio, TX 78296-1400
Attention: Pat Mascorro
Loan Department
Location RB-2
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
------------------------
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND
FIXTURE FILING(this "Deed of Trust") is made as of the 15th day of
September, 1997, by and between SOUTHWESTERN ICE, INC., a Texas corporation, a
wholly owned subsidiary of Packaged Ice, Inc., a Texas corporation
("Trustor"), whose mailing address is 8572 Katy Freeway, Suite 101, Houston,
Texas 77024, in favor of Jimmy R. Locke, of Bexar County, Texas, or any
successor or substitute appointed and designated as herein provided from
time to time acting hereunder, as trustee ("Trustee"), whose mailing address
is The Frost National Bank, P.O. Box 1600, San Antonio, TX 78296- 1400, for
the benefit of THE FROST NATIONAL BANK, a national banking association, agent
for each of the banks under the Credit Agreement (as defined below), as
beneficiary ("Beneficiary"), whose mailing address is P.O. Box 1600, San
Antonio, Texas 78296.
ARTICLE 1
BACKGROUND
1.01 Credit Agreement. Beneficiary has made, or agreed to make,
various loans to Packaged Ice, Inc., a Texas corporation (the "Borrower") as
more fully described in the Credit Agreement, of even date herewith, by and
between Borrower, Beneficiary, and certain Banks named therein, as amended,
supplemented, modified, restated or extended from time to time (the "Credit
Agreement"). All undefined capitalized terms used herein shall have the
meaning given them in the Credit Agreement.
1.02 Notes. Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrower payable to the order
of any Bank, evidencing loans advanced to Borrower under the Credit Agreement,
in an aggregate principal face amount of $20,000,000, bearing interest as
therein provided, containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and finally maturing on April 15,
2003, together with any renewals, increases, extensions, restatements, or
modifications thereof (collectively the "Note").
1.03 Security Documents. The loans described in the Credit
Agreement, including, but not limited to, the Revolving Credit Loans, are
secured by the collateral described in, among other things: (a) this Deed
of Trust; and (b) the Security Agreement, of even date herewith, by and between
Trustor, as
SWI ARIZONA DEED OF TRUST
<PAGE> 2
debtor, and Beneficiary, as secured party (the "Security Agreement"). The
loans described in the Credit Agreement are also secured by other collateral
as described in the Credit Agreement.
1.04 Loan Documents. The Credit Agreement, Revolving Credit
Loan, the Note, this Deed of Trust, the Security Agreement, and assignments,
agreements, documents or instruments executed by or on behalf of Trustor
with respect to the foregoing documents or the transactions contemplated
thereby, each as may hereafter be modified, amended, extended, renewed or
replaced, shall be collectively referred to herein as the "Loan Documents."
ARTICLE 2
GRANT IN TRUST; SECURITY INTEREST
The Secured Obligations as defined in Article 3 below shall be
secured by the Real Property Collateral described in Section 2.01 below
and the Personal Property Collateral described in Section 2.02 below. The
Real Property Collateral and the Personal Property Collateral are
hereinafter collectively referred to as the "Property".
2.01 Real Property Collateral. For the purpose of securing payment
and performance of the Secured Obligations, Trustor hereby irrevocably and
unconditionally grants, conveys, transfers and assigns to Trustee, in
trust for the benefit of Beneficiary, with power of sale, all rights, title,
interest, estates, powers and privileges of Trustor in or to all of the
following, now or hereafter acquired (the "Real Property Collateral"):
A. The real property situated in Maricopa County,
Arizona described on Exhibit A attached hereto and incorporated herein by
this reference (the "Land").
B. The interest that Trustor possesses in the
buildings, structures and improvements now or hereinafter located or
constructed on the Land, together with all water and water rights (whether
riparian, appropriative, or otherwise, and whether or not appurtenant),
pumps and pumping stations used in connection therewith and all shares of
stock evidencing the same, all machinery, equipment, appliances, fixtures
and other property, including, but not limited to, all storage tanks and
pipe lines, all gas, electric, heating, cooling air conditioning,
filtration, hot water, refrigeration, plumbing and lighting fixtures and
equipment, all floor coverings, all wells, pumps, pipes, motors, and
engines and pumping apparatus and equipment, which have been or may later be
attached or affixed in any manner to any building, structure or improvement
now or hereafter located or later to be constructed on the Land
(collectively, the "Improvements");
C. All the rights, rights of way, easements, licenses,
profits, privileges, tenements, hereditaments and appurtenances, now or
hereafter in any way appertaining and belonging to or used in connection
with the Land, the Improvements, and any part thereof or as a means of access
thereto, including, but not limited to, any claim at law or in equity, and
any after acquired title and reversion in or to each and every part of all
streets, roads, highways and alleys adjacent to and adjoining the same;
D. All leases, subleases, licenses and concessions or
other agreements relating to, or affecting the use, occupancy or maintenance
of, or services provided to, the Property, now or hereafter affecting the
Property or any portion thereof (collectively, the "Ancillary Rights").
2 SWI ARIZONA DEED OF TRUST
<PAGE> 3
E. Any strips or gores adjacent, used in connection
with or pertaining, to the Land or the Improvements.
F. All rentals, earnings, income, receipts,
royalties, revenues, issues and profits (the "Rents") which, after the date
hereof, and while Secured Obligations remain unpaid, may accrue from the
Land, the Improvements or any part of the foregoing, subject, however, to
the right, power and authority conferred upon Trustor to collect and apply
such proceeds set forth herein; and
2.02 Personal Property Collateral. For the purpose of securing
payment and performance of the Secured Obligations, Trustor grants to
Beneficiary a security interest in all rights, title, interest, estates,
powers and privileges of Trustor in or to all of the following, now or
hereafter acquired, to the extent constituting personal property (the
"Personal Property Collateral"):
A. The Improvements;
B. All "goods" (as defined in Chapter 9 of the Uniform
Commercial Code of the State of Arizona (Title 47, Arizona Revised Statutes
("A.R.S.")) or any successor or similar statute (the "UCC"));
C. All (i) plans and specifications for the
Improvements, (ii) Trustor's rights, but not liability for any breach by
Trustor, under all commitments (including any commitment for financing to pay
any of the Secured Obligations (hereafter defined), insurance policies and
other contracts and general intangibles directly relating to the development
or operation of the Real Property Collateral (including, but not limited to
trademarks, trade names and symbols); (iii) deposits (including, but not
limited to Trustor's rights in tenants' security deposits, deposits with
respect to utility services to the Real Property Collateral, and any
deposits or reserves hereunder or under any other Loan Document, taxes,
insurance or otherwise), money, accounts, instruments, documents, notes and
chattel paper arising from or by virtue of any transactions related to the
Real Property Collateral; (iv) permits, licenses, franchises,
certificates, development rights, commitments and rights for utilities,
and other rights and privileges obtained in connection with the Real
Property Collateral; (v) leases, rents, royalties, bonuses, issues,
profits, revenues and other benefits of the Real Property Collateral; (vi)
oil, gas and other hydrocarbons and other minerals produced from or
allocated to the Land and all products processed or obtained therefrom, and
the proceeds thereof; and (vii) engineering, accounting, title, legal, and
other technical or business data concerning the Real Property Collateral
which are in the possession of Trustor or in which Trustor can otherwise
grant a security interest;
D. All rights of Trustor under any policy or policies
of hazard or liability insurance relating to the Property and any and all
riders, amendments, extensions, renewals, supplements, or extensions thereof,
and all proceeds, loss payments, and premium refunds which may become
payable with respect to such insurance policies;
E. All construction, service, engineering, consulting,
architectural, and other similar contracts of any nature (including, but not
limited to, those of any general contractors and subcontractors) as such may
be modified, amended, or supplemented from time to time, concerning the
design, construction, management, operation, occupancy, use, and/or disposition
of any or all of the Real Property Collateral;
F. All blueprints, architectural drawings, plans,
specifications, soil tests, feasibility studies, appraisals, engineering
reports, and similar materials owned by Trustor relating to any or all of the
Real Property Collateral;
3 SWI ARIZONA DEED OF TRUST
<PAGE> 4
G. All payment and performance bonds or guaranties and
any and all modifications and extensions thereof relating to the Real
Property Collateral;
H. All assignable governmental permissions,
environmental clearances, rights, licenses, permits, approvals, consents,
and materials prepared for filing with any governmental agency, as are
necessary for the development, design, commencement, continuation, completion,
operation, occupancy, use, and disposition of any or all of the Real Property
Collateral;
I. All sales contracts and proceeds, whether cash,
promissory notes, contracts rights or otherwise, escrow agreements, broker's
agreements, instruments, notes, and agreements for sale concerning the sale
or disposition of any or all of the Real Property Collateral;
J. All rights under, and all proceeds of, any
commitment by any lender to extend financing to Trustor relating to the Real
Property Collateral;
K. All shares of water stock relating to the Real
Property Collateral;
L. All of the outstanding warranties and guaranties
from manufacturers, vendors, and contractors relating to the Real Property
Collateral;
M. All prepaid expenses, all deposits made with or
other security given to utility companies by Trustor with respect to the
Real Property Collateral and all advance payments of insurance premiums
made by Trustor and all claims or demands relating thereto;
N. All deposits relating to the construction,
design, development, operation, occupancy, use and disposition of any
portion of or all of the Real Property Collateral;
O. All proceeds and claims arising on account of any
damage to or taking of the Real Property Collateral or any part thereof, and
all causes of action and recoveries for any loss or diminution in the value
of the Real Property Collateral;
P. All judgments, awards of damages, royalties and
revenue of every kind, nature and description whatsoever that Trustor may be
entitled to receive from any person or entity owning or having or hereafter
acquiring a right to the oil, gas or mineral rights and reservations of
the Real Property Collateral; and
Q. All proceeds, whether cash, promissory notes, and
other property, real or personal or otherwise, resulting from the sale or
other disposition of all or any part of the foregoing whether now or hereafter
existing.
4 SWI ARIZONA DEED OF TRUST
<PAGE> 5
ARTICLE 3
SECURED OBLIGATIONS
Trustor has granted, conveyed, transferred and assigned its
interest in the Property in Article 2 above for the purpose of securing the
following obligations (collectively, the "SECURED OBLIGATION"):
3.01 Payment and performance of all obligations of
Trustor under the terms of the Credit Agreement (including, but not limited
to, the Revolving Credit Loan), together with all extensions,
modifications, substitutions or renewals thereof or other advances made
thereunder;
3.02 Payment and performance of all obligations of
Trustor under the terms of the Revolving Credit Loan and the Note, and
all other notes given in substitution therefor, together with all
extensions, modifications, supplement, increase, substitutions, extensions,
or renewals thereof or other advances made thereunder, in whole or in part
(such other Banks, or the subsequent holders at the time in question of the
Note or any of the Secured Obligations being collectively herein called
"HOLDERS" and individually a "HOLDER";
3.03 All indebtedness and other obligations owed by
Trustor (or any of them) to any Holder now or hereafter incurred or
arising pursuant to or permitted by the provisions of the Notes, this Deed
of Trust, or any other document now or hereafter evidencing, governing,
guaranteeing, securing, or otherwise executed in connection with the loans
evidenced by the Notes, including, but not limited to any loan or credit
agreement, tri-party financing agreement or other agreement between Trustor
(or any of them) and Holders, or among Trustor (or any of them), Holders
and any other party or parties, pertaining to the repayment or use of the
proceeds of the loan evidenced by the Note or any of the Loan Documents.
3.04 All other loans and future advances made by any
Holder to any Trustor and/or Borrower (or any of them) and all other
debts, obligations and liabilities of Trustor of every kind and character
now or hereafter existing in favor of any Holder, and arising under the
Credit Agreement, the Note, or any of the other Loan Documents, and whether
direct or indirect, primary or secondary, joint or several, fixed or
contingent, secured or unsecured, and whether originally payable to such
Holder or to a third party and subsequently acquired by such Holder, it being
contemplated that Trustor may hereafter become indebted to one or more Holders
for such other debts, obligations and liabilities arising from the Credit
Agreement, the Note, or any of the other Loan Documents; provided, however,
and notwithstanding the foregoing provisions of this Section 3.04, this Deed
of Trust shall not secure any such other loan, advance, debt, obligation
or liability with respect to which any such Holder is by applicable law
prohibited from obtaining a lien on real estate nor shall this Section 3.04
operate or be effective to constitute or require any assumption or payment by
any person, in any way, of any debt of any other person to the extent
that the same would violate or exceed the limit provided in any applicable
usury or other law.
3.05 Payment and performance of every obligation,
covenant and agreement of Trustor contained in this Deed of Trust,
together with all extensions, modifications, substitutions or renewals
hereof;
3.06 Payment and performance of every obligation,
covenant and agreement of Trustor contained in each of the other Loan
Documents, together with all extensions, modifications, substitutions or
renewals thereof or other advances made thereunder; and
5 SWI ARIZONA DEED OF TRUST
<PAGE> 6
3.07 Payment and performance of all other obligations
and liabilities of Trustor to Beneficiary, whether now existing or
hereafter incurred or created, whether voluntary or involuntary, whether due
or not due, whether absolute or contingent, or whether incurred directly or
acquired by Beneficiary by assignment or otherwise.
THE OBLIGATIONS SECURED BY THIS DEED OF TRUST MAY INCLUDE INTEREST AT A
VARIABLE RATE. SOME OF THE OBLIGATIONS SECURED BY THIS DEED OF TRUST
INCLUDE A SERIES OF ADVANCES THAT WILL BE OF A REVOLVING NATURE THAT MAY BE
MADE, REPAID AND REMADE FROM TIME TO TIME, EVEN IF THE UNPAID BALANCE OWED ON
SUCH OBLIGATION HAS PREVIOUSLY BEEN REDUCED TO ZERO.
ARTICLE 4
COVENANTS AND AGREEMENTS OF TRUSTOR
4.01 Payment of Secured Obligations. Trustor shall pay when due
the principal, interest and all other amounts due to Beneficiary as provided
in the Note or the other Loan Documents.
4.02 Maintenance, Repair, Alterations. Trustor: (a) shall
maintain, keep and preserve the Property in good condition and repair; (b)
shall not remove, demolish or substantially alter any of the Improvements
(other than (i) repairs in the ordinary course of business of a
non-structural nature which serve to preserve or increase the value of the
Property and (ii) alterations that are required by law), in whole or in part,
without the prior written consent of Beneficiary; (c) shall complete promptly
and in a good and workmanlike manner any Improvements which may be now or
hereafter constructed on the Property and promptly restore (unless
expressly provided to the contrary in any Loan Document) in like manner
any Improvements which may be damaged or destroyed thereon from any cause
whatsoever, and pay when due all claims for labor performed and materials
furnished therefor, whether or not insurance or other proceeds are
available for such restoration; (d) shall comply with all laws, ordinances,
rules, regulations, covenants, conditions and restrictions now or hereafter
affecting the Property or any part thereof or requiring any alteration or
improvement to be made thereon or thereto; (e) shall not commit, suffer or
permit any act to be done in, upon or to the Property or any part thereof in
violation of any law, ordinance, rule, regulation or order; (f) shall not
commit or permit any waste or deterioration of the Property; (g) shall keep
and maintain grounds, sidewalks, roads, parking and landscape areas located on
or abutting the Land in good and neat order and repair; (h) will not take (or
fail to take) any action, which if taken (or not so taken) would increase in
any way the risk of fire or other hazard occurring to or affecting the
Property or otherwise would impair the security of Beneficiary in the
Property; (i) shall not abandon the Property or any portion thereof or leave
the Property unprotected, unguarded, vacant or deserted for a period of time
greater than thirty (30) days; (j) shall not initiate, join in or consent
to any change in any zoning ordinance, general plan, specific plan,
private restrictive covenant or other public or private restriction limiting
the uses which may be made of the Property; (k) shall secure and maintain in
full force and effect all permits necessary for the use, occupancy and
operation of the Property; (l) except as permitted in the Credit Agreement,
shall not cause or permit any fixture or any article of Personal Property
Collateral to be removed from the Property without the prior written consent
of Beneficiary unless the same shall have been replaced in the ordinary
course of business by substantially equivalent property; (m) shall submit to
Beneficiary a duplicate set of plans and specifications, which must be
approved or waived by Beneficiary, before any material improvements, repairs
or alterations are begun which affect the Property; (o) except as otherwise
prohibited or restricted by any of the Loan Documents, shall do any and all
other acts which may be reasonably necessary to protect and preserve the
value of the Property and the rights of Trustee and Beneficiary with respect
thereto.
6 SWI ARIZONA DEED OF TRUST
<PAGE> 7
4.03 Taxes and Other Impositions. Trustor will pay, or cause to
be paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Property or the ownership, use, occupancy or
enjoyment of any portion thereof, or any utility service thereto, as the
same become due and payable, including, but not limited to all ad valorem
taxes assessed against the Property or any part thereof, except for any
such taxes or charges being contested in good faith and by proper
proceedings for which adequate reserves in accordance with generally
accepted accounting principles have been taken, and shall deliver promptly
to Beneficiary such evidence of the payment thereof as Beneficiary may
reasonably required.
4.04 Insurance. Trustor shall obtain and maintain at Trustor's
sole expense: (1) all-risk insurance with respect to all insurable
Property, against loss or damage by fire, lighting, windstorm, explosion,
hail, tornado and such hazards as are presently included in so-called "all
risk" coverage and against such other insurable hazards as Beneficiary may
require, in an amount not less than 100% of the full replacement cost,
including the cost of debris removal, without deduction for depreciation and
sufficient to prevent Trustor and Beneficiary from becoming a coinsurer,
such insurance to be in Builder's Risk (non- reporting) form during and
with respect to any construction on the Land; (2) if and to the extent any
portion of the Land is in a special flood hazard area, a flood insurance
policy in an amount equal to the lesser of the principal face amount of
the Notes or the maximum amount available; (3) commercial general public
liability insurance, on an "occurrence" basis, for the benefit of Trustor and
Beneficiary as named insured: (4) statutory workers' compensation insurance
with respect to any work on or about the Land; and (5) such other
insurance on the Property as may from time to time be reasonably required
by Beneficiary (including, but not limited to business interruption insurance,
boiler and machinery insurance, earthquake insurance, and war risk insurance)
and against other insurable hazards or casualties which at the time are
commonly insured against in the case of premises similarly situated, due
regard being given to the height, type, construction, location, use and
occupancy of buildings and improvements. All insurance policies shall be
issued and maintained by insurers, in amounts, with deductibles, and in
form satisfactory to Beneficiary, and shall require not less than thirty
(30) days' prior written notice to Beneficiary of any cancellation or change
of coverage. All insurance policies maintained, or caused to be
maintained, by Trustor with respect to the Property, except for public
liability insurance, shall provide that each such policy shall be primary
without right of contribution from any other insurance that may be carried by
Trustor or Beneficiary and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to
this Deed of Trust or any other Loan Document becomes insolvent or the
subject of any bankruptcy, receivership or similar proceeding or if in
the Beneficiary's reasonable opinion the financial responsible of such
insurer is or becomes inadequate, Trustor shall, in each instance promptly
upon the request of Beneficiary and at Trustor's expense, obtain and deliver
to Beneficiary a like policy (or, if and to the extent permitted by
Beneficiary, a certificate of insurance) issued by another insurer, which
insurer and policy meet the requirements of this Deed of Trust or such other
Loan Document, as the case may be. Without limiting the discretion of
Beneficiary with respect to required endorsements to insurance policies for
loss of or damage to the Property shall contain a standard mortgage clause
(without contribution) naming Beneficiary, as agent for the Banks, as
mortgagee with loss proceeds payable to Beneficiary notwithstanding (i)
any act, failure to act or negligence of or violation of any warranty,
declaration or condition contained in any such policy by any named insured;
(ii) the occupation or use of the Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Beneficiary under the Loan Documents; or (iv) any change in title
to or ownership of the Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of
each initial insurance policy (or to the extent permitted by Beneficiary, a
copy of the original policy and a satisfactory certificate of insurance) shall
be delivered to Beneficiary at the
7 SWI ARIZONA DEED OF TRUST
<PAGE> 8
time of execution of this Deed of Trust, with premiums fully paid, and each
renewal or substitute policy (or certificate) shall be delivered to
Beneficiary, with premiums fully paid, at least ten (10) days before the
termination of the policy it renews or replaces. Trustor shall pay all
premiums on policies required hereunder as they become due and payable
and promptly deliver to Beneficiary evidence satisfactory to Beneficiary
of the timely payment thereof. If any loss occurs at any time when Trustor
has failed to perform Trustor's covenants and agreements in this paragraph,
Beneficiary shall nevertheless be entitled to the benefit of all insurance
covering the loss and held by or for Trustor, to the same extent as if it
had been made payable to Beneficiary. Upon any foreclosure hereof or
transfer of title to the Property in extinguishment of the whole or
any part of the secured indebtedness, all of Trustor's right, title and
interest in and to the insurance policies referred to in this Article 4.04
(including unearned premiums) and all proceeds payable thereunder shall
thereupon vest in the purchaser at foreclosure or other such
transferee, to the extent permissible under such policies. Beneficiary
shall have the right (but not the obligation) to make proof of loss for,
settle and adjust any claim under, and receive the proceeds of, all insurance
for loss of or damage to the Property, and the expenses incurred by
Beneficiary in the adjustment and collection of insurance proceeds shall be a
part of the secured indebtedness and shall be due and payable to Beneficiary on
demand. Beneficiary shall not be, under any circumstances, liable or
responsible for the obtaining, maintaining or adequacy of any insurance or
for failure to collect or exercise diligence in the collection of any of
such proceeds or for failure to see to the proper application of any amount
paid over to Trustor. Any such proceeds received by Beneficiary shall,
after deduction therefrom of all reasonable expenses actually incurred by
Beneficiary, including attorneys' fees, at Beneficiary's option be (1)
released to Trustor, or (2) applied (upon compliance with such terms and
conditions as may be required by Beneficiary) to repair or restoration,
either partly or entirely, of the Property so damaged, or (3) applied to
the payment of the secured indebtedness in such order and manner as
Beneficiary, in its sole discretion, may elect, whether or not due. Trustor
shall at all times comply with the requirements of the insurance policies
required hereunder and of the issuers of such policies and of any board of
fire underwriters or similar body as applicable to or affecting the Property.
4.05 Casualties. Trustor shall give prompt written notice
thereof to Beneficiary after the happening of any casualty to or in
connection with the Property or any part thereof, whether or not covered by
insurance if the damages caused thereby exceed $25,000. In the event of such
casualty, the gross proceeds of the insurance relating to such Property (the
"Proceeds"), less all expenses (including attorneys' fees) incurred in the
collection of such Proceeds, shall be payable to Beneficiary, and Trustor
hereby authorizes and directs any affected insurance company to make
payment of such Proceeds in such a case directly to Beneficiary. If
Trustor receives any Proceeds resulting from such casualty, Trustor shall
promptly pay over such Proceeds to Beneficiary. Beneficiary is hereby
authorized and empowered by Trustor, at Beneficiary's option and in
Beneficiary's sole discretion, as attorney-in-fact for Trustor, with
full power of substitution, to make proof of loss, to appear in and
prosecute any action arising from any policy or policies of insurance, and
upon the occurrence of an Event of Default (as defined in Section 8.01
below), to settle, adjust, or compromise any material claim for loss, damage
or destruction under any policy or policies of insurance. The appointment
granted herein shall be deemed to be a power coupled with an interest.
Trustor shall not settle, adjust or compromise any claim for loss, damage or
destruction of the Property or any part thereof under any policy or policies
of insurance without the prior written consent of Beneficiary to such
settlement, adjustment or compromise. In the event of any damage to or
destruction of the Property, all, or any part, of the proceeds may be applied
to the Secured Obligations or to the restoration and repair of the Property,
as Beneficiary may determine in its sole and absolute discretion; provided,
however, that if Beneficiary requires Trustor to restore and repair the
Property, then Beneficiary shall pay to Trustor all Proceeds up to the amount
required to complete such restoration and repair. Nothing herein contained
shall be deemed to excuse Trustor from repairing or maintaining the Property
as provided in Section 4.02 above, or restoring all damage or destruction to
the Property, regardless of whether or not there
8 SWI ARIZONA DEED OF TRUST
<PAGE> 9
are Proceeds available to Trustor or whether any such Proceeds are sufficient
in amount; provided, however, if Proceeds are applied to the restoration or
repair of the Property by Beneficiary, Trustor shall not be obligated to
pay for repair and restoration up to the amount of Proceeds so
available, but shall be nevertheless liable for any amounts exceeding
available Proceeds for the restoration and repair of the Property.
Application or release by Beneficiary of any Proceeds shall not cure or waive
any default, notice of default or Event of Default under this Deed of Trust
or invalidate any act done pursuant to any notice of default.
4.06 Assignment of Policies Upon Foreclosure. In the event
of a trustee's sale, judicial foreclosure of this Deed of Trust or other
transfer of title or assignment of the Property in satisfaction, in whole or
in part, of the debt secured hereby, all right, title and interest of
Trustor in and to all policies of insurance required by Section 4.03 above
and any unearned premiums paid thereon shall, without further act, be
assigned to and shall inure to the benefit of and pass to the successor
in interest to Trustor or the purchaser or grantee of the Property, and
Trustor hereby irrevocably appoints Beneficiary its lawful attorney-in-fact,
with full power of substitution, to execute an assignment thereof and any
other document necessary to effect such transfer. The appointment granted
herein shall be deemed to be a power coupled with an interest.
4.07 Indemnification; Subrogation; Waiver of Offset.
A. If Beneficiary is made a party to any litigation
concerning this Deed of Trust, any of the other Loan Documents, the Property
or any part thereof or interest therein, or the occupancy of the Property by
Trustor or a tenant of Trustor, then Trustor shall indemnify, protect,
defend and hold Beneficiary harmless for, from and against any and all
liability by reason of said litigation, including attorneys' fees and
expenses incurred by Beneficiary as a result of any such litigation, whether
or not any such litigation is prosecuted to judgment; provided, however, that
Trustor's obligations under this sentence shall not apply to liability to
Beneficiary arising as the sole result of the gross negligence or willful
misconduct of Beneficiary. Upon the occurrence of an Event of Default
hereunder, Beneficiary may employ an attorney or attorneys to protect its
rights hereunder and under the other Loan Documents, and in the event of such
employment following any breach by Trustor, Trustor shall pay Beneficiary
reasonable attorneys' fees and expenses incurred by such Beneficiary,
whether or not an action is actually commenced against Trustor by reason of
its breach.
B. Trustor waives any and all right to claim or
recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Trustor, the Property, Trustor's
property or the property of others under Trustor's control from any cause
insured against or required to be insured against by the provisions of this
Deed of Trust, unless such loss or damage was caused solely by
Beneficiary's gross negligence or willful misconduct and then only to the
extent that such loss or damage is not covered by insurance proceeds; provided,
however, that this waiver of subrogation shall not be effective with respect
to any policy of insurance permitted or required by this Deed of Trust if:
(i) such policy prohibits, or if coverage thereunder would be reduced as a
result of, such waiver of subrogation; and (ii) Trustor is unable to obtain
from a carrier issuing such insurance a policy that, by special endorsement
or otherwise, permits such a waiver of subrogation.
C. Except as otherwise specifically provided herein,
all sums payable by Trustor pursuant to the Loan Documents, and all
Secured Obligations, shall be paid without notice, demand, counterclaim,
setoff, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and liabilities
of Trustor shall in no way be released, discharged or otherwise affected
(except as expressly provided herein) by reason of: (i) any damage to or
destruction of or any
9 SWI ARIZONA DEED OF TRUST
<PAGE> 10
condemnation or similar taking of the Property or any part thereof; (ii) any
restriction or prevention of or interference by any third party with any use
of the Property or any part thereof; (iii) any title defect or encumbrance or
any eviction from the Property or any part thereof, by title paramount or
otherwise; (iv) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation of other like proceeding relating to
Beneficiary, or any action taken with respect to this Deed of Trust by any
trustee or receiver of Beneficiary, or by any court, in any such proceeding;
(v) any claim which Trustor has or might have against Beneficiary; (vi) any
default or failure on the part of Beneficiary to perform or comply with any
of the terms hereof or of any other agreement with Trustor; or (vii) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Trustor shall have notice or knowledge of any of the foregoing.
Except as expressly provided herein, Trustor waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby.
4.08 Reserve for Insurance, Taxes and Assessments. Upon the
occurrence of an Event of Default and upon the written request of
Beneficiary, to secure certain of Trustor's obligations in this Article 4,
but not in lieu of such obligations, Trustor will deposit with Beneficiary a
sum equal to ad valorem taxes, assessments and charges (which charges for the
purpose of this paragraph shall include without limitation any recurring
charge which could result in a lien against the Property) against the Property
for the current year and the premiums for such policies of insurance for the
current year, all as estimated by Beneficiary and prorated to the end of
the calendar month following the month during which Beneficiary's request is
made, and thereafter will deposit with Beneficiary, on each date when an
installment of principal and/or interest is due on the Notes, sufficient
funds (as estimated from time to time by Beneficiary) to permit Beneficiary
to pay at least fifteen (15) days prior to the due date thereof, the next
maturing ad valorem taxes, assessments and charges and premiums for such
policies of insurance. Beneficiary shall have the right to rely upon tax
information furnished by applicable taxing authorities in the payment of such
taxes or assessments and shall have no obligation to make any protest of
any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Beneficiary for future use, applied to any
secured indebtedness or refunded to Trustor, at Beneficiary's option, and any
deficiency in such funds so deposited shall be made up Trustor upon demand of
Beneficiary. All such funds so deposited shall bear no interest, may be
mingled with the general funds of Beneficiary and shall be applied by
Beneficiary toward the payment of such taxes, assessments, charges and
premiums when statements therefor are presented to Beneficiary by Trustor
(which statements shall be presented by Trustor to Beneficiary a reasonable
time before the applicable amount is due); provided, however, that, if a
default shall have occurred hereunder, such funds may at Beneficiary's option
be applied to the payment of the secured indebtedness in the order
determined by Beneficiary in its sole discretion, and Beneficiary may (but
shall have no obligation) at any time, in its discretion, apply all or any
part of such funds toward the payment of any such taxes, assessments,
charges or premiums which are past due, together with any penalties or late
charges with respect thereto. The conveyance or transfer of Trustor's
interest in the Property for any reason (including without limitation
the foreclosure of a subordinate lien or security interest or a transfer
by operation of law) shall constitute an assignment or transfer of Trustor's
interest in and rights to such funds held by Beneficiary under this
paragraph but subject to the rights of Beneficiary hereunder.
4.09 Utilities. Trustor shall pay or shall cause to be paid
when due all utility charges which are incurred for the benefit of the
Property or which may become a charge or lien against the Property for gas,
electricity, water or sewer services furnished to the Property and all other
assessments or charges of a similar nature, whether public or private,
affecting or related to the Property or any portion thereof, whether or
not such taxes, assessments or charges are or may become liens thereon.
10 SWI ARIZONA DEED OF TRUST
<PAGE> 11
4.10 Defense of Actions and Costs. Trustor, at no cost or
expense to Beneficiary or Trustee, shall appear in and defend any action or
proceeding purporting to affect the security or validity of this Deed of
Trust or of, the other Loan Documents, the interest of Beneficiary herein or
therein, or the rights, powers or duties of Beneficiary or Trustee hereunder
or thereunder. If Beneficiary and Trustee, or either of them, elects to
become a party to such action or proceeding, or is made a party thereto or
to any other action or proceeding, of whatever kind or nature, concerning this
Deed of Trust, any of the Loan Documents, the Property or any part thereof
or interest therein, or the occupancy thereof, Trustor shall indemnify,
protect, defend and hold Trustee and Beneficiary harmless for, from and
against any and all liability, damage, cost and expense incurred by Trustee
and Beneficiary, or either of them, by reason of said action or proceeding
(including, but not limited to, Trustee's reasonable fees and expenses, the
reasonable fees and expenses of attorneys for Trustee and for Beneficiary,
and other expenses, of whatever kind or nature, incurred by Trustee or
Beneficiary, or either of them, as a result of such action or proceeding),
whether or not such action or proceeding is prosecuted to judgment or
decision. Immediately upon demand therefor by Trustee or Beneficiary, Trustor
shall pay thereto an amount equal to Trustor's liability to such person under
this Section 4.10, together with interest thereon from date of expenditure
at the Default Rate; and until paid, such sums shall be secured hereby.
4.11 Actions by Beneficiary to Preserve Property. If Trustor
fails to make any payment or to do any act as and in the manner provided
herein or in any of the other Loan Documents, subject to applicable notice
and cure periods, if any, Beneficiary, and Trustee, and each of them each
in its own discretion, without obligation so to do, without releasing
Trustor from any obligation, may make or do the same in such manner and to
such extent as either may deem necessary to protect the security hereof.
In connection therewith (without limiting their general and other powers,
whether conferred herein, in any other Loan Document or by law),
Beneficiary and Trustee, and each of them, shall have and are hereby given
the right, but not the obligation: (a) to enter upon and take possession
of the Property; (b) to make additions, alterations, repairs and
improvements to the Property which they or either of them may consider
reasonably necessary or proper to keep the Property in good condition and
repair; (c) to appear and participate in any action or proceeding affecting
or which may affect the security hereof or the rights or powers of Beneficiary
or Trustee; (d) to pay, purchase, contest or compromise any encumbrance,
claim, tax, stamp tax, assessment, water rate, sewer rate, insurance premium,
repair, rent charge, inspection, charge, lien or debt which in the judgment
of either may affect or appears to affect the security of this Deed of
Trust or to be prior or superior hereto or any other agreement given to
partially secure the indebtedness secured hereby; and (e) in exercising such
powers, to pay reasonable, necessary expenses, including employment of
counsel or other necessary or desirable consultants. Trustor shall,
immediately upon demand therefor by Beneficiary, pay to Beneficiary an
amount equal to all reasonable costs and expenses incurred by it in
connection with the exercise by Beneficiary of the foregoing rights
including, but not limited to, costs of evidence of title, court costs,
appraisals, surveys, receiver's fees, Trustee's and attorneys' fees, costs
and expenses, the fees and expenses of attorneys for Trustee, whether or
not an action is actually commenced in connection therewith, together with
interest thereon, from the date of such expenditures until Beneficiary has
been repaid such amount, at the Default Rate and, until paid, said sums shall
be secured hereby.
4.12 Survival of Obligations and Warranties. Trustor shall
fully and faithfully satisfy and perform the obligations of Trustor
contained herein and in the other Loan Documents, each agreement of
Trustor incorporated by reference therein or herein and each agreement the
performance of which is secured hereby or thereby, and any modification or
amendment hereof or thereof. All representations, warranties and covenants
of Trustor contained herein or in any such other Loan Document between
Trustor and Beneficiary shall survive the execution and delivery hereof
and shall remain continuing obligations, warranties and representations of
Trustor during any time when any portion of the Secured Obligations remain
outstanding.
11 SWI ARIZONA DEED OF TRUST
<PAGE> 12
4.13 Condemnation. Trustor shall notify Beneficiary immediately
after Trustor becomes aware of any threatened or pending proceeding for
condemnation affecting the Property or arising out of damage to the Property,
and Trustor shall, at Trustor's expense, diligently prosecute any such
proceedings. Beneficiary shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its
own choice. Beneficiary shall be entitled to receive all sums which may be
awarded or become payable to Trustor for the condemnation of the Property, or
any part thereof, for public or quasi-public use, or by virtue of private
sale in lieu thereof, and any sums which may be awarded or become payable to
Trustor for injury or damage to the Property, provided it is applied to the
secured indebtedness. Trustor shall, promptly upon request of Beneficiary,
execute such additional assignments and other documents as may be
necessary from time to time to permit such participation and to enable
Beneficiary to collect and receipt for any such sums. All such sums are
hereby assigned to Beneficiary, and shall, after deduction therefrom of all
reasonable expenses actually incurred by Beneficiary, including reasonable
attorneys' fees, at Beneficiary's option be (1) released to Trustor, or (2)
applied (upon compliance with such terms and conditions as may be required by
Beneficiary) to repair or restoration of the Property so affected, or (3)
applied to the payment of the secured indebtedness in such order and manner
as Beneficiary, in its sole discretion, may elect, whether or not due.
Beneficiary shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any such
sum or for failure to see to the proper application of any amount paid over
to Trustor. Beneficiary is hereby authorized, in the name of Trustor, to
execute and deliver valid acquittance for, and to appeal from, any such
award, judgment or decree. All reasonable costs and expenses (including
but not limited to reasonable attorneys' fees) incurred by Beneficiary
in connection with any condemnation shall be a demand obligation owing by
Trustor (which Trustor hereby promises to pay) to Beneficiary pursuant to this
Deed of Trust.
4.14 Compliance with Legal Requirements. The Property and the
use, operation and maintenance thereof and all activities thereon do and
shall at all times comply with all applicable Legal Requirements (defined
below). The Property is not, and shall not be, dependent on any other
property or premises or any interest therein other than the Property to
fulfill any requirement of any Legal Requirement. Trustor shall not, by act
or omission, permit any building or other improvement not subject to the
lien of this Deed of Trust to rely on the Property or any interest therein
to fulfill any requirement of any Legal Requirement. No part of the
Property constitutes a non-conforming use under any zoning law or similar
law or ordinance applicable thereto. Trustor has obtained and shall
preserve in force all requisite zoning, utility, building, health and
operating permits from the governmental authorities having jurisdiction
over the Property that the Property, or any use, activity, operation or
maintenance thereof or thereon, is not in compliance with any Legal
Requirement, Trustor will promptly furnish a copy of such notice or claim
to Beneficiary. Trustor has received no notice and has no knowledge of any
such noncompliance. As used in this Deed of Trust: (i) the term "Legal
Requirement" means any applicable local, state or federal law, rule or
regulation, agreement, covenant, restriction, easement or condition.
4.15 Additional Security. No other security now existing, or
hereafter taken, to secure the Secured Obligations nor the liability of any
maker, surety, guarantor or endorser with respect to the Secured Obligations,
or any of them, shall be impaired or affected by the execution of this Deed
of Trust; and all additional security shall be taken, considered and held
as cumulative. The taking of additional security, execution of partial
releases of the security, or any extension of the time of payment of the
indebtedness shall not diminish the force, effect or lien of this Deed of
Trust and shall not affect or impair the liability of any maker, surety,
guarantor or endorser for the payment of said indebtedness. In the event
Beneficiary at any time holds additional security for any of the Secured
Obligations, it may enforce the sale thereof or otherwise realize upon the
same, at its option, either before, concurrently, or after a sale is made
hereunder.
12 SWI ARIZONA DEED OF TRUST
<PAGE> 13
4.16 Inspections. Trustor hereby agrees that Trustee or
Beneficiary, or both, during such times as are reasonable under the
then-existing circumstances, may conduct from time to time, through
representatives of their own choice, on-site inspections and observations of:
(a) the maintenance and repair of the Property, including a review of all
maintenance and repair programs and practices and all reports and records,
including the records of expenditures, relating thereto; and (b) such other
facilities, practices and records of Trustor relating to the Property as
Beneficiary deems to be necessary or appropriate in order to monitor Trustor's
compliance with the provisions of this Deed of Trust and of any of the Loan
Documents.
4.17 Liens. Trustor shall pay and promptly discharge when due,
at Trustor's cost and expense, all liens, encumbrances and charges upon
the Property, or any part thereof or interest therein or,
alternatively, deposit with the Beneficiary an acceptable surety bond or
provide other security acceptable to the Beneficiary. If Trustor shall fail
either to remove and discharge any such lien, encumbrance or charge or to
deposit security in accordance with the preceding sentence, if applicable,
then, in addition to any other right or remedy of Beneficiary, Beneficiary
may, but shall not be obligated to, discharge the same, without inquiring
into the validity of such lien, encumbrance or charge, nor into the
existence of any defense or offset thereto, either by paying the amount
claimed to be due, or by procuring the discharge of such lien, encumbrance or
charge by depositing in a court a bond or the amount claimed or otherwise
giving security for such claim, or in such manner as is or may be prescribed
by law. Trustor shall, immediately upon demand therefor by Beneficiary, pay
to Beneficiary an amount equal to all reasonable costs and expenses incurred
by Beneficiary in connection with the exercise by Beneficiary of the
foregoing right to discharge any such lien, encumbrance or charge together
with interest therein from the date of such expenditure at the Default Rate,
and, until paid, such sums shall be secured hereby.
4.18 Beneficiary's Powers. Without affecting the liability of
any other person liable for the payment of the Secured Obligations, and
without affecting the lien or charge of this Deed of Trust upon any portion
of the Property not then or theretofore released as security for the full
amount of the Secured Obligations, Beneficiary may, from time to time and
without notice: (a) release any person so liable; (b) extend the maturity
or alter any of the terms of any such obligation; (c) grant other
indulgences; (d) release or reconvey, or cause to be released or reconveyed
at any time, at Beneficiary's option, any parcel, portion or all of the
Property; (e) take or release any other or additional security for any
obligation herein mentioned; or (f) make compositions or other arrangements
with debtors in relation thereto. By accepting payment or performance of
any obligation secured by this Deed of Trust after the payment or
performance thereof is due or after the recording of a notice of sale,
Beneficiary shall not have thereby waived its right to require prompt payment
or performance, when due, of all other Secured Obligations, or to declare the
occurrence of an Event of Default for failure so to pay or perform, or to
proceed with the sale under any notice of the occurrence of an Event of
Default, statement of breach or non-performance and notice of sale theretofore
given by Beneficiary or Trustee, or with respect to any unpaid balance of
the other Secured Obligations. The acceptance by Beneficiary of any sum in
an amount less than the sum then due shall not constitute a waiver of the
obligation of Trustor to pay the entire sum then due. Trustor's failure to
pay the entire sum then due shall continue to be an Event of Default,
notwithstanding the acceptance of partial payment, and, until the entire sum
then due shall have been paid, Beneficiary or Trustee shall at all times be
entitled to declare the occurrence of an Event of Default and to exercise
all the remedies herein conferred, and the right to proceed with a sale
under any notice of the occurrence of an Event of Default, statement of
breach or non-performance or notice of sale shall in no way be impaired,
whether or not such amounts are received prior or subsequent to such notice
or statement. No delay or omission of Trustee or Beneficiary in the
exercise of any right or power hereunder shall impair such right or power
or any other right or power nor shall the same be construed to be a waiver
of any Event of Default or any acquiescence therein.
13 SWI ARIZONA DEED OF TRUST
<PAGE> 14
4.19 Other Instruments. Trustor shall punctually pay all
amounts due and payable, and shall promptly and faithfully perform or
observe each and every other obligation or condition to be performed or
observed, under each deed of trust, mortgage or other lien or encumbrance,
lease, sublease, declaration, covenant, condition, restriction, license,
order or other instrument or agreement which affects or appears to affect the
Property, whether at law or in equity. Nothing contained in this Section
4.19 shall give to or confer upon Trustor any right to place any other
deeds of trust, mortgages or other liens or encumbrances against the Property
without obtaining Beneficiary's prior written consent.
4.20 Transfer of Property by Trustor. Trustor agrees that in the
event the interest of Trustor in the Property, or any part thereof, or
any interest therein is sold, agreed to be sold, conveyed, alienated,
encumbered, leased, assigned, conveyed or otherwise transferred by Trustor,
whether by operation of law or otherwise, without the prior written consent
of Beneficiary, the Secured Obligations, irrespective of the maturity dates
expressed therein, at the option of Beneficiary, and without demand or
notice shall immediately become due and payable. Beneficiary shall not
exercise this option if (a) Trustor causes to be submitted to Beneficiary
information required by Beneficiary to evaluate the intended transferee as if
a new loan were being made to the transferee; and (b) Beneficiary reasonably
determines that Beneficiary's security will not be impaired by the loan
assumption and that the risk of a default under this Deed of Trust is
acceptable to Beneficiary. To the extent permitted by applicable law,
Beneficiary may charge a reasonable fee as a condition to Beneficiary's
consent to the loan assumption. Beneficiary may also require the
transferee to sign an assumption agreement acceptable to Beneficiary that
obligates the transferee under this Deed of Trust. Notwithstanding the
assumption by the transferee, the Trustor named herein shall continue to be
obligated under the Loan Documents unless Beneficiary releases Trustor in
writing. This provision shall apply to each and every sale, transfer or
conveyance, regardless of whether or not Beneficiary has consented to or
waived Beneficiary's rights hereunder, whether by action or non-action, in
connection with any previous sale, transfer or conveyance.
Notwithstanding the preceding, to the extent permitted by the Credit
Agreement, Trustor shall be entitled to dispose of items of Personal
Property Collateral which become inadequate, obsolete, worn out,
unsuitable, undesirable or unnecessary for the operation of the Property,
provided that Trustor immediately substitutes and installs replacement
Personal Property Collateral of at least comparable worth, value and
utility. All such substituted items shall be installed free of all liens and
encumbrances and shall become a part of the Property as Personal Property
Collateral. Trustor will cooperate with Beneficiary and Trustee and will
pay all costs, including attorneys' fees, incurred in subjecting to the
lien hereof all items so substituted and Beneficiary will cooperate with
Trustor in securing, if necessary, a release from the lien hereof of the
Personal Property Collateral for which the substitution is made and in
providing such other documents as may be required to facilitate the removal
and substitution.
4.21 Beneficiary's Approval. Trustor shall not enter into any
lease or sublease of any portion of the Property without the prior written
approval of Beneficiary. Beneficiary may refuse such approval for any reason
or may condition its approval upon such events or occurrences as Beneficiary
deems appropriate, in its sole and unfettered discretion. Notwithstanding
the foregoing, Trustor may enter into a lease for the Property on market
terms and rates for terms of five (5) years or less (inclusive of all
extensions and renewal options) upon prior written approval of
Beneficiary, which approval shall not be unreasonably withheld. All
leases of the Property greater than one month shall specifically provide
that they are subordinate to this Deed of Trust; that the tenant attorns to
Beneficiary, such attornment to be effective upon Beneficiary's acquisition
of title to the Property; that the tenant agrees to execute such further
evidences of attornment as Beneficiary may from time to time request, that the
attornment of the tenant shall not be terminated by foreclosure; and that
Beneficiary may, at Beneficiary's option, accept or reject such attornments.
14 SWI ARIZONA DEED OF TRUST
<PAGE> 15
ARTICLE 5
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
5.01 Assignment of Rents, Issues and Profits. Trustor hereby
grants, transfers and assigns to Beneficiary all of the Rents of the
Property and hereby gives to and confers upon Beneficiary the right, power
and authority to collect such Rents. Trustor irrevocably appoints
Beneficiary its true and lawful attorney-in-fact, with full power of
substitution, at the option of Beneficiary, at any time and from time to time,
to demand, receive and enforce payment, to give receipts, releases and
satisfactions, and to sue, in its name or in the name of Trustor, for all
such Rents, and apply the same to the Secured Obligations; provided,
however, that Trustor shall have the right to collect such Rents (but not
more than one month in advance unless the written approval of Beneficiary
has first been obtained), and to retain and enjoy the same, so long as an
Event of Default, or an event or condition in which, with notice or lapse of
time would constitute an Event of Default, shall not have occurred hereunder
and be continuing. The assignment of the Rents in this Section 5.01 is
intended to be an absolute assignment from Trustor to Beneficiary and not
merely the passing of a security interest. The appointment granted herein
shall be deemed to be a power coupled with an interest.
5.02 Collection Upon Default. To the extent permitted by law,
upon the occurrence of an Event of Default hereunder, Beneficiary may, at any
time without notice, either in person, by agent, or by a receiver appointed
by a court, and without regard to the adequacy of any security for the
Secured Obligations, enter upon and take possession of the Property, or any
part thereof, and, with or without taking possession of the Property or any
portion thereof, in its own name sue for or otherwise collect such Rents
(including those past due and unpaid, and all prepaid rents and all other
monies which may have been or may hereafter be deposited with Trustor by
any lessee or tenant of Trustor to secure the payment of any rent or for
any services thereafter to be rendered by Trustor for any other obligation of
any tenant to Trustor arising under any lease, and Trustor agrees that, upon
the occurrence of any Event of Default hereunder, Trustor upon the request of
Beneficiary shall promptly deliver all such Rents and other monies to
Beneficiary), and Beneficiary may apply the same, less reasonable costs and
expenses of operation and collection, including, but not limited to,
attorneys' fees and expenses, whether or not suit is brought or prosecuted to
judgment, upon any of the Secured Obligations, notwithstanding that said
Secured Obligation or the performance of said Secured Obligation may not then
be due. The collection of such Rents, or the entering upon and taking
possession of the Property, or the application thereof as aforesaid, shall
not cure or waive any default, notice of default or Event of Default
hereunder or invalidate any act done in response to such default or Event
of Default or pursuant to such notice of default and shall not be
deemed or construed to make Beneficiary a mortgagee-in-possession of the
Property or any portion thereof.
5.03 Specific Assignments of Leases. Upon the occurrence of an
Event of Default and following demand of Beneficiary, Trustor shall, from
time to time hereafter, execute and deliver to Beneficiary recordable
assignments of any or all leases affecting the Property (the "Leases").
Each such assignment shall be made by an instrument (herein, an
"Assignment of Lease") in form and substance satisfactory to Beneficiary;
provided, however, that no such Assignment of Lease shall be construed
as imposing upon Beneficiary any obligation with respect to the Leases
or any of them. A default by Trustor in the performance of any covenant
of any lease so assigned to Beneficiary, by reason of which default the lessee
or other party thereunder has the right to cancel such lease or to claim any
diminution or offset against future Rents shall, at the option of
Beneficiary, constitute an Event of Default hereunder and Beneficiary shall
have all the rights and remedies set forth herein as if such Event of
Default had occurred hereunder. Beneficiary may, at its option, exercise its
rights hereunder or under any such Assignment of
15 SWI ARIZONA DEED OF TRUST
<PAGE> 16
Lease, and such exercise shall not constitute a waiver of any right hereunder
or thereunder. To the extent not inconsistent, all rights and remedies of
Beneficiary under any such Assignment of Lease and under this Deed of Trust
shall be cumulative.
ARTICLE 6
ENVIRONMENTAL
6.01 Definitions. In addition to any terms defined elsewhere in
this Deed of Trust, as used in this Article 6:
A. "HAZARDOUS SUBSTANCE" means any substance,
material or waste which is or becomes designated, classified or regulated as
being "toxic" or "hazardous" or a "pollutant," or which is or becomes
similarly designated, classified or regulated, under any federal, state
or local law, regulation or ordinance, or any petroleum products,
including crude oil and any product derived directly or indirectly from,
or any fraction or distillate of, crude oil.
B. "INDEMNIFIED COSTS" means all actual or
threatened liabilities, claims, actions, causes of action, judgments, orders,
damages (including, but not limited to, foreseeable and unforeseeable
consequential damages), costs, expenses, fines, penalties and losses
(including, but not limited to, sums paid in settlement of claims and all
consultant, expert and legal fees and expenses of Beneficiary's counsel),
including, but not limited to, those incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work (whether of the Property or any other property), or any
resulting damages, harm or injuries to the person or property of any third
parties or to any natural resources.
C. "INDEMNIFIED PARTIES" means and includes
Beneficiary, Trustee, their respective parents, subsidiaries and affiliated
companies, assignees of any of Beneficiary's or Trustee's interest in the
Loan Documents, owners of participation or other interests in the Loan
Documents, any purchasers of the Property at any trustee's sale or judicial
foreclosure sale or from Beneficiary or any of its affiliates, and the
officers, directors, employees and agents of each of them.
6.02 Indemnity Regarding Hazardous Substances. Trustor
indemnifies and holds the Indemnified Parties harmless for, from and against
any and all Indemnified Costs directly or indirectly arising out of or
resulting from any Hazardous Substance being present or released in, on or
around any part of the Property, or in the soil, groundwater or soil vapor on
or under the Property, including, but not limited to:
A. Any claim for such Indemnified Costs asserted by
any federal, state or local governmental agency, including the United
States Environmental Protection Agency and the Arizona Department of
Environmental Quality, and including any claim that any Indemnified
Party is liable for any such indemnified Costs as an "owner" or "operator"
of the Property under any law relating to Hazardous Substances; and
B. Any such Indemnified Costs claimed against any
Indemnified Party by any person other than a governmental agency, including
any person who may purchase or lease all or any portion of the Property from
Trustor, from any Indemnified Party, or from any other purchaser or lessee;
any person who may at any time have any interest in all or any portion of the
Property; any person who may at any time be
SWI ARIZONA DEED OF TRUST
16
<PAGE> 17
responsible for any clean-up costs or other Indemnified Costs relating to
the Property; and any person claiming to have been injured in any way as a
result of exposure to any Hazardous Substance; and
C. Any such Indemnified Costs which any Indemnified
Party reasonably believes at any time must be incurred to comply with any
law, judgment, order, regulation or regulatory directive relating to Hazardous
Substances, or which any Indemnified Party reasonably believes at any time
must be incurred to protect the public health or safety; and
D. Any such Indemnified Costs resulting from currently
existing conditions in, on or around the Property, whether known or
unknown by Trustor or the Indemnified Parties at the time this Agreement
is executed, and any such Indemnified Costs resulting from the activities
of Trustor, Trustor's tenants, or any other person in, on or around the
Property.
6.03 Indemnity Regarding Construction and Other Risks.
Trustor indemnifies and holds the Indemnified Parties harmless for, from
and against any and all Indemnified Costs directly or indirectly arising
out of or resulting from construction of any improvements on the Property,
including any defective workmanship or materials; or any failure to satisfy
any requirements of any laws, regulations, ordinances, governmental policies
or standards, reports, subdivision maps or development agreements that apply
or pertain to the Property; or breach of any representation or warranty
made or given by Trustor to any of the Indemnified Parties or to any
prospective or actual buyer or lessee of all or any portion of the Property;
or any claim or cause of action of any kind by any party that any
Indemnified Party is liable for any act or omission of Trustor or any other
person or entity in connection with the possession, sublease, operation or
development of the Property.
6.04 Defense of Indemnified Parties. Upon demand by any
Indemnified Party, Trustor shall defend any investigation, action or proceeding
involving any Indemnified Costs which is brought or commenced against any
Indemnified Party, whether alone or together with Trustor or any other
person, all at Indemnitor's own cost and by counsel to be approved by the
Indemnified Party in the exercise of its sole discretion. In the
alternative, any Indemnified Party may elect to conduct its own defense at the
expense of Trustor.
6.05 Representation and Warranty Regarding Hazardous Substances.
Trustor has researched and inquired into the previous uses and operations
on the Property. Based on that due diligence, Trustor represents and
warrants that to the best of its knowledge, no Hazardous Substance has been
disposed of or released, or otherwise now exists, in, on, under or around the
Property, except as Trustor has disclosed to Beneficiary in writing and
except as to use, generation, manufacture, storage, treatment, disposal or
release of Hazardous Substances that are: (a) generally recognized to be
appropriate to the normal business uses of Trustor; and (b) in compliance with
applicable local, state and federal laws, rules and regulations.
6.06 Compliance Regarding Hazardous Substances. Trustor has
complied, and shall comply and cause all tenants and any other persons who
may come upon the Property to comply, with all laws, regulations and
ordinances governing or applicable to Hazardous Substance, including, but
not limited to, those requiring disclosures to prospective and actual
purchasers of an interest in all or any portion of the Property. Trustor
also has complied and shall comply with the recommendations of any
qualified environmental engineer or other expert which apply or pertain to the
Property.
6.07 Notices Regarding Hazardous Substances. Trustor shall
promptly notify Beneficiary if it knows, suspects or believes there may be
any Hazardous Substance in or around the Property, or in the soil,
groundwater or soil vapor on or under the Property, or that Trustor or the
Property may be subject to any
SWI ARIZONA DEED OF TRUST
17
<PAGE> 18
threatened or pending investigation by any governmental agency under any
law, regulation or ordinance pertaining to any Hazardous Substance;
provided, however, that no such notice is required if the Hazardous
Substance is: (a) generally recognized to be appropriate to Trustor's
normal business uses; and (b) in compliance with applicable local, state and
federal laws, rules and regulations.
6.08 Site Visits, Observations and Testing. The Indemnified
Parties and their agents and representatives shall have the right at any
reasonable time to enter and visit the Property for the purposes of observing
the Property, taking and removing soil or groundwater samples, and conducting
tests on any part of the Property. The Indemnified Parties have no duty,
however, to visit or observe the Property or to conduct tests, and no site
visit, observation or testing by any Indemnified Party shall impose any
liability on any Indemnified Party. In no event shall any site visit,
observation or testing by any Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any law, regulation or
ordinance pertaining to Hazardous Substances or any other applicable
governmental law. Neither Trustor, nor any other party, is entitled to
rely on any site visit, observation or testing by any Indemnified Party. The
Indemnified Parties owe no duty of care to protect Trustor or any other
party against, or to inform Trustor or any other party of, any Hazardous
Substances or any other adverse condition affecting the Property. Any
Indemnified Party shall give Trustor reasonable notice before entering the
Property. The Indemnified Party shall make reasonable efforts to avoid
interfering with Trustor's use of the Property in exercising any rights
provided in this Section 6.08.
6.09 Survival. The provisions of this Article 6 shall
survive the repayment of the Secured Obligations and satisfaction of this
Deed of Trust, trustee's sale or judicial foreclosure of this Deed of Trust.
Notwithstanding anything to the contrary contained in this Article 6,
Trustor shall have no obligation to indemnify any Indemnified Party for
Indemnified Costs solely resulting from such Indemnified Party's gross
negligence or willful misconduct, or for any Indemnified Costs arising
solely from actions taken after the Property has been conveyed via Trustee's
sale or judicial foreclosure.
ARTICLE 7
SECURITY AGREEMENT
7.01 Security Interest. This Deed of Trust shall constitute a
security agreement within the meaning of Chapter 9 of the UCC, as to the
Personal Property Collateral and as to any other property covered and
encumbered by this Deed of Trust as to which the provisions of Chapter 9 of
the UCC may apply, and is intended to create a security interest in such
property in favor of Beneficiary. Trustor agrees to execute and deliver on
demand such security agreements, financing statements, continuation
statements and other instruments as Beneficiary may request in order to
impose or perfect the security interest and lien of Beneficiary upon any of
the Personal Property Collateral.
7.02 Remedies Upon Default. Upon the occurrence of any Event of
Default hereunder, Beneficiary shall have the right, in addition to the
rights granted to Beneficiary under the other Loan Documents, to cause any
of the Personal Property Collateral to be sold at any one or more public
or private sales as permitted by the UCC or other applicable law, and
Beneficiary shall further have all other rights and remedies, whether at
law, in equity, or by statute, as are available to secured creditors under
applicable law. Any such disposition may be conducted by an employee or agent
of Beneficiary or Trustee. Any person, including both Trustee and
Beneficiary, shall be eligible to purchase any part or all of such property at
any disposition to the extent permitted by applicable law. All
reasonable expenses of retaking, holding, preparing for sale, selling or
the like shall be borne by Trustor and shall include, Beneficiary's and
Trustee's
SWI ARIZONA DEED OF TRUST
18
<PAGE> 19
attorneys' fees and expenses. Trustor, upon demand of Beneficiary, shall
assemble such Personal Property Collateral and make it available to
Beneficiary at such place as shall be required by Beneficiary in its sole
discretion. Beneficiary shall give Trustor at least ten days prior written
notice of the time and place of any public sale of such property or after
which any private sale or any other intended disposition is to be made.
Notice provided to Trustor in the manner provided herein shall be deemed to be
commercially reasonable notice of such sale or other disposition.
7.03 Fixture Filing This Deed of Trust constitutes a financing
statement filed as a fixture filing under A.R.S. Section 47-9402.F, or any
successor similar statute, covering any Property which now is or later may
become fixtures attached to the Land or Improvements.
ARTICLE 8
EVENTS OF DEFAULT;
REMEDIES UPON EVENTS OF DEFAULT
8.01 Events of Default. Trustor shall be in default hereunder
(an "Event of Default") upon the occurrence of any one or more of the
following events: (i) Trustor fails to pay any amount when due under the Note,
subject to applicable notice and cure periods; (ii) Trustor breaches any
provision contained in this Deed of Trust, subject to applicable notice and
cure periods; (iii) Trustor applies for, consents to, or acquiesces in, the
appointment of a trustee, receiver, sequestrator or other custodian for
Trustor, or makes a general assignment for the benefit of creditors; or
(iv) Trustor permits or suffers to exist the commencement of bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, except for any involuntary proceeding
initiated or consented to by Beneficiary, or dissolution, winding up or
liquidation proceeding in respect of Trustor.
8.02 Acceleration Upon Default; Additional Remedies. Upon the
occurrence of an Event of Default hereunder, Beneficiary may, at its option,
declare the Secured Obligations to be immediately due and payable without any
presentment, demand, protest or notice of any kind. Notice of acceleration to
Trustor shall not be required. Whether or not Beneficiary exercises said
option, Beneficiary may, to the extent permitted by law, either in person or
by agent, with or without bringing any action or proceeding, or by a
receiver appointed by a court and without regard to the adequacy of its
security, enter upon and take possession of the Property, or any part
thereof, in its own name or in the name of the Trustee, and do any act
which it deems necessary or desirable to preserve the value, marketability
or rentability of the Property, or part thereof or interest therein, increase
the income therefrom or protect the security thereof and, with or without
taking possession of the Property, sue for or otherwise collect the Rents
including those past due and unpaid, and apply the same, less reasonable
costs and expenses of operation and collection, including, but not limited
to, attorneys' fees and expenses, upon the Secured Obligations all in
such order as Beneficiary may determine. The entering upon and taking
possession of the Property, the collection of such Rents, and the
application thereof as aforesaid, shall not cure or waive any default,
notice of default or Event of Default hereunder or invalidate any act done
in response to such default or Event of Default, or pursuant to such notice
of default and, notwithstanding the continuance in possession by Trustee,
Beneficiary or a receiver of all or any portion of the Property or the
collection, receipt and application of any of the Rents thereby, the Trustee
or Beneficiary shall be entitled to exercise every right provided for in
any of the Loan Documents or by law upon occurrence of any Event of
Default, including, but not limited to, the right to exercise the power of
sale. Beneficiary may also exercise all other rights and remedies provided
herein, in any Loan Document or in any other document or agreement now or
hereafter securing all or any portion of the Secured Obligations, or provided
by law.
SWI ARIZONA DEED OF TRUST
19
<PAGE> 20
8.03 Trustee's Sale.
A. If any Event of Default hereunder occurs,
Beneficiary may invoke the power of sale by delivering to Trustee a written
statement of breach or non-performance. Trustee shall then record a
Notice of Sale in the Recorder's Office of the county in which the Property
is located and shall mail copies of the Notice of Sale and any other notice
as prescribed by applicable law to Trustor and to the other persons as
prescribed by applicable law. After such time as required by
applicable law, and after publication and posting of the Notice of Sale in
accordance with applicable law, Trustee, without demand on Trustor, shall
sell the Property at public auction to the highest bidder for cash at the
time and place designated in the Notice of Sale. Trustee may postpone sale
of the Property by public declaration at the time and place of any
previously scheduled sale unless otherwise required by applicable law.
Beneficiary shall be entitled to a credit against its bid up to and
including the entire amount of the Secured Obligations, to the extent
permitted by law. Trustee shall deliver to the purchaser its Trustee's
deed conveying the Property without any covenant or warranty, expressed or
implied. The proceeds of the sale shall be applied in the following
order: (i) to all reasonable expenses of the sale, including, but not
limited to, Trustee's fees and attorneys' fees; (ii) to all sums secured by
this Deed of Trust; and (iii) any excess to the person or persons legally
entitled to it or to the County Treasurer of the county in which the sale took
place, or as otherwise provided by law.
B. A sale of less than the whole of the Property or
any defective or irregular sale made hereunder shall not exhaust the power
of sale provided for herein; and subsequent sales may be made hereunder
until all Secured Obligations have been satisfied, or the entire Property
sold, without defect or irregularity.
8.04 Judicial Foreclosure. If any Event of Default hereunder
occurs, Beneficiary may commence an action to judicially foreclose this
Deed of Trust in the manner provided by law for foreclosure of a
mortgage.
8.05 Appointment of Receiver. If an Event of Default
hereunder shall have occurred and be continuing, Beneficiary, as a matter of
right and without notice to Trustor or anyone claiming under Trustor, and
without regard to the then value of the Property or the interest of Trustor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers of the Property, and Trustor hereby
irrevocably consents to such appointment and waives notice of any
application therefor. Any such receiver or receivers shall have all the
usual powers and duties of receivers in like or similar cases and all the
powers and duties of Beneficiary in case of entry as provided herein and
shall continue as such and exercise all such powers until the date of the
sale of the Property unless such receivership is sooner terminated.
8.06 Application of Funds After Event of Default. Upon the
occurrence of an Event of Default hereunder, Beneficiary may, at any time
without notice, apply any or all sums or amounts received and held by
Beneficiary to pay insurance premiums, Impositions, or any of them, or as
rents or income of the Property, or as insurance or condemnation proceeds,
and all other sums or amounts received by Beneficiary from or on account
of Trustor or the Property, or otherwise, upon any Secured Obligation, in
such manner and order as Beneficiary may elect, notwithstanding that such
Secured Obligation may not yet be due. The receipt, use or application of
any such sum or amount shall not be construed to affect the maturity
of any Secured Obligations, or any of the rights or powers of Beneficiary
or Trustee under the terms of the other Loan Documents, or any of the
obligations of Trustor under this Deed of Trust or the other Loan Documents,
or to cure or waive any default, notice of default or Event of Default
hereunder or under any of the other Loan Documents; or to invalidate any act
of Trustee or Beneficiary.
SWI ARIZONA DEED OF TRUST
20
<PAGE> 21
8.07 Costs of Enforcement. If any Event of Default hereunder
occurs, Beneficiary and Trustee, and each of them, may employ attorneys
to protect their rights hereunder. Trustor promises to pay to
Beneficiary, on demand, the reasonable fees and expenses of such attorneys
and all other costs of enforcing the Secured Obligations, including, but not
limited to, recording fees, the expense of a Trustee's Sale Guarantee,
Trustee's fees and expenses, receivers' fees and expenses, and all other
expenses, of whatever kind or nature, incurred by Beneficiary and Trustee, and
each of them, in connection with the enforcement of the Secured Obligations,
whether or not such enforcement includes the filing of a lawsuit. Until paid,
shall bear interest, from date of expenditure, at the Default Rate, and shall
be secured hereby.
8.08 Remedies Not Exclusive. Trustee and Beneficiary, and each
of them, shall be entitled to enforce payment and performance of any Secured
Obligation and to exercise all rights and powers under this Deed of Trust
or under any other Loan Document or other agreement or any law now or
hereafter in force, notwithstanding some or all of the said Secured
Obligations may now or hereafter be otherwise secured, whether by
guaranty, mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Deed of Trust, nor its enforcement, whether by
court action or pursuant to the power of sale or other powers herein
contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon or enforce any other security now or hereafter held
by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and
each of them, shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such
order and manner as they may in their absolute discretion determine. No
remedy herein conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity
or by statute. Every power or remedy given hereby or by any of the other
Loan Documents to Trustee or Beneficiary or to which either of them may be
otherwise entitled may be exercised, concurrently or independently, from time
to time and as often as may be deemed expedient by Trustee or
Beneficiary, and either of them may pursue remedies as each in their sole
discretion shall deem appropriate.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF TRUSTOR
Trustor represents and warrants that, except as previously
disclosed to Beneficiary in a writing:
A. Trustor lawfully possesses and holds the Land and
Improvements;
B. Trustor has or will have good title to all
Property other than the Land and Improvements;
C. Trustor has the full and unlimited power, right
and authority to encumber the Property and assign the Rents;
D. This Deed of Trust creates a first and prior lien on
the Property;
E. The Property includes all property and rights which
may be reasonably necessary or desirable to promote the present and
any reasonable future beneficial use and enjoyment of the Land and
Improvements;
21 SWI ARIZONA DEED OF TRUST
<PAGE> 22
F. Trustor owns the Personal Property Collateral
free and clear of any security interests, liens, security
agreements, reservations of title or conditional sales contracts,
and there is no financing statement affecting such Personal
Property Collateral on file in any public office; and
G. Trustor's place of business, or its chief executive
office if it has more than one place of business, is located at the
address specified above.
ARTICLE 10
MISCELLANEOUS COVENANTS AND AGREEMENTS
10.01 Amendments. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed
by the party against whom enforcement of any waiver, change, discharge or
termination is sought.
10.02 Trustor's Waiver of Rights. Trustor hereby waives, to the
extent permitted by law: (a) the benefit of all laws now existing or that may
hereafter be enacted providing for any appraisement before sale of any portion
of the Property, and, whether now existing or hereafter arising or created;
(b) all rights of redemption, valuation, stay of execution, notice of
election to mature or declare due the whole of the Secured Obligations and
marshaling in the event of trustee's sale of judicial foreclosure of the liens
hereby created; and (c) all rights and remedies which Trustor may have or be
able to assert by reason of the laws of the State of Arizona pertaining to the
rights and remedies of sureties.
10.03 Statements by Trustor. Trustor shall, within 10 days after
notice thereof from Beneficiary, deliver to Beneficiary a written statement
setting forth the amounts then unpaid and secured by this Deed of Trust and
stating whether any offset or defense exists against such amounts.
10.04 Reconveyance by Trustee. Upon the written request of
Beneficiary stating that all Secured Obligations have been paid and fully
performed, and upon payment by Trustor of Trustee's fees and the costs and
expenses of executing and recording any requested reconveyance, Trustee shall
reconvey to Trustor, or to the person or persons legally entitled thereto,
without warranty, any portion of the Property then held hereunder. The
recitals in any such reconveyance of any matter or fact shall be conclusive
proof of the truthfulness thereof. The grantee in any such reconveyance
may be described as "the person or persons legally entitled thereto."
Beneficiary agrees to execute all documents, instruments, agreements and
financing statements in connection with any such reconveyance of the
Property and the security interest granted pursuant to Section 2.02 above.
10.05 Notices. Whenever Beneficiary, Trustor or Trustee shall
desire to give or serve any notice, demand, request or other communication
with respect to this Deed of Trust, unless otherwise required by
applicable law, each such notice, demand, request or other communication shall
be in writing and shall become effective: (i) upon delivery by hand; (ii) two
business days after being deposited, by the party giving such notice, demand,
request or other communication, with the United States Postal Service,
certified, postage prepaid; or (iii) one business day after being delivered,
by the party giving such notice, demand, request or other communication, to a
nationally recognized overnight courier delivery service, with the charge for
such overnight delivery prepaid, in either case addressed to the parties to
whom such notice, demand, request or other communication is directed, at the
addresses for such parties set forth in the first paragraph of this Deed of
Trust, or at such other addresses as each party may designate from time to time
by
22 SWI ARIZONA DEED OF TRUST
<PAGE> 23
delivering notice as provided herein. All such notices and other
communications shall be effective when mailed; provided, however, that
notices to Beneficiary shall be effective only when received by Beneficiary.
Notice given in any other manner shall be effective only if and when received
by the addressee.
10.06 Captions. The captions or headings at the beginning of
Articles, Sections and Subsections hereof are for the convenience of the
parties and shall not be used in construing it.
10.07 Invalidity of Certain Provisions. Every provision of this
Deed of Trust is intended to be severable. In the event any term or provision
hereof is declared to be illegal, invalid or unenforceable for any reason
whatsoever by a court of competent jurisdiction, such illegality, invalidity,
or unenforceability shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable. If the lien of this Deed of Trust is invalid or unenforceable
as to any part of the debt, or if the lien is invalid or unenforceable as to
any part of the Property, the unsecured or partially secured portion of the
debt shall be completely paid prior to the payment of the remaining and
secured or partially secured portion of the debt, and all payments made on
the debt, whether voluntary or by trustee's sale, judicial foreclosure or
other enforcement action or procedure, shall be considered to have been first
paid on and applied to the full payment of that portion of the debt which is
not secured or fully secured by the lien of this Deed of Trust.
10.08 Subrogation. To the extent that proceeds of the Secured
Obligations created under the Loan Documents are used, either directly or
indirectly, to pay any outstanding lien, charge or prior encumbrance against
the Property, Beneficiary shall be subrogated to any and all rights and
liens held by an owner or holder of such outstanding liens, charges and prior
encumbrances, irrespective of whether said liens, charges or encumbrances are
released.
10.09 No Merger of Lease. Upon the trustee's sale or judicial
foreclosure of the lien created by this Deed of Trust on the Property
pursuant to the provisions hereof, any lease or sublease or rental
agreement then existing and affecting all or any portion of the Property
shall not be destroyed or terminated by application of the law of merger or as
a matter of law or as a result of such trustee's sale or judicial
foreclosure unless Beneficiary or any purchaser at such trustee's sale or
judicial foreclosure sale shall so elect. No act by or on behalf of
Beneficiary or any such purchaser shall constitute a termination of any
lease or sublease unless Beneficiary or such purchaser shall give written
notice thereof to such tenant or subtenant. If both the lessor's and
lessee's estate under any lease or any portion thereof which constitutes a part
of the Property shall at any time become vested in one owner, this Deed of
Trust and the lien created hereby shall not be destroyed or terminated by
application of the doctrine of merger unless Beneficiary so elects as
evidenced by recording a written declaration so stating, and, unless and
until Beneficiary so elects, Beneficiary shall continue to have and enjoy
all of the rights and privileges of Beneficiary hereunder as to the
separate estates, except as otherwise provided by law.
10.10 Governing Law. This Deed of Trust, and its validity,
enforcement and interpretation, shall be governed by Texas law (without
regard to any conflict of laws principles) and applicable United States
federal law, except to the extent of procedural and substantive matters
relating only to the creation and perfection of liens and security
interests in, and the enforcement of rights and remedies against, the
Property, which matters shall be governed by the laws of the State of Arizona.
10.11 Joint and Several Obligations. Should this Deed of Trust be
signed by more than one party, all obligations herein contained shall be
deemed to be the joint and several obligations of each party executing
this Deed of Trust.
23 SWI ARIZONA DEED OF TRUST
<PAGE> 24
10.12 Interpretation. In this Deed of Trust the singular
shall include the plural and the masculine shall include the feminine and
neuter and vice versa, if the context so requires; and the word "person"
shall include corporation, partnership, joint venture, limited liability
company or other form of association or legal entity recognized in law.
10.13 Corrections. Trustor shall, upon request of Beneficiary,
promptly correct any defect, error or omission which may be discovered in the
contents hereof or in the execution or acknowledgment hereof, and will
execute, acknowledge and deliver such further instruments and do such further
acts as may be necessary or as may be reasonably requested by Beneficiary
to carry out more effectively the purposes hereof, to subject to the lien
and security interest hereby created any of Trustor's properties, rights
or interest covered or intended to be covered hereby, or to perfect and
maintain such lien and security interest.
10.14 Further Assurances. Trustor agrees to do or to cause to
be done such further acts and things and to execute and deliver or to
cause to be executed and delivered such additional assignments, agreements,
powers and instruments, as any of them may reasonably require or deem
advisable to keep valid and effective the charges and lien hereof, to carry
into effect the purposes of this Deed of Trust or to better assure and
confirm unto Beneficiary or Trustee their rights, powers and remedies
hereunder; and, upon request by Beneficiary or Trustee, shall supply
evidence of fulfillment of each of the covenants herein contained concerning
which a request for such evidence has been made. In the event that Trustor
fails or refuses to execute and deliver any assignments, agreements, powers
or instruments pursuant to this Section 10.14, Trustor irrevocably
appoints Beneficiary or Trustee, as applicable, its true and lawful
attorney-in-fact, with full power of substitution, to execute and
deliver any such assignments, agreements, powers and instruments. The
appointment granted herein shall be deemed to be a power coupled with an
interest.
10.15 Execution of Instruments by Trustee. At any time, and from
time to time, without liability therefor and without notice, upon written
request of Beneficiary and without affecting the personal liability of any
person for payment of the indebtedness or the performance of any other
obligation secured hereby, Trustee may: (a) release and reconvey any part of
said Property; (b) consent in writing to the making of any map or plat
thereof; (c) join in granting any easement thereon; or (d) join in any
extension agreement, agreement subordinating the lien or charge hereof, or
other agreement or instrument relating hereto or to the Property or any
portion thereof.
10.16 Appointment of Successor Trustee. Beneficiary may, from
time to time remove Trustee and appoint a successor Trustee to any Trustee
appointed hereunder. A Notice of Substitution of Trustee in the form
required by applicable law shall be recorded with the County Recorder of the
county in which the Land is located.
10.17 Successors and Assigns. Subject to Section 4.19 above,
this Deed of Trust applies to, inures to the benefit of and binds
Trustor, Trustee and Beneficiary and their respective legal
representatives, successors and assigns.
10.18 Priority. Except as otherwise expressly set forth in the
Credit Agreement, this Deed of Trust is intended to have and retain
priority over all other liens and encumbrances upon the Property,
excepting only: (a) such taxes, assessments, or Impositions as have, or by
law gain, priority over the lien created hereby; (b) covenants, conditions,
restrictions, easements, and rights of way which are of record or are
disclosed of record affecting the Property that have been approved by
Beneficiary in writing; (c) leases, liens, encumbrances and other matters as
to which Beneficiary hereafter expressly subordinates the lien of this Deed
of Trust by written instrument in recordable form. Under no circumstance
shall Beneficiary be obligated or required to subordinate the lien hereof to
any lease, lien, encumbrance, covenant or other
24 SWI ARIZONA DEED OF TRUST
<PAGE> 25
matter affecting the Property or any portion thereof. Beneficiary may,
however, at Beneficiary's option, exercisable in its sole and absolute
discretion, subordinate the lien of this Deed of Trust, in whole or in part,
to any or all leases, liens, or encumbrances by executing and recording with
the County Recorder of the county in which the Land is located, a
unilateral declaration of such subordination specifying the lease, lien,
encumbrance or other matter or matters to which this Deed of Trust shall
thereafter be subordinate.
10.19 Change of Law. In the event of the passage, after the
date of this Deed of Trust, of any law deducting from the value of the
Property, for the purposes of taxation, any lien thereon, or changing in any
way the laws now in force for the taxation of mortgages, deeds of trust, or
debts secured by mortgage or deed of trust (other than laws imposing taxes on
income), or the manner of the collection of any such taxes so as to affect
adversely the rights of Beneficiary under this Deed of Trust, the Secured
Obligations shall become due and payable at the option of Beneficiary
exercised by 30 days notice to Trustor unless Trustor, within such 30 day
period, shall, if permitted by law, assume the payment of any tax or
other charge so imposed upon Beneficiary for the period remaining until full
payment of the Secured Obligations.
10.20 No Waiver. No waiver by Beneficiary of any Event of
Default, default or breach by Trustor hereunder shall be implied from any
omission by Beneficiary to take action on account of such Event of
Default, default or breach if such Event of Default, default or breach
persists or is repeated, and no express waiver shall affect any Event of
Default, default or breach other than the particular Event of Default,
default or breach referred to in such waiver and such waiver shall be
operative only for the time and to the extent therein stated. Waivers of any
covenant, term or condition contained herein shall not be construed as a
waiver of any subsequent breach of the same covenant, term or condition.
The consent or approval by Beneficiary to or of any act by Trustor requiring
further consent or approval shall not be deemed to waive or render unnecessary
the consent or approval to or of any subsequent similar act.
10.21 Abandonment. Subject to such security agreements or other
liens as may exist thereon with the consent of Beneficiary, or any provided
for herein, any and all Personal Property Collateral that upon trustee's
sale or judicial foreclosure of the Property is owned by Trustor and is used
in connection with the operation of the Property, shall be deemed, at the
option of Beneficiary, to have become a part of the Property and abandoned
to Beneficiary in its then condition.
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be
executed by its duly authorized officers, agents or representatives as of the
date first above written.
"TRUSTOR"
SOUTHWESTERN ICE, INC., a Texas
corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
WITNESS
In accordance with the requirements of A.R.S. Section 14-5503, the
undersigned has executed this Deed of Trust solely for the purpose of
witnessing the grant of a power of attorney by Trustor to Beneficiary as
described in this Deed of Trust.
25 SWI ARIZONA DEED OF TRUST
<PAGE> 26
-----------------------------
-----------------------------
STATE OF TEXAS )
)
COUNTY OF BEXAR )
The foregoing instrument was acknowledged before me this ___ day
of September, 1997, by James F. Stuart, as President of SOUTHWESTERN ICE,
INC., a Texas corporation, on behalf of said corporation.
-----------------------------
Notary Public
My commission expires:
- -----------------------------
26 SWI ARIZONA DEED OF TRUST
<PAGE> 27
EXHIBIT A
Legal Description
SWI ARIZONA DEED OF TRUST
<PAGE> 1
EXHIBIT 10.24
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") is entered into
as of September 15, 1997, by PACKAGED ICE, INC., a Texas corporation (the
"PLEDGOR") in favor of THE FROST NATIONAL BANK, as Agent (in such capacity, the
"AGENT") for each of the Banks under the Credit Agreement (defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the
date hereof (as modified, amended, supplemented, or restated from time to time,
the "CREDIT AGREEMENT"), among Pledgor (the "BORROWER"), the Agent, and certain
other financial institutions who from time to time are parties thereto (the
"BANKS"), the Banks have extended Commitments to make Revolving Credit Loans to
the Borrower;
WHEREAS, as a condition precedent to the making of loans by the Banks
under the Credit Agreement, the Pledgor is required to execute and deliver this
Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Banks to extend the
Commitments to the Pledgor pursuant to the Credit Agreement, the Pledgor
agrees, for the benefit of each of the Banks, as follows:
SECTION 1. DEFINED TERMS. Capitalized terms not otherwise defined
herein shall have the meaning assigned to such terms in the Credit Agreement
unless the context hereof shall otherwise require or provide. For the purposes
of this Agreement, the following terms shall have the respective meanings
assigned to them in this Section 1:
"ATTRIBUTION GROUP" shall have the meaning assigned in Section 5(d)
hereof.
"BANKS" shall mean the Agent and each of the Banks, and each of their
respective successors, transferees and assigns.
"CLASS SECURITIES" shall have the meaning assigned in Section 4(i).
"CODE" shall have the meaning assigned in Section 7(a).
"EVENT OF DEFAULT" shall mean the occurrence of any one or more of the
following:
(a) Any Event of Default specified in the Credit
Agreement, the Notes, the Loan Papers, or agreements or contracts existing at
the date hereof or hereafter entered into between Agent and Borrower or Agent
and Issuers, or any of them, subject to applicable notice and cure periods;
(b) Default is made in the due observance or performance
by Pledgor of any of the covenants or agreements contained in this Agreement,
subject to applicable notice and cure periods;
<PAGE> 2
(c) Any statement, warranty or representation by Pledgor
contained in this Agreement proves to be untrue or inaccurate in any material
respect;
(d) This Agreement shall cease to be a legal, valid and
binding agreement enforceable against Pledgor in accordance with its terms,
shall be terminated, become or be declared ineffective or inoperative or cease
to provide the respective liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be provided hereby;
(e) Pledgor shall: (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor or liquidator of
itself or of all or a substantial part of its assets, (ii) file a voluntary
petition in bankruptcy, (iii) generally fail to pay, or admit in writing it is
unable to pay, its debts as they become due or generally not pay its debts as
they become due, (iv) make a general assignment for the benefit of creditors,
(v) file a petition or answer seeking reorganization or an arrangement with
creditors or to take advantage of any bankruptcy or insolvency laws, (vi) file
an answer admitting the material allegations of, or consent to, or default in
answering, a petition filed against Pledgor in any bankruptcy, reorganization
or insolvency proceeding, or (vii) take corporate action for the purpose of
effecting any of the foregoing;
(f) An involuntary proceeding shall be commenced against
Pledgor seeking bankruptcy or reorganization or the appointment of a receiver,
custodian, trustee, liquidator or other similar official, of all or
substantially all of its assets, and such proceeding shall not have been
dismissed within sixty (60) days of the filing thereof; or an order, order for
relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Pledgor or appointing a receiver; or
(g) The levy on, seizure, or attachment of all or part of
the Pledged Collateral.
"ISSUERS" shall mean Packaged Ice Leasing, Inc., Southwestern Ice,
Inc., Mission Party Ice, Inc., and Southwest Texas Packaged Ice, Inc.
"PLEDGED COLLATERAL" shall have the meaning assigned to it in Section
2 hereof.
"PLEDGED SHARES" shall mean all shares of common stock, capital stock,
voting stock and other equity interests issued by the Issuers which are
delivered or required to be delivered under the terms of the Credit Agreement
from time to time by the Pledgor to the Agent as Pledged Collateral hereunder.
"RULE 144" shall have the meaning assigned in Section 5(d) hereof.
"SECURED INDEBTEDNESS" shall mean all indebtedness, obligations and
liabilities described or referred to in clauses (a) through (e) below,
inclusive:
(a) All or any part of the Obligations, whether for
principal, interest, fees, expenses, or otherwise;
(b) Any and all indebtedness and obligations of Pledgor
to Banks arising pursuant to this Agreement or any other document,
instrument or agreement delivered in connection herewith, including
reasonable legal expenses and other reasonable expenses incurred in
the preparation, execution and/or the enforcement of the Credit
Agreement, Notes, this Agreement and any of the other Loan Papers;
2 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 3
(c) All other and additional debts, obligations and
liabilities of every kind and character of the Borrower and/or the
Issuers, now or hereafter owed to or existing in favor of Banks,
regardless of whether such debts, obligations and liabilities be
direct or indirect, primary or secondary, joint, several, or joint and
several, fixed or contingent, and regardless of whether such present
or future debts, obligations and liabilities may, prior to their
acquisition by Banks, be or have been payable to, or be or have been
in favor of some other person or have been acquired by Banks in a
transaction with one other than the Borrower and/or the Issuers;
(d) Any and all renewals, extensions, modifications, or
increases of the indebtedness and obligations described in (a)-(c)
above.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
SECTION 2. PLEDGE. As collateral security for the payment of the
Secured Indebtedness, Pledgor hereby pledges, hypothecates, assigns, transfers,
sets over, delivers and transfers to the Agent, for its benefit and the benefit
of each of the other Banks, and hereby grants to the Agent, for its benefit and
the benefit of each of the other Banks, a continuing security interest in all
of Pledgor's rights, titles and interests in and to all the following property:
(a) All capital stock of the Issuers identified in
Exhibit A attached hereto, now owned or hereafter acquired by Pledgor,
including (but not limited to) the Pledged Shares and the certificates
representing the Pledged Shares, together with all cash, securities,
dividends, increases, distributions and profits received therefrom or
in connection therewith, including distributions or payments in
partial or complete liquidation or redemption, or as a result of
reclassification, readjustments, reorganizations or changes in the
capital structure of the Issuers, or any of them, and any other
property at any time and from time to time received, receivable or
otherwise distributed or delivered to Agent, and all rights and
privileges pertaining thereto;
(b) All additional shares of every class of common stock,
capital stock, voting stock and other equity interests of the Issuers,
or any of them, from time to time acquired by the Pledgor in any
manner, and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares;
(c) All securities hereafter delivered to Agent or its
designees, in substitution for, or in addition to, any of the
foregoing, all certificates representing or evidencing such
securities, and all cash, securities, instruments, documents,
dividends, increases, distributions and profits received therefrom,
and any other property at any time and from time to time received by,
receivable by or otherwise distributed or delivered to Agent or its
respective designees, in respect of or in exchange for any or all of
the property described;
(d) All subscriptions, warrants, options and any other
rights issued now or hereafter by the Issuers of the Pledged Shares or
any other person whatsoever upon or in connection with the Pledged
Shares and any part of the Pledged Collateral;
(e) All products and proceeds of the foregoing and all
general intangibles and contract rights related thereto, including
without limitation, all revenues, distributions, dividends, property,
registration rights, contract rights and other rights and interests
that Pledgor is, or may hereafter become, entitled to receive on
account of any collateral described in Sections 2(a) through (d);
3 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 4
(all such Pledged Shares, certificates, securities, instruments,
documents, dividends, increases, distributions, profits, intangibles,
contract rights and other property being herein collectively called
the "PLEDGED COLLATERAL").
Pledgor shall forthwith deliver to Agent or its respective designees
all subscriptions, warrants, options and all such other rights to acquire the
Pledged Collateral, and upon delivery to Agent or its respective designees,
Agent or its respective designees shall hold such subscriptions, warrants,
options and other rights as additional collateral pledged to secure the Secured
Indebtedness; provided, however, that if Agent determines, in its sole
discretion, that any such subscriptions, warrants, options or other rights
shall terminate, expire or be materially reduced in value by holding the same
as Pledged Collateral, Agent shall have the right (but not the obligation), in
its sole discretion, to sell or exercise the same, and if exercised, then the
monies disbursed by Agent in connection therewith shall become part of the
Secured Indebtedness and all of the stock, securities, evidences of
indebtedness and other items so acquired shall become part of the Pledged
Collateral;
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
titles, interests, privileges and preferences appertaining to or incidental
thereto, unto Agent, its successors and assigns, forever, subject, however, to
the terms, covenants and conditions hereafter set forth.
SECTION 3. AGENT AS CUSTODIAN. Agent (or an agent designated by
Agent) shall have physical possession of the certificates or instruments
representing or evidencing the Pledged Collateral. Pledgor agrees that the
Pledgor will deposit with Agent or its respective designees, along with the
certificates or instruments representing or evidencing the Pledged Collateral,
duly executed stock powers in favor of Agent or its nominees. In addition,
Agent shall at all times have the right to exchange certificates or instruments
representing or evidencing the Pledged Collateral for certificates or
instruments of smaller or larger denominations if the same exist for any
purpose consistent with its performance of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby
represents and warrants to Agent and each of the other Banks, that:
(a) Pledgor is the legal and equitable owner of the
Pledged Collateral free and clear of all liens, charges, pledges,
encumbrances and security interests of every kind and nature;
(b) The Pledged Shares have been validly authorized,
issued and are fully paid and non-assessable;
(c) Pledgor has good right and lawful authority to pledge
the Pledged Collateral in the manner hereby done or contemplated;
(d) No consent or approval of any governmental body or
regulatory authority, or of any securities exchange, is necessary to
effect the validity of the rights created hereunder which have not
been obtained;
(e) Except for any financing statement which may have
been filed by the Agent, no financing statement covering the Pledged
Collateral or any part thereof, has been filed with any filing
officer;
4 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 5
(f) No security agreement covering the Pledged
Collateral, or any part thereof, has been made and no security
interest, other than the one herein created, has attached or been
perfected in the Pledged Collateral or any part thereof;
(g) The execution, delivery and consummation of this
Agreement will not violate the charter or bylaws of Pledgor or any
law, regulation, mortgage, indenture, contract, instrument, judgment
or decree applicable to or binding on Pledgor or the Issuers;
(h) The Pledged Shares constitute all of the issued and
outstanding voting stock of the Issuers;
(i) The Pledgor has held the Pledged Collateral, free and
clear of all liens, encumbrances and debt, and borne the full economic
risk thereof since the acquisition of the Pledged Collateral by
Pledgor, and at no time has Pledgor held any short position in such
securities or option to sell such securities, and at no time during
such period did any member of the Attribution Group hold a short
position in any shares or securities of the class of any security
pledged as Pledged Collateral hereunder or convertible into such class
(hereinafter referred to as "CLASS SECURITIES") or an option to sell
any such Class Securities; and
(j) The information contained in all forms or other
statements given to Agent by Pledgor regarding the Pledged Shares is
true, complete and accurate in all material respects, and the Pledgor
will immediately notify Agent of any change in such information.
The delivery at any time by Pledgor to Agent of additional Pledged
Collateral shall constitute a representation and warranty by Pledgor that, with
respect to such Pledged Collateral, and each item thereof, the matters
heretofore warranted in clauses (a) through (i) immediately above are true and
correct at, and as if they were made at, the date of such delivery, unless
otherwise disclosed in writing to Agent.
SECTION 5. COVENANTS.
(a) ADDITIONAL DOCUMENTS AND INFORMATION. Pledgor
covenants and agrees to: (i) from time to time promptly execute and
deliver to Agent all such stock powers, assignments, certificates,
supplemental writings, financing statements and other items, do all
other acts or things, and take such further actions, as Agent may
reasonably request from time to time in order more fully to evidence
and perfect the interests of Agent in the Pledged Collateral; (ii)
punctually and properly perform all of Pledgor's covenants and duties
under any other security agreement, deed of trust, collateral pledge
agreement or contract of any kind now or hereafter existing as
security for or in connection with payment of the Secured Indebtedness
(to the extent liable thereon) in accordance with the terms hereof and
in accordance with the terms of the Note; (iii) allow Agent to inspect
all records of Pledgor relating to the Pledged Collateral or to the
Secured Indebtedness at all reasonable times, and to make and take
away copies of such records; (iv) promptly notify Agent of any change
in any fact or circumstances warranted or represented by Pledgor in
this Agreement or in any other writing furnished by Pledgor to Agent
in connection with the Pledged Collateral or the Secured Indebtedness;
(v) promptly notify Agent of any claim, action or proceeding affecting
title to the Pledged Collateral, or any part thereof, or the security
interest herein, and, at the request of Agent, appear in and defend,
at Pledgor's expense, any such action or proceeding; and (vi)
promptly, after being requested by Agent pay to the requesting party
the amount of all reasonable expenses, including reasonable attorney's
fees and other legal expenses, incurred by such requesting party in
perfecting, maintaining and enforcing the security interests.
5 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 6
(b) PROCEEDS. Should the Pledged Collateral, or any part
thereof, ever be in any manner converted by the Issuers, or any of
them, into another type of property or any money or other proceeds
ever be paid or delivered to Pledgor as a result of Pledgor's rights
in the Pledged Collateral, then, in any such event, all such property,
money and other proceeds, except only ordinary cash dividends (unless
and until payable to Agent pursuant to Section 6(b) hereof), shall
become part of the Pledged Collateral, and shall be delivered to Agent
by Pledgor for the benefit of Agent and the other Banks.
(c) PERFORMANCE BY AGENT. Should any covenant, duty or
agreement of Pledgor fail to be performed in accordance with its terms
hereunder, Agent may, but shall never be obligated to, perform or
attempt to perform such covenant, duty or agreement on behalf of
Pledgor, and any reasonable amount expended by Agent in such
performance or attempted performance shall become a part of the
Secured Indebtedness, and, at the written request of Agent, the
Pledgor agrees to pay such amount promptly to requesting party at such
party's office in San Antonio, Texas, together with interest thereon
at the non-default rate provided in the Credit Agreement.
(d) RULE 144. Except as provided below, the Pledgor
hereby further covenants and agrees that (i) it or any person, party
or entity with whom it shall be deemed one "person" for purposes of
(a)(2) of Rule 144 of the Securities and Exchange Commission ("RULE
144"), or any affiliate of such Pledgor, person, party or entity (as
the term "affiliate" is defined in Rule 144(a)(1)) (the Pledgor and
all such persons, parties, entities and affiliates being hereinafter
collectively referred to as the "ATTRIBUTION GROUP") will not sell or
allow the Attribution Group to sell any Class Securities, whether or
not such securities are pledged hereunder, from the date hereof until
the Secured Indebtedness has been paid in full and in the event of any
such sale consented to by Agent, will furnish Agent with a copy of any
Form 144 filed in respect of such sale; (ii) it will cooperate fully
with Agent with respect to any sale by Agent of any of the Pledged
Collateral, including full and complete compliance with all
requirements of Rule 144 and will give to Agent all information and
will do all things necessary, including the execution of all
documents, forms, instruments, and other items, to comply with Rule
144 and any and all other rules, regulations or laws of the United
States or the State of Texas necessary for the complete and
unrestricted sale and/or transfer of the Pledged Collateral and will
exercise its best efforts to have the Issuers, upon the request of the
Agent, publicly disseminate all information required to satisfy Rule
144(c); and (iii) neither the Pledgor nor the Attribution Group will
hold a short position in such securities from the date hereof until
the Secured Indebtedness is paid in full.
(e) NEGATIVE COVENANTS. Pledgor covenants and agrees
that, without the prior written consent of Agent, Pledgor will not
unless otherwise permitted by the Credit Agreement: (i) sell, assign
or transfer any rights of Pledgor in the Pledged Collateral; (ii)
grant any options or other rights in the Pledged Collateral; (iii)
create any other security interest in, mortgage, or otherwise encumber
the Pledged Collateral, or any part thereof, or permit the same to be
or become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance of any kind or
character, except the security interest herein created; (iv) vote for,
or consent to, any amendment of the articles of incorporation or
charter of the Issuers, or any of them, that might materially
adversely affect the value of the Pledged Collateral; (v) permit the
Issuers, or any of them, to merge or consolidate with or into any
corporation or other person other than mergers or consolidations under
which Pledgor retains 100% of the capital stock of the surviving
corporation; or (vi) permit the Issuers, or any of them, to issue any
additional shares of its capital stock.
6 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 7
(f) DISTRIBUTIONS. Any and all cash dividends payable on
the Pledged Collateral, or stock and/or liquidating dividends,
distributions in property, returns of capital or other distributions
made on or in respect of the Pledged Collateral, whether resulting
from a subdivision, combination or reclassification of the
outstanding, capital stock of any issuer thereof or received in
exchange for Pledged Collateral or any part thereof or as a result of
any merger, consolidation, acquisition or other exchange of assets to
which any such issuer may be a party or otherwise, and any and all
cash and other property received in exchange for the Pledged
Collateral, or received in payment of the principal of or in
redemption of the Pledged Collateral (either at maturity, upon call
for redemption or otherwise), shall be and become part of, and
constitute, the "Pledged Collateral" and, if received by the Pledgor,
shall be held in trust for the benefit of Agent and forthwith be
delivered to Agent or its respective designees (accompanied by proper
instruments of assignment and/or stock powers executed by the Pledgor
in accordance with Agent's instructions) to be held subject to the
terms of this Agreement.
SECTION 6. VOTING RIGHTS; DIVIDENDS, ETC., PRIOR TO DEFAULT.
(a) RIGHTS PRIOR TO DEFAULT. So long as no Event of
Default shall have occurred after the date hereof and be continuing,
the Pledgor shall be entitled to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement; provided, however, that the Pledgor shall
not exercise or refrain from exercising any such right or power if
such action would have a material adverse effect on the value of the
Pledged Collateral or any part thereof as determined by Pledgor's
Board of Directors in its reasonable business judgment.
(b) TERMINATION OF RIGHTS. Upon the occurrence after the
date hereof of an Event of Default, all rights of the Pledgor to
exercise the voting and/or consensual rights and powers which it is
entitled to exercise pursuant to Section 6(a) hereof shall cease, at
the option of Agent, and all such rights shall thereupon become vested
in Agent who shall have the sole and exclusive right and authority to
exercise such voting and/or consensual rights and powers. Further,
Agent shall have the right upon the occurrence of an Event of Default,
to notify and direct the Issuers to thereafter make all payments,
distributions, dividends and any other distributions payable in
respect thereof directly to Agent. The Issuers in making any
distribution to Agent hereunder shall be fully protected in relying on
the written statement of Agent that it then holds a security interest
which entitles it to receive such payments and distributions. Any and
all money and other property paid over to or received by Agent
pursuant to the provisions of this subsection shall be retained by
Agent as additional collateral hereunder and may be applied (and upon
the Pledgor's written request all cash shall promptly be applied) in
accordance with the provisions hereof.
SECTION 7. RIGHTS AND REMEDIES OF AGENT UPON AND AFTER DEFAULT.
(a) REMEDIES. Upon the occurrence of an Event of
Default, in addition to any and all other rights and remedies which
Agent may then have hereunder, under the Credit Agreement, the other
Loan Papers, under applicable law, or under the Texas Business and
Commerce Code or other states, as applicable (hereinafter called the
"CODE"), or otherwise, Agent may at its option (i) declare the entire
unpaid balance of principal and all accrued interest on all or any
part of the Secured Indebtedness immediately due and payable, without
written notice, demand, or presentment, other than notice required
under the Credit Agreement, which are hereby waived; (ii) reduce its
claim to judgment, foreclose or otherwise enforce its security
interest in all or any part of the Pledged Collateral by any available
judicial procedure; (iii) after notification, if any, expressly
7 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 8
provided for herein, sell or otherwise dispose of, at the office of
Agent, or elsewhere, as chosen by Agent, all or any part of the
Pledged Collateral, and any such sale or other disposition may be as a
unit or in parcels, by public or private proceedings, and by way of
one or more contracts (it being agreed that the sale of any part of
the Pledged Collateral shall not exhaust Agent's power of sale, but
sales may be made from time to time until all of the Pledged
Collateral has been sold or until the Secured Indebtedness has been
paid in full, provided, however that Agent shall not have any
obligation to sell the Pledged Collateral piecemeal, it being
specifically acknowledged that a sale of all of the Pledged Collateral
to one purchaser in single transaction shall be conclusively presumed
to be commercially reasonable), and at any such sale it shall not be
necessary to exhibit the Pledged Collateral; (iv) at its discretion,
retain the Pledged Collateral in satisfaction of the Secured
Indebtedness whenever the circumstances are such that Agent is
entitled to do so under the Code; (v) apply by appropriate judicial
proceedings for appointment of a receiver for the Pledged Collateral,
or any part thereof, and Pledgor hereby consents to any such
appointment; (vi) together with the other Banks, purchase the Pledged
Collateral at any public sale in accordance with the Code; (vii)
purchase the Pledged Collateral at any private sale in accordance with
the Code; and (viii) exercise the rights set forth in this Section 7
hereof in accordance with the Code.
(b) SALE OF PLEDGED COLLATERAL. Agent is authorized, at
any sale of the Pledged Collateral, if it deems it advisable, to
restrict the prospective bidders or purchasers to those persons who
will represent and agree that they are purchasing for their own
account, for investment, and not with a view to distribution or sale
of any of the Pledged Collateral. Upon any such sale, Agent shall
have the right to deliver, assign, and transfer to the purchaser
thereof the Pledged Collateral so sold. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or
right of whatsoever kind, including, any equity or right of
redemption, of Pledgor which hereby specifically waives all rights of
redemption, stay, or appraisal which it has or may have under any rule
of law or statute now existing or hereafter adopted, and such waiver
shall be deemed to have been made after default. Agent shall give
Pledgor ten (10) days' written notice of their intention to make any
such public or private sale or sale at broker's board or on a
securities exchange. Such notice, in case of sale at broker's board
or on a securities exchange, shall state the board or exchange at
which such sale is to be made and the day on which the Pledged
Collateral, or that portion thereof so being sold, which will first be
offered for sale at such board or exchange. Agent shall not have any
obligation to disclose or provide any information concerning the
Issuers or the Pledged Collateral to prospective purchasers of the
Pledged Collateral other than information in its possession at such
time and Pledgor agrees and acknowledges that it shall be commercially
reasonable for any notices of any such sale, published or otherwise,
to specifically so state. At any such sale the Pledged Collateral may
be sold in one lot as an entirety or in separate parcels, as Agent may
elect, and any such election shall be presumed to be commercially
reasonable. Agent shall not be obligated to make any such sale
pursuant to any such notice. Agent may, without notice or
publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any
part of the Pledged Collateral on credit or for future delivery, the
Pledged Collateral so sold may be retained by Agent until the selling
price is paid by the purchaser thereof, but Agent shall not incur any
liability in case of the failure of such purchaser to take and pay for
the Pledged Collateral so sold, and, in case of any such failure, such
Pledged Collateral may again be sold upon like notice. Agent may
also, at its discretion, proceed by a suit or suits at law or in
equity to foreclose the pledge and sell the Pledged Collateral, or any
portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction. If any consent, approval or authorization of
any state, municipal or other governmental department, agency or
authority should be necessary to effectuate
8 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 9
any sale or other disposition of the Pledged Collateral, or any part
disposition of the Pledged Collateral, or any part thereof, Pledgor
will execute all such applications and other instruments as may be
required in connection with securing any such consent, approval or
authorization, and will otherwise use its best efforts to secure the
same.
(c) POSSIBLE RESTRICTIONS ON SALE OF PLEDGED COLLATERAL.
Because of the Securities Act, as amended, or any other applicable
laws or regulations, there may be legal restrictions or limitations
affecting Agent in any attempts to dispose of certain portions of the
Pledged Collateral in the enforcement of its rights and remedies
hereunder. For these reasons Agent is hereby authorized by Pledgor,
but not obligated, in the event of any Event of Default hereunder
giving rise to Agent's right to sell or otherwise dispose of the
Pledged Collateral, and after the giving of any notices required
herein, to sell all or any part of the Pledged Collateral at private
sale, subject to an investment letter or in any other manner which
will not require the Pledged Collateral, or any part thereof, to be
registered in accordance with the Securities Act, as amended, or other
applicable rules and regulations promulgated thereunder, or any other
law or regulation, at the best price reasonably obtainable by Agent at
any such private sale or other disposition in the manner mentioned
above and Pledgor specifically acknowledges that any such disposition
shall be commercially reasonable under the Code. Agent is also hereby
authorized by Pledgor, but not obligated, to take such actions, give
such notices, obtain such consents, and do such other things as Agent
may deem required or appropriate in the event of a sale or disposition
of any of the Pledged Collateral. Pledgor clearly understands that
Agent may at its discretion approach a restricted number of potential
purchasers and that a sale under such circumstances may yield a lower
price for the Pledged Collateral, or any part or parts thereof, than
would otherwise be obtainable if the same were registered and sold in
the open market. Pledgor agrees (i) in the event Agent shall, upon an
Event of Default hereunder, sell the Pledged Collateral, or any
portion thereof, at such private sale or sales, Agent shall have the
right to rely upon the advice and opinion of any member firm of the
National Security Exchange as to the best price reasonably obtainable
upon such private sale thereof, and (ii) that such reliance shall be
conclusive evidence that Agent handled such matter in a commercially
reasonable manner under the Code.
(d) NOTIFICATION. Reasonable notification of the time
and place of any public sale of the Pledged Collateral, or reasonable
notification of the time after which any private sale or other
intended disposition of the Pledged Collateral is to be made, shall be
sent to Pledgor and to any other person entitled under the Code to
notice; provided, that if the Pledged Collateral threatens to decline
quickly in value or is of a type customarily sold on a recognized
market, Agent may sell or otherwise dispose of the Pledged Collateral
without notification, advertisement or other notice of any kind. It
is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purpose of this Agreement.
(e) APPLICATION OF PROCEEDS. Upon the maturity of any
instrument evidencing the Secured Indebtedness or any part thereof,
whether such maturity be by such terms of such instruments or through
the exercise of any power of acceleration, Agent is authorized and
empowered to apply any and all funds realized from the sale of the
Pledged Collateral not previously credited against the Secured
Indebtedness first toward the payment of the costs, charges and
expenses, if any, incurred in the collection of such funds hereunder,
and then toward the payment of the Secured Indebtedness as provided
for in the Credit Agreement and shall pay any balance remaining to the
Pledgor or as prescribed by the Code.
9 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 10
(f) NOTICES. In the event that any notice is required to
be given to Pledgor with respect to any sale or liquidation of the
Pledged Collateral, any notice addressed to Pledgor at the address set
forth below its signature hereto, postage prepaid, deposited in the
United States mail ten (10) calendar days prior to the date of any
such intended action shall be deemed to be a sufficient and
commercially reasonable notice. Nothing contained herein shall
prevent Agent from giving notice in any other manner which is
considered reasonable.
SECTION 8. AUTHORITY OF AGENT. Agent shall have and be entitled to
all of the rights, powers, protections, authorities, indemnifications and
rights to payment of expenses as set forth in the Credit Agreement.
SECTION 9. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
appoints Agent the Pledgor's attorney-in-fact for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which Agent may deem reasonably necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, Agent shall have
the right and power to receive, endorse, and collect all checks and other
orders for the payment of money made payable to the Pledgor representing any
dividend or other distribution payable or distributable in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same.
SECTION 10. CERTAIN RIGHTS BEFORE AND AFTER AN EVENT OF DEFAULT.
(a) AGENT'S RESPONSIBILITY FOR PLEDGED COLLATERAL. Agent
shall not have any duty to fix or preserve rights against prior
parties to the Pledged Collateral, and shall never be liable for its
failure to use diligence to collect any amount payable with respect to
the Pledged Collateral, but shall be liable only to account to Pledgor
for what it may actually collect or receive thereon. If the Pledged
Collateral declines in value, Pledgor will, upon demand by Agent
deliver to Agent, to become part of the Pledged Collateral, additional
property satisfactory to Agent.
(b) INTENTIONALLY DELETED
(c) FINANCING STATEMENT. Agent shall have the right at
any time to execute and file this Agreement as a financing statement,
but the failure of Agent to do so shall not impair the validity or
enforceability of this Agreement.
(d) MAXIMUM INTEREST. Regardless of any provision
contained herein or in any Note or Notes, notes executed in connection
with the Credit Agreement, or in any other writings in connection
herewith, Agent shall not be entitled to receive, collect or apply as
interest on the Secured Indebtedness any amount in excess of the
Maximum Rate, and, to this end, in the event of acceleration of the
maturity of the Secured Indebtedness, or any item thereof, proper
credit shall be given for unearned interest.
(e) DISCLOSURE. Agent is granted the right to discuss
Pledgor's affairs, finances and accounts with all parties to such
degree as Agent deems necessary or advisable to protect its security
interests and/or the repayment of the Secured Indebtedness. The
Pledgor covenants to do all things necessary or appropriate to permit
Agent to fully exercise its rights under this paragraph.
(f) DEPOSIT OF PROCEEDS. Except as expressly prescribed
above, all payments received by Agent with respect to the Pledged
Collateral shall, at Agent's option, be deposited in a special
10 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 11
interest bearing account at a bank (which may be, but need not be, a
trust account or escrow account maintained at Agent) to be designated
by Agent in the name of Agent styled "Collateral Account." Funds in
said account are hereby assigned to Agent and shall be impressed with
a lien to secure the Secured Indebtedness, and shall be applied by
Agent as provided for above.
(g) PAYMENT OF EXPENSES. At Agent's option, Agent may
discharge taxes, liens and interest, perform or cause to be performed,
for and on behalf of the Pledgor, any actions and conditions,
obligations or covenants which the Pledgor has failed or refused to
perform and may pay for the repair, maintenance or preservation of any
of the Pledged Collateral, and all reasonable sums so expended,
including, but not limited to, reasonable attorneys' fees, court
costs, agents' fee or commissions, or any other costs or expenses,
shall become part of the Secured Indebtedness, shall bear interest
from the date of payment at the rate specified in Section 2.4 of the
Credit Agreement, and shall be payable at the place designated for
payment of the Secured Indebtedness, and shall be secured by this
Agreement.
SECTION 11. CUMULATIVE RIGHTS AND REMEDIES. All rights and remedies
of Agent hereunder are cumulative of each other and of every other right or
remedy which Agent may otherwise have at law or in equity or under any other
contract or other writing for the enforcement of the security interest herein
or the collection of the Secured Indebtedness, and the exercise by Agent of one
or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies. Should the Pledgor have
heretofore executed or hereafter execute any other security agreement in favor
of Agent in which a security interest is created as security for the debts of
another or others, in respect of which Pledgor may not be personally liable,
the security interest therein created and all other rights, powers and
privileges vested in Agent by the terms thereof shall exist concurrently with
the security interest created herein, and, in addition, all property in which
Agent holds a security interest under any such other security agreement shall
also be part of the Pledged Collateral hereunder, and all or any part of the
proceeds of the sale or other disposition of such property may, in the
discretion of Agent be applied by it in accordance with the terms hereof, and
of such other security agreement, or agreements, or any of them.
SECTION 12. ASSIGNABILITY OF RIGHTS, ETC. The rights, powers and
interest held by Agent hereunder, together with the Pledged Collateral, may be
transferred and assigned by Agent in whole or in part, at such time and upon
such terms as it may deem advisable.
SECTION 13. NO WAIVER. Should any part of the Secured Indebtedness
be payable in installments, the acceptance by Agent at any time and from time
to time of part payment of the aggregate amount of all installments then
matured shall not be deemed to be a waiver of the default then existing. No
waiver by Agent of any default shall be deemed to be a waiver of any other
subsequent default, nor shall any such waiver by Agent be deemed to be a
continuing waiver. No delay or omission by Agent in exercising any right or
power hereunder, or under any other writings executed by the Pledgor as
security for or in connection with the Secured Indebtedness, shall impair any
such right or power or be construed as a waiver thereof or any acquiescence
therein, nor shall any single or partial exercise of any such right or power
preclude other or further exercise thereof, or the exercise of any other right
or power of Agent hereunder or under such other writings. No action or
omission of Agent shall constitute a waiver by Agent of any rights or remedies
hereunder.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Agent and
the security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
11 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 12
(a) any lack of validity or enforceability of the Secured
Indebtedness, the Credit Agreement or any other Loan Paper;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Indebtedness,
or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, the Notes, or any other Loan Papers;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured
Indebtedness; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Issuers, the
Pledgor or any other third-party pledgor.
SECTION 15. BINDING EFFECT. This Agreement shall be binding on the
Pledgor and the Pledgor's legal representatives, successors and assigns and
shall inure to the benefit of Agent, the other Banks, and their successors and
assigns.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
SECTION 17. SECTION 26.02 NOTICE. THIS AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING THE MATTERS CONTAINED HEREIN AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED in Bexar County, Texas on the date first above stated.
PLEDGOR:
-------
PACKAGED ICE, INC., a Texas corporation
By:__________________________________
James F. Stuart, Chief Executive Officer
Address: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III
AGENT:
-----
THE FROST NATIONAL BANK, a national
banking association
By:__________________________________
Richard D. Young, Senior Vice
President
12 PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT A
<S> <C> <C> <C>
Percentage Owned Certificate Number Number of Pledged
Issuers by Pledgor Shares
------- ---------------- ------------------- -----------------
Packaged Ice Leasing, Inc. 100% 1 1,000
Southwestern Ice, Inc. 100% 1 1,000
Mission Party Ice, Inc. 100% 1 1,000
Southwest Texas Packaged Ice, Inc. 100% 1 1,000
</TABLE>
PII PLEDGE AND SECURITY AGREEMENT
<PAGE> 1
EXHIBIT 10.25
RECORDED AT THE REQUEST OF AND
WHEN RECORDED MAIL TO:
The Frost National Bank
P.O. Box 1600
San Antonio, TX 78296-1400
Attention: Pat Mascorro
Loan Department
Location RB-2
DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
________________________
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this "DEED OF TRUST") is made as of the 15th day of September, 1997, by
and between SOUTHWESTERN ICE, INC., a Texas corporation, a wholly owned
subsidiary of Packaged Ice, Inc., a Texas corporation ("TRUSTOR"), whose
mailing address is 8572 Katy Freeway, Suite 101, Houston, Texas 77024, in favor
of Jimmy R. Locke, of Bexar County, Texas, or any successor or substitute
appointed and designated as herein provided from time to time acting hereunder,
as trustee ("TRUSTEE"), whose mailing address is The Frost National Bank, P.O.
Box 1600, San Antonio, TX 78296-1400, for the benefit of THE FROST NATIONAL
BANK, a national banking association, agent for each of the banks under the
Credit Agreement (as defined below), as beneficiary ("BENEFICIARY"), whose
mailing address is P.O. Box 1600, San Antonio, Texas 78296.
ARTICLE 1
BACKGROUND
1.01 Credit Agreement. Beneficiary has made, or agreed to make,
various loans to Packaged Ice, Inc., a Texas corporation (the "BORROWER") as
more fully described in the Credit Agreement, of even date herewith, by and
between Borrower, Beneficiary, and certain Banks named therein, as amended,
supplemented, modified, restated or extended from time to time (the "CREDIT
AGREEMENT"). All undefined capitalized terms used herein shall have the
meaning given them in the Credit Agreement.
1.02 Notes. Each Revolving Credit Note (as such term is defined in
the Credit Agreement) executed by Borrower payable to the order of any Bank,
evidencing loans advanced to Borrower under the Credit Agreement, in an
aggregate principal face amount of $20,000,000, bearing interest as therein
provided, containing a provision for the payment of a reasonable additional
amount as attorneys' fees, and finally maturing on April 15, 2003, together
with any renewals, increases, extensions, restatements, or modifications
thereof (collectively the "NOTE").
1.03 Security Documents. The loans described in the Credit Agreement,
including, but not limited to, the Revolving Credit Loans, are secured by the
collateral described in, among other things: (a) this Deed of Trust; and (b)
the Security Agreement, of even date herewith, by and between Trustor, as
SWI ARIZONA DEED OF TRUST
<PAGE> 2
debtor, and Beneficiary, as secured party (the "SECURITY AGREEMENT"). The
loans described in the Credit Agreement are also secured by other collateral as
described in the Credit Agreement.
1.04 Loan Documents. The Credit Agreement, Revolving Credit Loan, the
Note, this Deed of Trust, the Security Agreement, and assignments, agreements,
documents or instruments executed by or on behalf of Trustor with respect to
the foregoing documents or the transactions contemplated thereby, each as may
hereafter be modified, amended, extended, renewed or replaced, shall be
collectively referred to herein as the "LOAN DOCUMENTS."
ARTICLE 2
GRANT IN TRUST; SECURITY INTEREST
The Secured Obligations as defined in Article 3 below shall be secured
by the Real Property Collateral described in Section 2.01 below and the
Personal Property Collateral described in Section 2.02 below. The Real
Property Collateral and the Personal Property Collateral are hereinafter
collectively referred to as the "PROPERTY".
2.01 Real Property Collateral. For the purpose of securing payment and
performance of the Secured Obligations, Trustor hereby irrevocably and
unconditionally grants, conveys, transfers and assigns to Trustee, in trust for
the benefit of Beneficiary, with power of sale, all rights, title, interest,
estates, powers and privileges of Trustor in or to all of the following, now or
hereafter acquired (the "REAL PROPERTY COLLATERAL"):
A. The real property situated in Pima County, Arizona
described on Exhibit A attached hereto and incorporated herein by this
reference (the "LAND").
B. The interest that Trustor possesses in the buildings,
structures and improvements now or hereinafter located or constructed on the
Land, together with all water and water rights (whether riparian,
appropriative, or otherwise, and whether or not appurtenant), pumps and pumping
stations used in connection therewith and all shares of stock evidencing the
same, all machinery, equipment, appliances, fixtures and other property,
including, but not limited to, all storage tanks and pipe lines, all gas,
electric, heating, cooling air conditioning, filtration, hot water,
refrigeration, plumbing and lighting fixtures and equipment, all floor
coverings, all wells, pumps, pipes, motors, and engines and pumping apparatus
and equipment, which have been or may later be attached or affixed in any
manner to any building, structure or improvement now or hereafter located or
later to be constructed on the Land (collectively, the "IMPROVEMENTS");
C. All the rights, rights of way, easements, licenses,
profits, privileges, tenements, hereditaments and appurtenances, now or
hereafter in any way appertaining and belonging to or used in connection with
the Land, the Improvements, and any part thereof or as a means of access
thereto, including, but not limited to, any claim at law or in equity, and any
after acquired title and reversion in or to each and every part of all streets,
roads, highways and alleys adjacent to and adjoining the same;
D. All leases, subleases, licenses and concessions or other
agreements relating to, or affecting the use, occupancy or maintenance of, or
services provided to, the Property, now or hereafter affecting the Property or
any portion thereof (collectively, the "ANCILLARY RIGHTS").
2 SWI ARIZONA DEED OF TRUST
<PAGE> 3
E. Any strips or gores adjacent, used in connection with or
pertaining, to the Land or the Improvements.
F. All rentals, earnings, income, receipts, royalties,
revenues, issues and profits (the "RENTS") which, after the date hereof, and
while Secured Obligations remain unpaid, may accrue from the Land, the
Improvements or any part of the foregoing, subject, however, to the right,
power and authority conferred upon Trustor to collect and apply such proceeds
set forth herein; and
2.02 Personal Property Collateral. For the purpose of securing
payment and performance of the Secured Obligations, Trustor grants to
Beneficiary a security interest in all rights, title, interest, estates, powers
and privileges of Trustor in or to all of the following, now or hereafter
acquired, to the extent constituting personal property (the "PERSONAL PROPERTY
COLLATERAL"):
A. The Improvements;
B. All "goods" (as defined in Chapter 9 of the Uniform
Commercial Code of the State of Arizona (Title 47, Arizona Revised Statutes
("A.R.S.")) or any successor or similar statute (the "UCC"));
C. All (i) plans and specifications for the Improvements,
(ii) Trustor's rights, but not liability for any breach by Trustor, under all
commitments (including any commitment for financing to pay any of the Secured
Obligations (hereafter defined), insurance policies and other contracts and
general intangibles directly relating to the development or operation of the
Real Property Collateral (including, but not limited to trademarks, trade names
and symbols); (iii) deposits (including, but not limited to Trustor's rights in
tenants' security deposits, deposits with respect to utility services to the
Real Property Collateral, and any deposits or reserves hereunder or under any
other Loan Document, taxes, insurance or otherwise), money, accounts,
instruments, documents, notes and chattel paper arising from or by virtue of
any transactions related to the Real Property Collateral; (iv) permits,
licenses, franchises, certificates, development rights, commitments and rights
for utilities, and other rights and privileges obtained in connection with the
Real Property Collateral; (v) leases, rents, royalties, bonuses, issues,
profits, revenues and other benefits of the Real Property Collateral; (vi) oil,
gas and other hydrocarbons and other minerals produced from or allocated to the
Land and all products processed or obtained therefrom, and the proceeds
thereof; and (vii) engineering, accounting, title, legal, and other technical
or business data concerning the Real Property Collateral which are in the
possession of Trustor or in which Trustor can otherwise grant a security
interest;
D. All rights of Trustor under any policy or policies of
hazard or liability insurance relating to the Property and any and all riders,
amendments, extensions, renewals, supplements, or extensions thereof, and all
proceeds, loss payments, and premium refunds which may become payable with
respect to such insurance policies;
E. All construction, service, engineering, consulting,
architectural, and other similar contracts of any nature (including, but not
limited to, those of any general contractors and subcontractors) as such may be
modified, amended, or supplemented from time to time, concerning the design,
construction, management, operation, occupancy, use, and/or disposition of any
or all of the Real Property Collateral;
F. All blueprints, architectural drawings, plans,
specifications, soil tests, feasibility studies, appraisals, engineering
reports, and similar materials owned by Trustor relating to any or all of the
Real Property Collateral;
3 SWI ARIZONA DEED OF TRUST
<PAGE> 4
G. All payment and performance bonds or guaranties and any
and all modifications and extensions thereof relating to the Real Property
Collateral;
H. All assignable governmental permissions, environmental
clearances, rights, licenses, permits, approvals, consents, and materials
prepared for filing with any governmental agency, as are necessary for the
development, design, commencement, continuation, completion, operation,
occupancy, use, and disposition of any or all of the Real Property Collateral;
I. All sales contracts and proceeds, whether cash, promissory
notes, contracts rights or otherwise, escrow agreements, broker's agreements,
instruments, notes, and agreements for sale concerning the sale or disposition
of any or all of the Real Property Collateral;
J. All rights under, and all proceeds of, any commitment by
any lender to extend financing to Trustor relating to the Real Property
Collateral;
K. All shares of water stock relating to the Real Property
Collateral;
L. All of the outstanding warranties and guaranties from
manufacturers, vendors, and contractors relating to the Real Property
Collateral;
M. All prepaid expenses, all deposits made with or other
security given to utility companies by Trustor with respect to the Real
Property Collateral and all advance payments of insurance premiums made by
Trustor and all claims or demands relating thereto;
N. All deposits relating to the construction, design,
development, operation, occupancy, use and disposition of any portion of or all
of the Real Property Collateral;
O. All proceeds and claims arising on account of any damage
to or taking of the Real Property Collateral or any part thereof, and all
causes of action and recoveries for any loss or diminution in the value of the
Real Property Collateral;
P. All judgments, awards of damages, royalties and revenue of
every kind, nature and description whatsoever that Trustor may be entitled to
receive from any person or entity owning or having or hereafter acquiring a
right to the oil, gas or mineral rights and reservations of the Real Property
Collateral; and
Q. All proceeds, whether cash, promissory notes, and other
property, real or personal or otherwise, resulting from the sale or other
disposition of all or any part of the foregoing whether now or hereafter
existing.
4 SWI ARIZONA DEED OF TRUST
<PAGE> 5
ARTICLE 3
SECURED OBLIGATIONS
Trustor has granted, conveyed, transferred and assigned its interest in
the Property in Article 2 above for the purpose of securing the following
obligations (collectively, the "SECURED OBLIGATIONS"):
3.01 Payment and performance of all obligations of Trustor
under the terms of the Credit Agreement (including, but not limited to, the
Revolving Credit Loan), together with all extensions, modifications,
substitutions or renewals thereof or other advances made thereunder;
3.02 Payment and performance of all obligations of Trustor
under the terms of the Revolving Credit Loan and the Note, and all other notes
given in substitution therefor, together with all extensions, modifications,
supplement, increase, substitutions, extensions, or renewals thereof or other
advances made thereunder, in whole or in part (such other Banks, or the
subsequent holders at the time in question of the Note or any of the Secured
Obligations being collectively herein called "HOLDERS" and individually a
"HOLDER";
3.03 All indebtedness and other obligations owed by Trustor (or
any of them) to any Holder now or hereafter incurred or arising pursuant to or
permitted by the provisions of the Notes, this Deed of Trust, or any other
document now or hereafter evidencing, governing, guaranteeing, securing, or
otherwise executed in connection with the loans evidenced by the Notes,
including, but not limited to any loan or credit agreement, tri-party financing
agreement or other agreement between Trustor (or any of them) and Holders, or
among Trustor (or any of them), Holders and any other party or parties,
pertaining to the repayment or use of the proceeds of the loan evidenced by the
Note or any of the Loan Documents.
3.04 All other loans and future advances made by any Holder to
any Trustor and/or Borrower (or any of them) and all other debts, obligations
and liabilities of Trustor of every kind and character now or hereafter
existing in favor of any Holder, and arising under the Credit Agreement, the
Note, or any of the other Loan Documents, and whether direct or indirect,
primary or secondary, joint or several, fixed or contingent, secured or
unsecured, and whether originally payable to such Holder or to a third party
and subsequently acquired by such Holder, it being contemplated that Trustor
may hereafter become indebted to one or more Holders for such other debts,
obligations and liabilities arising from the Credit Agreement, the Note, or any
of the other Loan Documents; provided, however, and notwithstanding the
foregoing provisions of this Section 3.04, this Deed of Trust shall not secure
any such other loan, advance, debt, obligation or liability with respect to
which any such Holder is by applicable law prohibited from obtaining a lien on
real estate nor shall this Section 3.04 operate or be effective to constitute
or require any assumption or payment by any person, in any way, of any debt of
any other person to the extent that the same would violate or exceed the limit
provided in any applicable usury or other law.
3.05 Payment and performance of every obligation, covenant and
agreement of Trustor contained in this Deed of Trust, together with all
extensions, modifications, substitutions or renewals hereof;
3.06 Payment and performance of every obligation, covenant and
agreement of Trustor contained in each of the other Loan Documents, together
with all extensions, modifications, substitutions or renewals thereof or other
advances made thereunder; and
5 SWI ARIZONA DEED OF TRUST
<PAGE> 6
3.07 Payment and performance of all other obligations and
liabilities of Trustor to Beneficiary, whether now existing or hereafter
incurred or created, whether voluntary or involuntary, whether due or not due,
whether absolute or contingent, or whether incurred directly or acquired by
Beneficiary by assignment or otherwise.
THE OBLIGATIONS SECURED BY THIS DEED OF TRUST MAY INCLUDE INTEREST AT A
VARIABLE RATE. SOME OF THE OBLIGATIONS SECURED BY THIS DEED OF TRUST INCLUDE A
SERIES OF ADVANCES THAT WILL BE OF A REVOLVING NATURE THAT MAY BE MADE, REPAID
AND REMADE FROM TIME TO TIME, EVEN IF THE UNPAID BALANCE OWED ON SUCH
OBLIGATION HAS PREVIOUSLY BEEN REDUCED TO ZERO.
ARTICLE 4
COVENANTS AND AGREEMENTS OF TRUSTOR
4.01 Payment of Secured Obligations. Trustor shall pay when due the
principal, interest and all other amounts due to Beneficiary as provided in the
Note or the other Loan Documents.
4.02 Maintenance, Repair, Alterations. Trustor: (a) shall maintain,
keep and preserve the Property in good condition and repair; (b) shall not
remove, demolish or substantially alter any of the Improvements (other than (i)
repairs in the ordinary course of business of a non-structural nature which
serve to preserve or increase the value of the Property and (ii) alterations
that are required by law), in whole or in part, without the prior written
consent of Beneficiary; (c) shall complete promptly and in a good and
workmanlike manner any Improvements which may be now or hereafter constructed
on the Property and promptly restore (unless expressly provided to the contrary
in any Loan Document) in like manner any Improvements which may be damaged or
destroyed thereon from any cause whatsoever, and pay when due all claims for
labor performed and materials furnished therefor, whether or not insurance or
other proceeds are available for such restoration; (d) shall comply with all
laws, ordinances, rules, regulations, covenants, conditions and restrictions
now or hereafter affecting the Property or any part thereof or requiring any
alteration or improvement to be made thereon or thereto; (e) shall not commit,
suffer or permit any act to be done in, upon or to the Property or any part
thereof in violation of any law, ordinance, rule, regulation or order; (f)
shall not commit or permit any waste or deterioration of the Property; (g)
shall keep and maintain grounds, sidewalks, roads, parking and landscape areas
located on or abutting the Land in good and neat order and repair; (h) will not
take (or fail to take) any action, which if taken (or not so taken) would
increase in any way the risk of fire or other hazard occurring to or affecting
the Property or otherwise would impair the security of Beneficiary in the
Property; (i) shall not abandon the Property or any portion thereof or leave
the Property unprotected, unguarded, vacant or deserted for a period of time
greater than thirty (30) days; (j) shall not initiate, join in or consent to
any change in any zoning ordinance, general plan, specific plan, private
restrictive covenant or other public or private restriction limiting the uses
which may be made of the Property; (k) shall secure and maintain in full force
and effect all permits necessary for the use, occupancy and operation of the
Property; (l) except as permitted in the Credit Agreement, shall not cause or
permit any fixture or any article of Personal Property Collateral to be removed
from the Property without the prior written consent of Beneficiary unless the
same shall have been replaced in the ordinary course of business by
substantially equivalent property; (m) shall submit to Beneficiary a duplicate
set of plans and specifications, which must be approved or waived by
Beneficiary, before any material improvements, repairs or alterations are begun
which affect the Property; (o) except as otherwise prohibited or restricted by
any of the Loan Documents, shall do any and all other acts which may be
reasonably necessary to protect and preserve the value of the Property and the
rights of Trustee and Beneficiary with respect thereto.
6 SWI ARIZONA DEED OF TRUST
<PAGE> 7
4.03 Taxes and Other Impositions. Trustor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Property or the ownership, use, occupancy or
enjoyment of any portion thereof, or any utility service thereto, as the same
become due and payable, including, but not limited to all ad valorem taxes
assessed against the Property or any part thereof, except for any such taxes or
charges being contested in good faith and by proper proceedings for which
adequate reserves in accordance with generally accepted accounting principles
have been taken, and shall deliver promptly to Beneficiary such evidence of the
payment thereof as Beneficiary may reasonably required.
4.04 Insurance. Trustor shall obtain and maintain at Trustor's sole
expense: (1) all-risk insurance with respect to all insurable Property,
against loss or damage by fire, lighting, windstorm, explosion, hail, tornado
and such hazards as are presently included in so-called "all risk" coverage and
against such other insurable hazards as Beneficiary may require, in an amount
not less than 100% of the full replacement cost, including the cost of debris
removal, without deduction for depreciation and sufficient to prevent Trustor
and Beneficiary from becoming a coinsurer, such insurance to be in Builder's
Risk (non-reporting) form during and with respect to any construction on the
Land; (2) if and to the extent any portion of the Land is in a special flood
hazard area, a flood insurance policy in an amount equal to the lesser of the
principal face amount of the Notes or the maximum amount available; (3)
commercial general public liability insurance, on an "occurrence" basis, for
the benefit of Trustor and Beneficiary as named insured: (4) statutory workers'
compensation insurance with respect to any work on or about the Land; and (5)
such other insurance on the Property as may from time to time be reasonably
required by Beneficiary (including, but not limited to business interruption
insurance, boiler and machinery insurance, earthquake insurance, and war risk
insurance) and against other insurable hazards or casualties which at the time
are commonly insured against in the case of premises similarly situated, due
regard being given to the height, type, construction, location, use and
occupancy of buildings and improvements. All insurance policies shall be
issued and maintained by insurers, in amounts, with deductibles, and in form
satisfactory to Beneficiary, and shall require not less than thirty (30) days'
prior written notice to Beneficiary of any cancellation or change of coverage.
All insurance policies maintained, or caused to be maintained, by Trustor with
respect to the Property, except for public liability insurance, shall provide
that each such policy shall be primary without right of contribution from any
other insurance that may be carried by Trustor or Beneficiary and that all of
the provisions thereof, except the limits of liability, shall operate in the
same manner as if there were a separate policy covering each insured. If any
insurer which has issued a policy of title, hazard, liability or other
insurance required pursuant to this Deed of Trust or any other Loan Document
becomes insolvent or the subject of any bankruptcy, receivership or similar
proceeding or if in the Beneficiary's reasonable opinion the financial
responsible of such insurer is or becomes inadequate, Trustor shall, in each
instance promptly upon the request of Beneficiary and at Trustor's expense,
obtain and deliver to Beneficiary a like policy (or, if and to the extent
permitted by Beneficiary, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Deed of Trust or
such other Loan Document, as the case may be. Without limiting the discretion
of Beneficiary with respect to required endorsements to insurance policies for
loss of or damage to the Property shall contain a standard mortgage clause
(without contribution) naming Beneficiary, as agent for the Banks, as mortgagee
with loss proceeds payable to Beneficiary notwithstanding (i) any act, failure
to act or negligence of or violation of any warranty, declaration or condition
contained in any such policy by any named insured; (ii) the occupation or use
of the Property for purposes more hazardous than permitted by the terms of any
such policy; (iii) any foreclosure or other action by Beneficiary under the
Loan Documents; or (iv) any change in title to or ownership of the Property or
any portion thereof, such proceeds to be held for application as provided in
the Loan Documents. The originals of each initial insurance policy (or to the
extent permitted by Beneficiary, a copy of the original policy and a
satisfactory certificate of insurance) shall be delivered to Beneficiary at the
7 SWI ARIZONA DEED OF TRUST
<PAGE> 8
time of execution of this Deed of Trust, with premiums fully paid, and each
renewal or substitute policy (or certificate) shall be delivered to
Beneficiary, with premiums fully paid, at least ten (10) days before the
termination of the policy it renews or replaces. Trustor shall pay all
premiums on policies required hereunder as they become due and payable and
promptly deliver to Beneficiary evidence satisfactory to Beneficiary of the
timely payment thereof. If any loss occurs at any time when Trustor has failed
to perform Trustor's covenants and agreements in this paragraph, Beneficiary
shall nevertheless be entitled to the benefit of all insurance covering the
loss and held by or for Trustor, to the same extent as if it had been made
payable to Beneficiary. Upon any foreclosure hereof or transfer of title to
the Property in extinguishment of the whole or any part of the secured
indebtedness, all of Trustor's right, title and interest in and to the insurance
policies referred to in this Article 4.04 (including unearned premiums) and all
proceeds payable thereunder shall thereupon vest in the purchaser at
foreclosure or other such transferee, to the extent permissible under such
policies. Beneficiary shall have the right (but not the obligation) to make
proof of loss for, settle and adjust any claim under, and receive the proceeds
of, all insurance for loss of or damage to the Property, and the expenses
incurred by Beneficiary in the adjustment and collection of insurance proceeds
shall be a part of the secured indebtedness and shall be due and payable to
Beneficiary on demand. Beneficiary shall not be, under any circumstances,
liable or responsible for the obtaining, maintaining or adequacy of any
insurance or for failure to collect or exercise diligence in the collection of
any of such proceeds or for failure to see to the proper application of any
amount paid over to Trustor. Any such proceeds received by Beneficiary shall,
after deduction therefrom of all reasonable expenses actually incurred by
Beneficiary, including attorneys' fees, at Beneficiary's option be (1) released
to Trustor, or (2) applied (upon compliance with such terms and conditions as
may be required by Beneficiary) to repair or restoration, either partly or
entirely, of the Property so damaged, or (3) applied to the payment of the
secured indebtedness in such order and manner as Beneficiary, in its sole
discretion, may elect, whether or not due. Trustor shall at all times comply
with the requirements of the insurance policies required hereunder and of the
issuers of such policies and of any board of fire underwriters or similar body
as applicable to or affecting the Property.
4.05 Casualties. Trustor shall give prompt written notice thereof to
Beneficiary after the happening of any casualty to or in connection with the
Property or any part thereof, whether or not covered by insurance if the
damages caused thereby exceed $25,000. In the event of such casualty, the
gross proceeds of the insurance relating to such Property (the "PROCEEDS"),
less all expenses (including attorneys' fees) incurred in the collection of
such Proceeds, shall be payable to Beneficiary, and Trustor hereby authorizes
and directs any affected insurance company to make payment of such Proceeds in
such a case directly to Beneficiary. If Trustor receives any Proceeds
resulting from such casualty, Trustor shall promptly pay over such Proceeds to
Beneficiary. Beneficiary is hereby authorized and empowered by Trustor, at
Beneficiary's option and in Beneficiary's sole discretion, as attorney-in-fact
for Trustor, with full power of substitution, to make proof of loss, to appear
in and prosecute any action arising from any policy or policies of insurance,
and upon the occurrence of an Event of Default (as defined in Section 8.01
below), to settle, adjust, or compromise any material claim for loss, damage or
destruction under any policy or policies of insurance. The appointment granted
herein shall be deemed to be a power coupled with an interest. Trustor shall
not settle, adjust or compromise any claim for loss, damage or destruction of
the Property or any part thereof under any policy or policies of insurance
without the prior written consent of Beneficiary to such settlement, adjustment
or compromise. In the event of any damage to or destruction of the Property,
all, or any part, of the proceeds may be applied to the Secured Obligations or
to the restoration and repair of the Property, as Beneficiary may determine in
its sole and absolute discretion; provided, however, that if Beneficiary
requires Trustor to restore and repair the Property, then Beneficiary shall pay
to Trustor all Proceeds up to the amount required to complete such restoration
and repair. Nothing herein contained shall be deemed to excuse Trustor from
repairing or maintaining the Property as provided in Section 4.02 above, or
restoring all damage or destruction to the Property, regardless of whether or
not there
8 SWI ARIZONA DEED OF TRUST
<PAGE> 9
are Proceeds available to Trustor or whether any such Proceeds are sufficient
in amount; provided, however, if Proceeds are applied to the restoration or
repair of the Property by Beneficiary, Trustor shall not be obligated to pay
for repair and restoration up to the amount of Proceeds so available, but shall
be nevertheless liable for any amounts exceeding available Proceeds for the
restoration and repair of the Property. Application or release by Beneficiary
of any Proceeds shall not cure or waive any default, notice of default or Event
of Default under this Deed of Trust or invalidate any act done pursuant to any
notice of default.
4.06 Assignment of Policies Upon Foreclosure. In the event of a
trustee's sale, judicial foreclosure of this Deed of Trust or other transfer of
title or assignment of the Property in satisfaction, in whole or in part, of
the debt secured hereby, all right, title and interest of Trustor in and to all
policies of insurance required by Section 4.03 above and any unearned premiums
paid thereon shall, without further act, be assigned to and shall inure to the
benefit of and pass to the successor in interest to Trustor or the purchaser or
grantee of the Property, and Trustor hereby irrevocably appoints Beneficiary
its lawful attorney-in-fact, with full power of substitution, to execute an
assignment thereof and any other document necessary to effect such transfer.
The appointment granted herein shall be deemed to be a power coupled with an
interest.
4.07 Indemnification; Subrogation; Waiver of Offset.
A. If Beneficiary is made a party to any litigation
concerning this Deed of Trust, any of the other Loan Documents, the Property or
any part thereof or interest therein, or the occupancy of the Property by
Trustor or a tenant of Trustor, then Trustor shall indemnify, protect, defend
and hold Beneficiary harmless for, from and against any and all liability by
reason of said litigation, including attorneys' fees and expenses incurred by
Beneficiary as a result of any such litigation, whether or not any such
litigation is prosecuted to judgment; provided, however, that Trustor's
obligations under this sentence shall not apply to liability to Beneficiary
arising as the sole result of the gross negligence or willful misconduct of
Beneficiary. Upon the occurrence of an Event of Default hereunder, Beneficiary
may employ an attorney or attorneys to protect its rights hereunder and under
the other Loan Documents, and in the event of such employment following any
breach by Trustor, Trustor shall pay Beneficiary reasonable attorneys' fees and
expenses incurred by such Beneficiary, whether or not an action is actually
commenced against Trustor by reason of its breach.
B. Trustor waives any and all right to claim or recover
against Beneficiary, its officers, employees, agents and representatives, for
loss of or damage to Trustor, the Property, Trustor's property or the property
of others under Trustor's control from any cause insured against or required to
be insured against by the provisions of this Deed of Trust, unless such loss or
damage was caused solely by Beneficiary's gross negligence or willful
misconduct and then only to the extent that such loss or damage is not covered
by insurance proceeds; provided, however, that this waiver of subrogation shall
not be effective with respect to any policy of insurance permitted or required
by this Deed of Trust if: (i) such policy prohibits, or if coverage thereunder
would be reduced as a result of, such waiver of subrogation; and (ii) Trustor
is unable to obtain from a carrier issuing such insurance a policy that, by
special endorsement or otherwise, permits such a waiver of subrogation.
C. Except as otherwise specifically provided herein, all sums
payable by Trustor pursuant to the Loan Documents, and all Secured Obligations,
shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction,
and the obligations and liabilities of Trustor shall in no way be released,
discharged or otherwise affected (except as expressly provided herein) by
reason of: (i) any damage to or destruction of or any
9 SWI ARIZONA DEED OF TRUST
<PAGE> 10
condemnation or similar taking of the Property or any part thereof; (ii) any
restriction or prevention of or interference by any third party with any use of
the Property or any part thereof; (iii) any title defect or encumbrance or any
eviction from the Property or any part thereof, by title paramount or
otherwise; (iv) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation of other like proceeding relating to
Beneficiary, or any action taken with respect to this Deed of Trust by any
trustee or receiver of Beneficiary, or by any court, in any such proceeding;
(v) any claim which Trustor has or might have against Beneficiary; (vi) any
default or failure on the part of Beneficiary to perform or comply with any of
the terms hereof or of any other agreement with Trustor; or (vii) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not Trustor shall have notice or knowledge of any of the foregoing. Except
as expressly provided herein, Trustor waives all rights now or hereafter
conferred by statute or otherwise to any abatement, suspension, deferment,
diminution or reduction of any sum secured hereby.
4.08 Reserve for Insurance, Taxes and Assessments. Upon the
occurrence of an Event of Default and upon the written request of Beneficiary,
to secure certain of Trustor's obligations in this Article 4, but not in lieu
of such obligations, Trustor will deposit with Beneficiary a sum equal to ad
valorem taxes, assessments and charges (which charges for the purpose of this
paragraph shall include without limitation any recurring charge which could
result in a lien against the Property) against the Property for the current
year and the premiums for such policies of insurance for the current year, all
as estimated by Beneficiary and prorated to the end of the calendar month
following the month during which Beneficiary's request is made, and thereafter
will deposit with Beneficiary, on each date when an installment of principal
and/or interest is due on the Notes, sufficient funds (as estimated from time
to time by Beneficiary) to permit Beneficiary to pay at least fifteen (15) days
prior to the due date thereof, the next maturing ad valorem taxes, assessments
and charges and premiums for such policies of insurance. Beneficiary shall
have the right to rely upon tax information furnished by applicable taxing
authorities in the payment of such taxes or assessments and shall have no
obligation to make any protest of any such taxes or assessments. Any excess
over the amounts required for such purposes shall be held by Beneficiary for
future use, applied to any secured indebtedness or refunded to Trustor, at
Beneficiary's option, and any deficiency in such funds so deposited shall be
made up Trustor upon demand of Beneficiary. All such funds so deposited shall
bear no interest, may be mingled with the general funds of Beneficiary and
shall be applied by Beneficiary toward the payment of such taxes, assessments,
charges and premiums when statements therefor are presented to Beneficiary by
Trustor (which statements shall be presented by Trustor to Beneficiary a
reasonable time before the applicable amount is due); provided, however, that,
if a default shall have occurred hereunder, such funds may at Beneficiary's
option be applied to the payment of the secured indebtedness in the order
determined by Beneficiary in its sole discretion, and Beneficiary may (but
shall have no obligation) at any time, in its discretion, apply all or any part
of such funds toward the payment of any such taxes, assessments, charges or
premiums which are past due, together with any penalties or late charges with
respect thereto. The conveyance or transfer of Trustor's interest in the
Property for any reason (including without limitation the foreclosure of a
subordinate lien or security interest or a transfer by operation of law) shall
constitute an assignment or transfer of Trustor's interest in and rights to
such funds held by Beneficiary under this paragraph but subject to the rights
of Beneficiary hereunder.
4.09 Utilities. Trustor shall pay or shall cause to be paid when due
all utility charges which are incurred for the benefit of the Property or which
may become a charge or lien against the Property for gas, electricity, water or
sewer services furnished to the Property and all other assessments or charges
of a similar nature, whether public or private, affecting or related to the
Property or any portion thereof, whether or not such taxes, assessments or
charges are or may become liens thereon.
10 SWI ARIZONA DEED OF TRUST
<PAGE> 11
4.10 Defense of Actions and Costs. Trustor, at no cost or expense to
Beneficiary or Trustee, shall appear in and defend any action or proceeding
purporting to affect the security or validity of this Deed of Trust or of, the
other Loan Documents, the interest of Beneficiary herein or therein, or the
rights, powers or duties of Beneficiary or Trustee hereunder or thereunder. If
Beneficiary and Trustee, or either of them, elects to become a party to such
action or proceeding, or is made a party thereto or to any other action or
proceeding, of whatever kind or nature, concerning this Deed of Trust, any of
the Loan Documents, the Property or any part thereof or interest therein, or
the occupancy thereof, Trustor shall indemnify, protect, defend and hold
Trustee and Beneficiary harmless for, from and against any and all liability,
damage, cost and expense incurred by Trustee and Beneficiary, or either of
them, by reason of said action or proceeding (including, but not limited to,
Trustee's reasonable fees and expenses, the reasonable fees and expenses of
attorneys for Trustee and for Beneficiary, and other expenses, of whatever kind
or nature, incurred by Trustee or Beneficiary, or either of them, as a result
of such action or proceeding), whether or not such action or proceeding is
prosecuted to judgment or decision. Immediately upon demand therefor by Trustee
or Beneficiary, Trustor shall pay thereto an amount equal to Trustor's
liability to such person under this Section 4.10, together with interest
thereon from date of expenditure at the Default Rate; and until paid, such
sums shall be secured hereby.
4.11 Actions by Beneficiary to Preserve Property. If Trustor fails to
make any payment or to do any act as and in the manner provided herein or in
any of the other Loan Documents, subject to applicable notice and cure periods,
if any, Beneficiary, and Trustee, and each of them each in its own discretion,
without obligation so to do, without releasing Trustor from any obligation, may
make or do the same in such manner and to such extent as either may deem
necessary to protect the security hereof. In connection therewith (without
limiting their general and other powers, whether conferred herein, in any other
Loan Document or by law), Beneficiary and Trustee, and each of them, shall have
and are hereby given the right, but not the obligation: (a) to enter upon and
take possession of the Property; (b) to make additions, alterations, repairs
and improvements to the Property which they or either of them may consider
reasonably necessary or proper to keep the Property in good condition and
repair; (c) to appear and participate in any action or proceeding affecting or
which may affect the security hereof or the rights or powers of Beneficiary or
Trustee; (d) to pay, purchase, contest or compromise any encumbrance, claim,
tax, stamp tax, assessment, water rate, sewer rate, insurance premium, repair,
rent charge, inspection, charge, lien or debt which in the judgment of either
may affect or appears to affect the security of this Deed of Trust or to be
prior or superior hereto or any other agreement given to partially secure the
indebtedness secured hereby; and (e) in exercising such powers, to pay
reasonable, necessary expenses, including employment of counsel or other
necessary or desirable consultants. Trustor shall, immediately upon demand
therefor by Beneficiary, pay to Beneficiary an amount equal to all reasonable
costs and expenses incurred by it in connection with the exercise by
Beneficiary of the foregoing rights including, but not limited to, costs of
evidence of title, court costs, appraisals, surveys, receiver's fees, Trustee's
and attorneys' fees, costs nd expenses, the fees and expenses of attorneys for
Trustee, whether or not an action is actually commenced in connection
therewith, together with interest thereon, from the date of such expenditures
until Beneficiary has been repaid such amount, at the Default Rate and, until
paid, said sums shall be secured hereby.
4.12 Survival of Obligations and Warranties. Trustor shall fully and
faithfully satisfy and perform the obligations of Trustor contained herein and
in the other Loan Documents, each agreement of Trustor incorporated by
reference therein or herein and each agreement the performance of which is
secured hereby or thereby, and any modification or amendment hereof or thereof.
All representations, warranties and covenants of Trustor contained herein or in
any such other Loan Document between Trustor and Beneficiary shall survive the
execution and delivery hereof and shall remain continuing obligations,
warranties and representations of Trustor during any time when any portion of
the Secured Obligations remain outstanding.
11 SWI ARIZONA DEED OF TRUST
<PAGE> 12
4.13 Condemnation. Trustor shall notify Beneficiary immediately after
Trustor becomes aware of any threatened or pending proceeding for condemnation
affecting the Property or arising out of damage to the Property, and Trustor
shall, at Trustor's expense, diligently prosecute any such proceedings.
Beneficiary shall have the right (but not the obligation) to participate in any
such proceeding, and to be represented by counsel of its own choice.
Beneficiary shall be entitled to receive all sums which may be awarded or
become payable to Trustor for the condemnation of the Property, or any part
thereof, for public or quasi-public use, or by virtue of private sale in lieu
thereof, and any sums which may be awarded or become payable to Trustor for
injury or damage to the Property, provided it is applied to the secured
indebtedness. Trustor shall, promptly upon request of Beneficiary, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Beneficiary to collect and
receipt for any such sums. All such sums are hereby assigned to Beneficiary,
and shall, after deduction therefrom of all reasonable expenses actually
incurred by Beneficiary, including reasonable attorneys' fees, at Beneficiary's
option be (1) released to Trustor, or (2) applied (upon compliance with such
terms and conditions as may be required by Beneficiary) to repair or
restoration of the Property so affected, or (3) applied to the payment of the
secured indebtedness in such order and manner as Beneficiary, in its sole
discretion, may elect, whether or not due. Beneficiary shall not be, under any
circumstances, liable or responsible for failure to collect or to exercise
diligence in the collection of any such sum or for failure to see to the proper
application of any amount paid over to Trustor. Beneficiary is hereby
authorized, in the name of Trustor, to execute and deliver valid acquittance
for, and to appeal from, any such award, judgment or decree. All reasonable
costs and expenses (including but not limited to reasonable attorneys' fees)
incurred by Beneficiary in connection with any condemnation shall be a demand
obligation owing by Trustor (which Trustor hereby promises to pay) to
Beneficiary pursuant to this Deed of Trust.
4.14 Compliance with Legal Requirements. The Property and the use,
operation and maintenance thereof and all activities thereon do and shall at
all times comply with all applicable Legal Requirements (defined below). The
Property is not, and shall not be, dependent on any other property or premises
or any interest therein other than the Property to fulfill any requirement of
any Legal Requirement. Trustor shall not, by act or omission, permit any
building or other improvement not subject to the lien of this Deed of Trust to
rely on the Property or any interest therein to fulfill any requirement of any
Legal Requirement. No part of the Property constitutes a non-conforming use
under any zoning law or similar law or ordinance applicable thereto. Trustor
has obtained and shall preserve in force all requisite zoning, utility,
building, health and operating permits from the governmental authorities having
jurisdiction over the Property that the Property, or any use, activity,
operation or maintenance thereof or thereon, is not in compliance with any
Legal Requirement, Trustor will promptly furnish a copy of such notice or claim
to Beneficiary. Trustor has received no notice and has no knowledge of any
such noncompliance. As used in this Deed of Trust: (i) the term "LEGAL
REQUIREMENT" means any applicable local, state or federal law, rule or
regulation, agreement, covenant, restriction, easement or condition.
4.15 Additional Security. No other security now existing, or
hereafter taken, to secure the Secured Obligations nor the liability of any
maker, surety, guarantor or endorser with respect to the Secured Obligations,
or any of them, shall be impaired or affected by the execution of this Deed of
Trust; and all additional security shall be taken, considered and held as
cumulative. The taking of additional security, execution of partial releases
of the security, or any extension of the time of payment of the indebtedness
shall not diminish the force, effect or lien of this Deed of Trust and shall
not affect or impair the liability of any maker, surety, guarantor or endorser
for the payment of said indebtedness. In the event Beneficiary at any time
holds additional security for any of the Secured Obligations, it may enforce
the sale thereof or otherwise realize upon the same, at its option, either
before, concurrently, or after a sale is made hereunder.
12 SWI ARIZONA DEED OF TRUST
<PAGE> 13
4.16 Inspections. Trustor hereby agrees that Trustee or Beneficiary,
or both, during such times as are reasonable under the then-existing
circumstances, may conduct from time to time, through representatives of their
own choice, on-site inspections and observations of: (a) the maintenance and
repair of the Property, including a review of all maintenance and repair
programs and practices and all reports and records, including the records of
expenditures, relating thereto; and (b) such other facilities, practices and
records of Trustor relating to the Property as Beneficiary deems to be
necessary or appropriate in order to monitor Trustor's compliance with the
provisions of this Deed of Trust and of any of the Loan Documents.
4.17 Liens. Trustor shall pay and promptly discharge when due, at
Trustor's cost and expense, all liens, encumbrances and charges upon the
Property, or any part thereof or interest therein or, alternatively, deposit
with the Beneficiary an acceptable surety bond or provide other security
acceptable to the Beneficiary. If Trustor shall fail either to remove and
discharge any such lien, encumbrance or charge or to deposit security in
accordance with the preceding sentence, if applicable, then, in addition to any
other right or remedy of Beneficiary, Beneficiary may, but shall not be
obligated to, discharge the same, without inquiring into the validity of such
lien, encumbrance or charge, nor into the existence of any defense or offset
thereto, either by paying the amount claimed to be due, or by procuring the
discharge of such lien, encumbrance or charge by depositing in a court a bond
or the amount claimed or otherwise giving security for such claim, or in such
manner as is or may be prescribed by law. Trustor shall, immediately upon
demand therefor by Beneficiary, pay to Beneficiary an amount equal to all
reasonable costs and expenses incurred by Beneficiary in connection with the
exercise by Beneficiary of the foregoing right to discharge any such lien,
encumbrance or charge together with interest therein from the date of such
expenditure at the Default Rate, and, until paid, such sums shall be secured
hereby.
4.18 Beneficiary's Powers. Without affecting the liability of any
other person liable for the payment of the Secured Obligations, and without
affecting the lien or charge of this Deed of Trust upon any portion of the
Property not then or theretofore released as security for the full amount of
the Secured Obligations, Beneficiary may, from time to time and without notice:
(a) release any person so liable; (b) extend the maturity or alter any of the
terms of any such obligation; (c) grant other indulgences; (d) release or
reconvey, or cause to be released or reconveyed at any time, at Beneficiary's
option, any parcel, portion or all of the Property; (e) take or release any
other or additional security for any obligation herein mentioned; or (f) make
compositions or other arrangements with debtors in relation thereto. By
accepting payment or performance of any obligation secured by this Deed of
Trust after the payment or performance thereof is due or after the recording of
a notice of sale, Beneficiary shall not have thereby waived its right to
require prompt payment or performance, when due, of all other Secured
Obligations, or to declare the occurrence of an Event of Default for failure so
to pay or perform, or to proceed with the sale under any notice of the
occurrence of an Event of Default, statement of breach or non-performance and
notice of sale theretofore given by Beneficiary or Trustee, or with respect to
any unpaid balance of the other Secured Obligations. The acceptance by
Beneficiary of any sum in an amount less than the sum then due shall not
constitute a waiver of the obligation of Trustor to pay the entire sum then
due. Trustor's failure to pay the entire sum then due shall continue to be an
Event of Default, notwithstanding the acceptance of partial payment, and, until
the entire sum then due shall have been paid, Beneficiary or Trustee shall at
all times be entitled to declare the occurrence of an Event of Default and to
exercise all the remedies herein conferred, and the right to proceed with a
sale under any notice of the occurrence of an Event of Default, statement of
breach or non-performance or notice of sale shall in no way be impaired,
whether or not such amounts are received prior or subsequent to such notice or
statement. No delay or omission of Trustee or Beneficiary in the exercise of
any right or power hereunder shall impair such right or power or any other
right or power nor shall the same be construed to be a waiver of any Event of
Default or any acquiescence therein.
13 SWI ARIZONA DEED OF TRUST
<PAGE> 14
4.19 Other Instruments. Trustor shall punctually pay all amounts due
and payable, and shall promptly and faithfully perform or observe each and
every other obligation or condition to be performed or observed, under each
deed of trust, mortgage or other lien or encumbrance, lease, sublease,
declaration, covenant, condition, restriction, license, order or other
instrument or agreement which affects or appears to affect the Property,
whether at law or in equity. Nothing contained in this Section 4.19 shall give
to or confer upon Trustor any right to place any other deeds of trust,
mortgages or other liens or encumbrances against the Property without obtaining
Beneficiary's prior written consent.
4.20 Transfer of Property by Trustor. Trustor agrees that in the
event the interest of Trustor in the Property, or any part thereof, or any
interest therein is sold, agreed to be sold, conveyed, alienated, encumbered,
leased, assigned, conveyed or otherwise transferred by Trustor, whether by
operation of law or otherwise, without the prior written consent of
Beneficiary, the Secured Obligations, irrespective of the maturity dates
expressed therein, at the option of Beneficiary, and without demand or notice
shall immediately become due and payable. Beneficiary shall not exercise this
option if (a) Trustor causes to be submitted to Beneficiary information
required by Beneficiary to evaluate the intended transferee as if a new loan
were being made to the transferee; and (b) Beneficiary reasonably determines
that Beneficiary's security will not be impaired by the loan assumption and
that the risk of a default under this Deed of Trust is acceptable to
Beneficiary. To the extent permitted by applicable law, Beneficiary may charge
a reasonable fee as a condition to Beneficiary's consent to the loan
assumption. Beneficiary may also require the transferee to sign an assumption
agreement acceptable to Beneficiary that obligates the transferee under this
Deed of Trust. Notwithstanding the assumption by the transferee, the Trustor
named herein shall continue to be obligated under the Loan Documents unless
Beneficiary releases Trustor in writing. This provision shall apply to each
and every sale, transfer or conveyance, regardless of whether or not
Beneficiary has consented to or waived Beneficiary's rights hereunder, whether
by action or non-action, in connection with any previous sale, transfer or
conveyance. Notwithstanding the preceding, to the extent permitted by the
Credit Agreement, Trustor shall be entitled to dispose of items of Personal
Property Collateral which become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary for the operation of the Property, provided that
Trustor immediately substitutes and installs replacement Personal Property
Collateral of at least comparable worth, value and utility. All such
substituted items shall be installed free of all liens and encumbrances and
shall become a part of the Property as Personal Property Collateral. Trustor
will cooperate with Beneficiary and Trustee and will pay all costs, including
attorneys' fees, incurred in subjecting to the lien hereof all items so
substituted and Beneficiary will cooperate with Trustor in securing, if
necessary, a release from the lien hereof of the Personal Property Collateral
for which the substitution is made and in providing such other documents as may
be required to facilitate the removal and substitution.
4.21 Beneficiary's Approval. Trustor shall not enter into any lease
or sublease of any portion of the Property without the prior written approval
of Beneficiary. Beneficiary may refuse such approval for any reason or may
condition its approval upon such events or occurrences as Beneficiary deems
appropriate, in its sole and unfettered discretion. Notwithstanding the
foregoing, Trustor may enter into a lease for the Property on market terms and
rates for terms of five (5) years or less (inclusive of all extensions and
renewal options) upon prior written approval of Beneficiary, which approval
shall not be unreasonably withheld. All leases of the Property greater than
one month shall specifically provide that they are subordinate to this Deed of
Trust; that the tenant attorns to Beneficiary, such attornment to be effective
upon Beneficiary's acquisition of title to the Property; that the tenant agrees
to execute such further evidences of attornment as Beneficiary may from time to
time request, that the attornment of the tenant shall not be terminated by
foreclosure; and that Beneficiary may, at Beneficiary's option, accept or
reject such attornments.
14 SWI ARIZONA DEED OF TRUST
<PAGE> 15
ARTICLE 5
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
5.01 Assignment of Rents, Issues and Profits. Trustor hereby grants,
transfers and assigns to Beneficiary all of the Rents of the Property and
hereby gives to and confers upon Beneficiary the right, power and authority to
collect such Rents. Trustor irrevocably appoints Beneficiary its true and
lawful attorney-in-fact, with full power of substitution, at the option of
Beneficiary, at any time and from time to time, to demand, receive and enforce
payment, to give receipts, releases and satisfactions, and to sue, in its name
or in the name of Trustor, for all such Rents, and apply the same to the
Secured Obligations; provided, however, that Trustor shall have the right to
collect such Rents (but not more than one month in advance unless the written
approval of Beneficiary has first been obtained), and to retain and enjoy the
same, so long as an Event of Default, or an event or condition in which, with
notice or lapse of time would constitute an Event of Default, shall not have
occurred hereunder and be continuing. The assignment of the Rents in this
Section 5.01 is intended to be an absolute assignment from Trustor to
Beneficiary and not merely the passing of a security interest. The appointment
granted herein shall be deemed to be a power coupled with an interest.
5.02 Collection Upon Default. To the extent permitted by law, upon
the occurrence of an Event of Default hereunder, Beneficiary may, at any time
without notice, either in person, by agent, or by a receiver appointed by a
court, and without regard to the adequacy of any security for the Secured
Obligations, enter upon and take possession of the Property, or any part
thereof, and, with or without taking possession of the Property
or any portion thereof, in its own name sue for or otherwise collect such Rents
(including those past due and unpaid, and all prepaid rents and all other
monies which may have been or may hereafter be deposited with Trustor by any
lessee or tenant of Trustor to secure the payment of any rent or for any
services thereafter to be rendered by Trustor for any other obligation of any
tenant to Trustor arising under any lease, and Trustor agrees that, upon the
occurrence of any Event of Default hereunder, Trustor upon the request of
Beneficiary shall promptly deliver all such Rents and other monies to
Beneficiary), and Beneficiary may apply the same, less reasonable costs and
expenses of operation and collection, including, but not limited to, attorneys'
fees and expenses, whether or not suit is brought or prosecuted to judgment,
upon any of the Secured Obligations, notwithstanding that said Secured
Obligation or the performance of said Secured Obligation may not then be due.
The collection of such Rents, or the entering upon and taking possession of the
Property, or the application thereof as aforesaid, shall not cure or waive any
default, notice of default or Event of Default hereunder or invalidate any act
done in response to such default or Event of Default or pursuant to such notice
of default and shall not be deemed or construed to make Beneficiary a
mortgagee-in-possession of the Property or any portion thereof.
5.03 Specific Assignments of Leases. Upon the occurrence of an Event
of Default and following demand of Beneficiary, Trustor shall, from time to
time hereafter, execute and deliver to Beneficiary recordable assignments of
any or all leases affecting the Property (the "LEASES"). Each such assignment
shall be made by an instrument (herein, an "ASSIGNMENT OF LEASE") in form and
substance satisfactory to Beneficiary; provided, however, that no such
Assignment of Lease shall be construed as imposing upon Beneficiary any
obligation with respect to the Leases or any of them. A default by Trustor in
the performance of any covenant of any lease so assigned to Beneficiary, by
reason of which default the lessee or other party thereunder has the right to
cancel such lease or to claim any diminution or offset against future Rents
shall, at the option of Beneficiary, constitute an Event of Default hereunder
and Beneficiary shall have all the rights and remedies set forth herein as if
such Event of Default had occurred hereunder. Beneficiary may, at its option,
exercise its rights hereunder or under any such Assignment of
15 SWI ARIZONA DEED OF TRUST
<PAGE> 16
Lease, and such exercise shall not constitute a waiver of any right hereunder
or thereunder. To the extent not inconsistent, all rights and remedies of
Beneficiary under any such Assignment of Lease and under this Deed of Trust
shall be cumulative.
ARTICLE 6
ENVIRONMENTAL
6.01 Definitions. In addition to any terms defined elsewhere in this
Deed of Trust, as used in this Article 6:
A. "HAZARDOUS SUBSTANCE" means any substance, material or
waste which is or becomes designated, classified or regulated as being "toxic"
or "hazardous" or a "pollutant," or which is or becomes similarly designated,
classified or regulated, under any federal, state or local law, regulation or
ordinance, or any petroleum products, including crude oil and any product
derived directly or indirectly from, or any fraction or distillate of, crude
oil.
B. "INDEMNIFIED COSTS" means all actual or threatened
liabilities, claims, actions, causes of action, judgments, orders, damages
(including, but not limited to, foreseeable and unforeseeable consequential
damages), costs, expenses, fines, penalties and losses (including, but not
limited to, sums paid in settlement of claims and all consultant, expert and
legal fees and expenses of Beneficiary's counsel), including, but not limited
to, those incurred in connection with any investigation of site conditions or
any clean-up, remedial, removal or restoration work (whether of the Property or
any other property), or any resulting damages, harm or injuries to
the person or property of any third parties or to any natural resources.
C. "INDEMNIFIED PARTIES" means and includes Beneficiary,
Trustee, their respective parents, subsidiaries and affiliated companies,
assignees of any of Beneficiary's or Trustee's interest in the Loan Documents,
owners of participation or other interests in the Loan Documents, any
purchasers of the Property at any trustee's sale or judicial foreclosure sale
or from Beneficiary or any of its affiliates, and the officers, directors,
employees and agents of each of them.
6.02 Indemnity Regarding Hazardous Substances. Trustor indemnifies
and holds the Indemnified Parties harmless for, from and against any and all
Indemnified Costs directly or indirectly arising out of or resulting from any
Hazardous Substance being present or released in, on or around any part of the
Property, or in the soil, groundwater or soil vapor on or under the Property,
including, but not limited to:
A. Any claim for such Indemnified Costs asserted by any
federal, state or local governmental agency, including the United States
Environmental Protection Agency and the Arizona Department of Environmental
Quality, and including any claim that any Indemnified Party is liable for any
such indemnified Costs as an "owner" or "operator" of the Property under any
law relating to Hazardous Substances; and
B. Any such Indemnified Costs claimed against any Indemnified
Party by any person other than a governmental agency, including any person who
may purchase or lease all or any portion of the Property from Trustor, from any
Indemnified Party, or from any other purchaser or lessee; any person who may at
any time have any interest in all or any portion of the Property; any person
who may at any time be
16 SWI ARIZONA DEED OF TRUST
<PAGE> 17
responsible for any clean-up costs or other Indemnified Costs relating to the
Property; and any person claiming to have been injured in any way as a result
of exposure to any Hazardous Substance; and
C. Any such Indemnified Costs which any Indemnified Party
reasonably believes at any time must be incurred to comply with any law,
judgment, order, regulation or regulatory directive relating to Hazardous
Substances, or which any Indemnified Party reasonably believes at any time must
be incurred to protect the public health or safety; and
D. Any such Indemnified Costs resulting from currently
existing conditions in, on or around the Property, whether known or unknown by
Trustor or the Indemnified Parties at the time this Agreement is executed, and
any such Indemnified Costs resulting from the activities of Trustor, Trustor's
tenants, or any other person in, on or around the Property.
6.03 Indemnity Regarding Construction and Other Risks. Trustor
indemnifies and holds the Indemnified Parties harmless for, from and against
any and all Indemnified Costs directly or indirectly arising out of or
resulting from construction of any improvements on the Property, including any
defective workmanship or materials; or any failure to satisfy any requirements
of any laws, regulations, ordinances, governmental policies or standards,
reports, subdivision maps or development agreements that apply or pertain to
the Property; or breach of any representation or warranty made or given by
Trustor to any of the Indemnified Parties or to any prospective or actual buyer
or lessee of all or any portion of the Property; or any claim or cause of
action of any kind by any party that any Indemnified Party is liable for any
act or omission of Trustor or any other person or entity in connection with the
possession, sublease, operation or development of the Property.
6.04 Defense of Indemnified Parties. Upon demand by any Indemnified
Party, Trustor shall defend any investigation, action or proceeding involving
any Indemnified Costs which is brought or commenced against any Indemnified
Party, whether alone or together with Trustor or any other person, all at
Indemnitor's own cost and by counsel to be approved by the Indemnified Party in
the exercise of its sole discretion. In the alternative, any Indemnified Party
may elect to conduct its own defense at the expense of Trustor.
6.05 Representation and Warranty Regarding Hazardous Substances.
Trustor has researched and inquired into the previous uses and operations on
the Property. Based on that due diligence, Trustor represents and warrants
that to the best of its knowledge, no Hazardous Substance has been disposed of
or released, or otherwise now exists, in, on, under or around the Property,
except as Trustor has disclosed to Beneficiary in writing and except as to use,
generation, manufacture, storage, treatment, disposal or release of Hazardous
Substances that are: (a) generally recognized to be appropriate to the normal
business uses of Trustor; and (b) in compliance with applicable local, state
and federal laws, rules and regulations.
6.06 Compliance Regarding Hazardous Substances. Trustor has complied,
and shall comply and cause all tenants and any other persons who may come upon
the Property to comply, with all laws, regulations and ordinances governing or
applicable to Hazardous Substance, including, but not limited to, those
requiring disclosures to prospective and actual purchasers of an interest in
all or any portion of the Property. Trustor also has complied and shall comply
with the recommendations of any qualified environmental engineer or other
expert which apply or pertain to the Property.
6.07 Notices Regarding Hazardous Substances. Trustor shall promptly
notify Beneficiary if it knows, suspects or believes there may be any Hazardous
Substance in or around the Property, or in the soil, groundwater or soil vapor
on or under the Property, or that Trustor or the Property may be subject to any
17 SWI ARIZONA DEED OF TRUST
<PAGE> 18
threatened or pending investigation by any governmental agency under any law,
regulation or ordinance pertaining to any Hazardous Substance; provided,
however, that no such notice is required if the Hazardous Substance is: (a)
generally recognized to be appropriate to Trustor's normal business uses; and
(b) in compliance with applicable local, state and federal laws, rules and
regulations.
6.08 Site Visits, Observations and Testing. The Indemnified Parties
and their agents and representatives shall have the right at any reasonable
time to enter and visit the Property for the purposes of observing the
Property, taking and removing soil or groundwater samples, and conducting tests
on any part of the Property. The Indemnified Parties have no duty, however, to
visit or observe the Property or to conduct tests, and no site visit,
observation or testing by any Indemnified Party shall impose any liability on
any Indemnified Party. In no event shall any site visit, observation or
testing by any Indemnified Party be a representation that Hazardous Substances
are or are not present in, on or under the Property, or that there has been or
shall be compliance with any law, regulation or ordinance pertaining to
Hazardous Substances or any other applicable governmental law. Neither
Trustor, nor any other party, is entitled to rely on any site visit,
observation or testing by any Indemnified Party. The Indemnified Parties owe
no duty of care to protect Trustor or any other party against, or to inform
Trustor or any other party of, any Hazardous Substances or any other adverse
condition affecting the Property. Any Indemnified Party shall give Trustor
reasonable notice before entering the Property. The Indemnified Party shall
make reasonable efforts to avoid interfering with Trustor's use of the Property
in exercising any rights provided in this Section 6.08.
6.09 Survival. The provisions of this Article 6 shall survive the
repayment of the Secured Obligations and satisfaction of this Deed of Trust,
trustee's sale or judicial foreclosure of this Deed of Trust. Notwithstanding
anything to the contrary contained in this Article 6, Trustor shall have no
obligation to indemnify any Indemnified Party for Indemnified Costs solely
resulting from such Indemnified Party's gross negligence or willful misconduct,
or for any Indemnified Costs arising solely from actions taken after the
Property has been conveyed via Trustee's sale or judicial foreclosure.
ARTICLE 7
SECURITY AGREEMENT
7.01 Security Interest. This Deed of Trust shall constitute a
security agreement within the meaning of Chapter 9 of the UCC, as to the
Personal Property Collateral and as to any other property covered and
encumbered by this Deed of Trust as to which the provisions of Chapter 9 of the
UCC may apply, and is intended to create a security interest in such property
in favor of Beneficiary. Trustor agrees to execute and deliver on demand such
security agreements, financing statements, continuation statements and other
instruments as Beneficiary may request in order to impose or perfect the
security interest and lien of Beneficiary upon any of the Personal Property
Collateral.
7.02 Remedies Upon Default. Upon the occurrence of any Event of
Default hereunder, Beneficiary shall have the right, in addition to the rights
granted to Beneficiary under the other Loan Documents, to cause any of the
Personal Property Collateral to be sold at any one or more public or private
sales as permitted by the UCC or other applicable law, and Beneficiary shall
further have all other rights and remedies, whether at law, in equity, or by
statute, as are available to secured creditors under applicable law. Any such
disposition may be conducted by an employee or agent of Beneficiary or Trustee.
Any person, including both Trustee and Beneficiary, shall be eligible to
purchase any part or all of such property at any disposition to the extent
permitted by applicable law. All reasonable expenses of retaking, holding,
preparing for sale, selling or the like shall be borne by Trustor and shall
include, Beneficiary's and Trustee's
18 SWI ARIZONA DEED OF TRUST
<PAGE> 19
attorneys' fees and expenses. Trustor, upon demand of Beneficiary, shall
assemble such Personal Property Collateral and make it available to Beneficiary
at such place as shall be required by Beneficiary in its sole discretion.
Beneficiary shall give Trustor at least ten days prior written notice of the
time and place of any public sale of such property or after which any private
sale or any other intended disposition is to be made. Notice provided to
Trustor in the manner provided herein shall be deemed to be commercially
reasonable notice of such sale or other disposition.
7.03 Fixture Filing This Deed of Trust constitutes a financing
statement filed as a fixture filing under A.R.S. Section 47-9402.F, or any
successor similar statute, covering any Property which now is or later may
become fixtures attached to the Land or Improvements.
ARTICLE 8
EVENTS OF DEFAULT;
REMEDIES UPON EVENTS OF DEFAULT
8.01 Events of Default. Trustor shall be in default hereunder (an
"EVENT OF DEFAULT") upon the occurrence of any one or more of the following
events: (i) Trustor fails to pay any amount when due under the Note, subject to
applicable notice and cure periods; (ii) Trustor breaches any provision
contained in this Deed of Trust, subject to applicable notice and cure periods;
(iii) Trustor applies for, consents to, or acquiesces in, the appointment of a
trustee, receiver, sequestrator or other custodian for Trustor, or makes a
general assignment for the benefit of creditors; or (iv) Trustor permits or
suffers to exist the commencement of bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or insolvency law,
except for any involuntary proceeding initiated or consented to by Beneficiary,
or dissolution, winding up or liquidation proceeding in respect of Trustor.
8.02 Acceleration Upon Default; Additional Remedies. Upon the
occurrence of an Event of Default hereunder, Beneficiary may, at its option,
declare the Secured Obligations to be immediately due and payable without any
presentment, demand, protest or notice of any kind. Notice of acceleration to
Trustor shall not be required. Whether or not Beneficiary exercises said
option, Beneficiary may, to the extent permitted by law, either in person or by
agent, with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its security, enter
upon and take possession of the Property, or any part thereof, in its own name
or in the name of the Trustee, and do any act which it deems necessary or
desirable to preserve the value, marketability or rentability of the Property,
or part thereof or interest therein, increase the income therefrom or protect
the security thereof and, with or without taking possession of the Property,
sue for or otherwise collect the Rents including those past due and unpaid, and
apply the same, less reasonable costs and expenses of operation and collection,
including, but not limited to, attorneys' fees and expenses, upon the Secured
Obligations all in such order as Beneficiary may determine. The entering upon
and taking possession of the Property, the collection of such Rents, and the
application thereof as aforesaid, shall not cure or waive any default, notice
of default or Event of Default hereunder or invalidate any act done in response
to such default or Event of Default, or pursuant to such notice of default and,
notwithstanding the continuance in possession by Trustee, Beneficiary or a
receiver of all or any portion of the Property or the collection, receipt and
application of any of the Rents thereby, the Trustee or Beneficiary shall be
entitled to exercise every right provided for in any of the Loan Documents or
by law upon occurrence of any Event of Default, including, but not limited to,
the right to exercise the power of sale. Beneficiary may also exercise all
other rights and remedies provided herein, in any Loan Document or in any other
document or agreement now or hereafter securing all or any portion of the
Secured Obligations, or provided by law.
19 SWI ARIZONA DEED OF TRUST
<PAGE> 20
8.03 Trustee's Sale.
A. If any Event of Default hereunder occurs, Beneficiary may
invoke the power of sale by delivering to Trustee a written statement of breach
or non-performance. Trustee shall then record a Notice of Sale in the
Recorder's Office of the county in which the Property is located and shall mail
copies of the Notice of Sale and any other notice as prescribed by applicable
law to Trustor and to the other persons as prescribed by applicable law. After
such time as required by applicable law, and after publication and posting of
the Notice of Sale in accordance with applicable law, Trustee, without demand
on Trustor, shall sell the Property at public auction to the highest bidder for
cash at the time and place designated in the Notice of Sale. Trustee may
postpone sale of the Property by public declaration at the time and place of
any previously scheduled sale unless otherwise required by applicable law.
Beneficiary shall be entitled to a credit against its bid up to and including
the entire amount of the Secured Obligations, to the extent permitted by law.
Trustee shall deliver to the purchaser its Trustee's deed conveying the
Property without any covenant or warranty, expressed or implied. The proceeds
of the sale shall be applied in the following order: (i) to all reasonable
expenses of the sale, including, but not limited to, Trustee's fees and
attorneys' fees; (ii) to all sums secured by this Deed of Trust; and (iii) any
excess to the person or persons legally entitled to it or to the County
Treasurer of the county in which the sale took place, or as otherwise provided
by law.
B. A sale of less than the whole of the Property or any
defective or irregular sale made hereunder shall not exhaust the power of sale
provided for herein; and subsequent sales may be made hereunder until all
Secured Obligations have been satisfied, or the entire Property sold, without
defect or irregularity.
8.04 Judicial Foreclosure. If any Event of Default hereunder occurs,
Beneficiary may commence an action to judicially foreclose this Deed of Trust
in the manner provided by law for foreclosure of a mortgage.
8.05 Appointment of Receiver. If an Event of Default hereunder shall
have occurred and be continuing, Beneficiary, as a matter of right and without
notice to Trustor or anyone claiming under Trustor, and without regard to the
then value of the Property or the interest of Trustor therein, shall have the
right to apply to any court having jurisdiction to appoint a receiver or
receivers of the Property, and Trustor hereby irrevocably consents to such
appointment and waives notice of any application therefor. Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Beneficiary in case of entry as
provided herein and shall continue as such and exercise all such powers until
the date of the sale of the Property unless such receivership is sooner
terminated.
8.06 Application of Funds After Event of Default. Upon the occurrence
of an Event of Default hereunder, Beneficiary may, at any time without notice,
apply any or all sums or amounts received and held by Beneficiary to pay
insurance premiums, Impositions, or any of them, or as rents or income of the
Property, or as insurance or condemnation proceeds, and all other sums or
amounts received by Beneficiary from or on account of Trustor or the Property,
or otherwise, upon any Secured Obligation, in such manner and order as
Beneficiary may elect, notwithstanding that such Secured Obligation may not yet
be due. The receipt, use or application of any such sum or amount shall not be
construed to affect the maturity of any Secured Obligations, or any of the
rights or powers of Beneficiary or Trustee under the terms of the other Loan
Documents, or any of the obligations of Trustor under this Deed of Trust or the
other Loan Documents, or to cure or waive any default, notice of default or
Event of Default hereunder or under any of the other Loan Documents; or to
invalidate any act of Trustee or Beneficiary.
20 SWI ARIZONA DEED OF TRUST
<PAGE> 21
8.07 Costs of Enforcement. If any Event of Default hereunder occurs,
Beneficiary and Trustee, and each of them, may employ attorneys to protect
their rights hereunder. Trustor promises to pay to Beneficiary, on demand, the
reasonable fees and expenses of such attorneys and all other costs of enforcing
the Secured Obligations, including, but not limited to, recording fees, the
expense of a Trustee's Sale Guarantee, Trustee's fees and expenses, receivers'
fees and expenses, and all other expenses, of whatever kind or nature, incurred
by Beneficiary and Trustee, and each of them, in connection with the
enforcement of the Secured Obligations, whether or not such enforcement
includes the filing of a lawsuit. Until paid, shall bear interest, from date
of expenditure, at the Default Rate, and shall be secured hereby.
8.08 Remedies Not Exclusive. Trustee and Beneficiary, and each of
them, shall be entitled to enforce payment and performance of any Secured
Obligation and to exercise all rights and powers under this Deed of Trust or
under any other Loan Document or other agreement or any law now or hereafter in
force, notwithstanding some or all of the said Secured Obligations may now or
hereafter be otherwise secured, whether by guaranty, mortgage, deed of trust,
pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of
Trust, nor its enforcement, whether by court action or pursuant to the power of
sale or other powers herein contained, shall prejudice or in any manner affect
Trustee's or Beneficiary's right to realize upon or enforce any other security
now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee
and Beneficiary, and each of them, shall be entitled to enforce this Deed of
Trust and any other security now or hereafter held by Beneficiary or Trustee in
such order and manner as they may in their absolute discretion determine. No
remedy herein conferred upon or reserved to Trustee or Beneficiary is intended
to be exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given hereby or by any of the other Loan Documents to Trustee
or Beneficiary or to which either of them may be otherwise entitled may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Trustee or Beneficiary, and either of them may pursue
remedies as each in their sole discretion shall deem appropriate.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF TRUSTOR
Trustor represents and warrants that, except as previously
disclosed to Beneficiary in a writing:
A. Trustor lawfully possesses and holds the Land and
Improvements;
B. Trustor has or will have good title to all Property other
than the Land and Improvements;
C. Trustor has the full and unlimited power, right and
authority to encumber the Property and assign the Rents;
D. This Deed of Trust creates a first and prior lien on the
Property;
E. The Property includes all property and rights which may be
reasonably necessary or desirable to promote the present and any
reasonable future beneficial use and enjoyment of the Land and
Improvements;
21 SWI ARIZONA DEED OF TRUST
<PAGE> 22
F. Trustor owns the Personal Property Collateral free and
clear of any security interests, liens, security agreements,
reservations of title or conditional sales contracts, and there is no
financing statement affecting such Personal Property Collateral on file
in any public office; and
G. Trustor's place of business, or its chief executive office
if it has more than one place of business, is located at the address
specified above.
ARTICLE 10
MISCELLANEOUS COVENANTS AND AGREEMENTS
10.01 Amendments. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change, discharge or
termination is sought.
10.02 Trustor's Waiver of Rights. Trustor hereby waives, to the extent
permitted by law: (a) the benefit of all laws now existing or that may
hereafter be enacted providing for any appraisement before sale of any portion
of the Property, and, whether now existing or hereafter arising or created; (b)
all rights of redemption, valuation, stay of execution, notice of election to
mature or declare due the whole of the Secured Obligations and marshaling in
the event of trustee's sale of judicial foreclosure of the liens hereby
created; and (c) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of Arizona pertaining to the rights
and remedies of sureties.
10.03 Statements by Trustor. Trustor shall, within 10 days after
notice thereof from Beneficiary, deliver to Beneficiary a written statement
setting forth the amounts then unpaid and secured by this Deed of Trust and
stating whether any offset or defense exists against such amounts.
10.04 Reconveyance by Trustee. Upon the written request of Beneficiary
stating that all Secured Obligations have been paid and fully performed, and
upon payment by Trustor of Trustee's fees and the costs and expenses of
executing and recording any requested reconveyance, Trustee shall reconvey to
Trustor, or to the person or persons legally entitled thereto, without
warranty, any portion of the Property then held hereunder. The recitals in any
such reconveyance of any matter or fact shall be conclusive proof of the
truthfulness thereof. The grantee in any such reconveyance may be described as
"the person or persons legally entitled thereto." Beneficiary agrees to
execute all documents, instruments, agreements and financing statements in
connection with any such reconveyance of the Property and the security interest
granted pursuant to Section 2.02 above.
10.05 Notices. Whenever Beneficiary, Trustor or Trustee shall desire
to give or serve any notice, demand, request or other communication with
respect to this Deed of Trust, unless otherwise required by applicable law,
each such notice, demand, request or other communication shall be in writing
and shall become effective: (i) upon delivery by hand; (ii) two business days
after being deposited, by the party giving such notice, demand, request or
other communication, with the United States Postal Service, certified, postage
prepaid; or (iii) one business day after being delivered, by the party giving
such notice, demand, request or other communication, to a nationally recognized
overnight courier delivery service, with the charge for such overnight delivery
prepaid, in either case addressed to the parties to whom such notice, demand,
request or other communication is directed, at the addresses for such parties
set forth in the first paragraph of this Deed of Trust, or at such other
addresses as each party may designate from time to time by
22 SWI ARIZONA DEED OF TRUST
<PAGE> 23
delivering notice as provided herein. All such notices and other
communications shall be effective when mailed; provided, however, that notices
to Beneficiary shall be effective only when received by Beneficiary. Notice
given in any other manner shall be effective only if and when received by the
addressee.
10.06 Captions. The captions or headings at the beginning of Articles,
Sections and Subsections hereof are for the convenience of the parties and
shall not be used in construing it.
10.07 Invalidity of Certain Provisions. Every provision of this Deed
of Trust is intended to be severable. In the event any term or provision hereof
is declared to be illegal, invalid or unenforceable for any reason whatsoever
by a court of competent jurisdiction, such illegality, invalidity, or
unenforceability shall not affect the balance of the terms and provisions
hereof, which terms and provisions shall remain binding and enforceable. If
the lien of this Deed of Trust is invalid or unenforceable as to any part of
the debt, or if the lien is invalid or unenforceable as to any part of the
Property, the unsecured or partially secured portion of the debt shall be
completely paid prior to the payment of the remaining and secured or partially
secured portion of the debt, and all payments made on the debt, whether
voluntary or by trustee's sale, judicial foreclosure or other enforcement
action or procedure, shall be considered to have been first paid on and applied
to the full payment of that portion of the debt which is not secured or fully
secured by the lien of this Deed of Trust.
10.08 Subrogation. To the extent that proceeds of the Secured
Obligations created under the Loan Documents are used, either directly or
indirectly, to pay any outstanding lien, charge or prior encumbrance against
the Property, Beneficiary shall be subrogated to any and all rights and liens
held by an owner or holder of such outstanding liens, charges and prior
encumbrances, irrespective of whether said liens, charges or encumbrances are
released.
10.09 No Merger of Lease. Upon the trustee's sale or judicial
foreclosure of the lien created by this Deed of Trust on the Property pursuant
to the provisions hereof, any lease or sublease or rental agreement then
existing and affecting all or any portion of the Property shall not be
destroyed or terminated by application of the law of merger or as a matter of
law or as a result of such trustee's sale or judicial foreclosure unless
Beneficiary or any purchaser at such trustee's sale or judicial foreclosure
sale shall so elect. No act by or on behalf of Beneficiary or any such
purchaser shall constitute a termination of any lease or sublease unless
Beneficiary or such purchaser shall give written notice thereof to such tenant
or subtenant. If both the lessor's and lessee's estate under any lease or any
portion thereof which constitutes a part of the Property shall at any time
become vested in one owner, this Deed of Trust and the lien created hereby
shall not be destroyed or terminated by application of the doctrine of merger
unless Beneficiary so elects as evidenced by recording a written declaration so
stating, and, unless and until Beneficiary so elects, Beneficiary shall
continue to have and enjoy all of the rights and privileges of Beneficiary
hereunder as to the separate estates, except as otherwise provided by law.
10.10 Governing Law. This Deed of Trust, and its validity, enforcement
and interpretation, shall be governed by Texas law (without regard to any
conflict of laws principles) and applicable United States federal law, except
to the extent of procedural and substantive matters relating only to the
creation and perfection of liens and security interests in, and the enforcement
of rights and remedies against, the Property, which matters shall be governed
by the laws of the State of Arizona.
10.11 Joint and Several Obligations. Should this Deed of Trust be
signed by more than one party, all obligations herein contained shall be deemed
to be the joint and several obligations of each party executing this Deed of
Trust.
23 SWI ARIZONA DEED OF TRUST
<PAGE> 24
10.12 Interpretation. In this Deed of Trust the singular shall include
the plural and the masculine shall include the feminine and neuter and vice
versa, if the context so requires; and the word "person" shall include
corporation, partnership, joint venture, limited liability company or other
form of association or legal entity recognized in law.
10.13 Corrections. Trustor shall, upon request of Beneficiary,
promptly correct any defect, error or omission which may be discovered in the
contents hereof or in the execution or acknowledgment hereof, and will execute,
acknowledge and deliver such further instruments and do such further acts as
may be necessary or as may be reasonably requested by Beneficiary to carry out
more effectively the purposes hereof, to subject to the lien and security
interest hereby created any of Trustor's properties, rights or interest covered
or intended to be covered hereby, or to perfect and maintain such lien and
security interest.
10.14 Further Assurances. Trustor agrees to do or to cause to be done
such further acts and things and to execute and deliver or to cause to be
executed and delivered such additional assignments, agreements, powers and
instruments, as any of them may reasonably require or deem advisable to keep
valid and effective the charges and lien hereof, to carry into effect the
purposes of this Deed of Trust or to better assure and confirm unto Beneficiary
or Trustee their rights, powers and remedies hereunder; and, upon request by
Beneficiary or Trustee, shall supply evidence of fulfillment of each of the
covenants herein contained concerning which a request for such evidence has
been made. In the event that Trustor fails or refuses to execute and deliver
any assignments, agreements, powers or instruments pursuant to this Section
10.14, Trustor irrevocably appoints Beneficiary or Trustee, as applicable, its
true and lawful attorney-in-fact, with full power of substitution, to execute
and deliver any such assignments, agreements, powers and instruments. The
appointment granted herein shall be deemed to be a power coupled with an
interest.
10.15 Execution of Instruments by Trustee. At any time, and from time
to time, without liability therefor and without notice, upon written request of
Beneficiary and without affecting the personal liability of any person for
payment of the indebtedness or the performance of any other obligation secured
hereby, Trustee may: (a) release and reconvey any part of said Property; (b)
consent in writing to the making of any map or plat thereof; (c) join in
granting any easement thereon; or (d) join in any extension agreement,
agreement subordinating the lien or charge hereof, or other agreement or
instrument relating hereto or to the Property or any portion thereof.
10.16 Appointment of Successor Trustee. Beneficiary may, from time to
time remove Trustee and appoint a successor Trustee to any Trustee appointed
hereunder. A Notice of Substitution of Trustee in the form required by
applicable law shall be recorded with the County Recorder of the county in
which the Land is located.
10.17 Successors and Assigns. Subject to Section 4.19 above, this Deed
of Trust applies to, inures to the benefit of and binds Trustor, Trustee and
Beneficiary and their respective legal representatives, successors and assigns.
10.18 Priority. Except as otherwise expressly set forth in the Credit
Agreement, this Deed of Trust is intended to have and retain priority over all
other liens and encumbrances upon the Property, excepting only: (a) such
taxes, assessments, or Impositions as have, or by law gain, priority over the
lien created hereby; (b) covenants, conditions, restrictions, easements, and
rights of way which are of record or are disclosed of record affecting the
Property that have been approved by Beneficiary in writing; (c) leases, liens,
encumbrances and other matters as to which Beneficiary hereafter expressly
subordinates the lien of this Deed of Trust by written instrument in recordable
form. Under no circumstance shall Beneficiary be obligated or required to
subordinate the lien hereof to any lease, lien, encumbrance, covenant or other
24 SWI ARIZONA DEED OF TRUST
<PAGE> 25
matter affecting the Property or any portion thereof. Beneficiary may,
however, at Beneficiary's option, exercisable in its sole and absolute
discretion, subordinate the lien of this Deed of Trust, in whole or in part, to
any or all leases, liens, or encumbrances by executing and recording with the
County Recorder of the county in which the Land is located, a unilateral
declaration of such subordination specifying the lease, lien, encumbrance or
other matter or matters to which this Deed of Trust shall thereafter be
subordinate.
10.19 Change of Law. In the event of the passage, after the date of
this Deed of Trust, of any law deducting from the value of the Property, for
the purposes of taxation, any lien thereon, or changing in any way the laws now
in force for the taxation of mortgages, deeds of trust, or debts secured by
mortgage or deed of trust (other than laws imposing taxes on income), or the
manner of the collection of any such taxes so as to affect adversely the rights
of Beneficiary under this Deed of Trust, the Secured Obligations shall become
due and payable at the option of Beneficiary exercised by 30 days notice to
Trustor unless Trustor, within such 30 day period, shall, if permitted by law,
assume the payment of any tax or other charge so imposed upon Beneficiary for
the period remaining until full payment of the Secured Obligations.
10.20 No Waiver. No waiver by Beneficiary of any Event of Default,
default or breach by Trustor hereunder shall be implied from any omission by
Beneficiary to take action on account of such Event of Default, default or
breach if such Event of Default, default or breach persists or is repeated, and
no express waiver shall affect any Event of Default, default or breach other
than the particular Event of Default, default or breach referred to in such
waiver and such waiver shall be operative only for the time and to the extent
therein stated. Waivers of any covenant, term or condition contained herein
shall not be construed as a waiver of any subsequent breach of the same
covenant, term or condition. The consent or approval by Beneficiary to or of
any act by Trustor requiring further consent or approval shall not be deemed to
waive or render unnecessary the consent or approval to or of any subsequent
similar act.
10.21 Abandonment. Subject to such security agreements or other liens
as may exist thereon with the consent of Beneficiary, or any provided for
herein, any and all Personal Property Collateral that upon trustee's sale or
judicial foreclosure of the Property is owned by Trustor and is used in
connection with the operation of the Property, shall be deemed, at the option
of Beneficiary, to have become a part of the Property and abandoned to
Beneficiary in its then condition.
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed
by its duly authorized officers, agents or representatives as of the date first
above written.
"TRUSTOR"
SOUTHWESTERN ICE, INC., a Texas
corporation
By: ______________________________
James F. Stuart, Chief Executive Officer
WITNESS
In accordance with the requirements of A.R.S. Section 14-5503, the
undersigned has executed this Deed of Trust solely for the purpose of
witnessing the grant of a power of attorney by Trustor to Beneficiary as
described in this Deed of Trust.
25 SWI ARIZONA DEED OF TRUST
<PAGE> 26
___________________________________
___________________________________
STATE OF TEXAS )
)
COUNTY OF BEXAR )
The foregoing instrument was acknowledged before me this ___ day of
September, 1997, by James F. Stuart, as President of SOUTHWESTERN ICE, INC., a
Texas corporation, on behalf of said corporation.
___________________________________
Notary Public
My commission expires:
- -----------------------------------
26 SWI ARIZONA DEED OF TRUST
<PAGE> 27
EXHIBIT A
Legal Description
SWI ARIZONA DEED OF TRUST
<PAGE> 1
EXHIBIT 10.26
RECORDED AT THE REQUEST OF AND
WHEN RECORDED MAIL TO:
The Frost National Bank
P.O. Box 1600
San Antonio, TX 78296-1400
Attention: Pat Mascorro
Loan Department
Location RB-2
- --------------------------------------------------------------------------------
LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
------------------------
THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (this "DEED OF TRUST") is made as of 15th day of September,
1997, by SOUTHWESTERN ICE, INC., a Texas corporation, (the "TRUSTOR"), whose
mailing address is 8572 Katy Freeway, Suite 101, Houston, Texas 77024, in favor
of Jimmy R. Locke, of Bexar County, Texas, or any successor or substitute
appointed and designated as herein provided from time to time acting hereunder,
as trustee ("TRUSTEE"), whose mailing address is The Frost National Bank, P.O.
Box 1600, San Antonio, TX 78296-1400, for the benefit of THE FROST NATIONAL
BANK, a national banking association, agent, as beneficiary ("BENEFICIARY"),
whose mailing address is P.O. Box 1600, San Antonio, Texas 78296.
ARTICLE 1
BACKGROUND
1.1 Credit Agreement. Beneficiary has made, or agreed to make,
various loans to Packaged Ice, Inc., a Texas corporation (the "BORROWER") as
more fully described in the Credit Agreement, of even date herewith, by and
between Borrower, Beneficiary, and certain Banks named therein, as amended,
supplemented, modified, restated or extended from time to time (the "CREDIT
AGREEMENT"). All undefined capitalized terms used herein shall have the
meaning given them in the Credit Agreement.
1.2 Notes. Each Revolving Credit Note (as such term is defined in
the Credit Agreement) executed by Borrower payable to the order of any Bank,
evidencing loans advanced to Borrower under the Credit Agreement, in an
aggregate principal face amount of $20,000,000, bearing interest as therein
provided, containing a provision for the payment of a reasonable additional
amount as attorneys' fees, and finally maturing on April 15, 2003, together
with any renewals, increases, extensions, restatements, or modifications
thereof (collectively the "NOTE").
1.3 Security Documents. The loans described in the Credit
Agreement, including, but not limited to, the Revolving Credit Loans, are
secured by the collateral described in, among other things: (a) this Deed of
Trust; and (b) the Security Agreement, of even date herewith, by and between
Trustor, as debtor, and Beneficiary, as secured party (the "SECURITY
AGREEMENT"). The loans described in the Credit Agreement are also secured by
other collateral as described in the Credit Agreement.
SWI LEASEHOLD DEED OF TRUST
<PAGE> 2
1.4 Loan Documents. The Credit Agreement, Revolving Credit Loan,
the Note, this Deed of Trust, the Security Agreement, and assignments,
agreements, documents or instruments executed by or on behalf of Trustor with
respect to the foregoing documents or the transactions contemplated thereby,
each as may hereafter be modified, amended, extended, renewed or replaced,
shall be collectively referred to herein as the "LOAN DOCUMENTS."
ARTICLE 2
GRANT IN TRUST; SECURITY INTEREST
The Secured Obligations as defined in Article 3 below shall be secured
by the Real Property Collateral described in Section 2.01 below and the
Personal Property Collateral described in Section 2.02 below. The Real
Property Collateral and the Personal Property Collateral are hereinafter
collectively referred to as the "PROPERTY".
2. 1 Real Property Collateral. For the purpose of securing payment
and performance of the Secured Obligations, Trustor hereby irrevocably and
unconditionally grants, conveys, transfers and assigns to Trustee, in trust for
the benefit of Beneficiary, with power of sale, all rights, title, interest,
estates, powers and privileges of Trustor in or to all of the following, now or
hereafter acquired (the "REAL PROPERTY COLLATERAL"):
2.1.1 The leasehold estate (the "LEASEHOLD ESTATE") in the
real property situated in Maricopa County, Arizona described on Exhibit "A"
attached hereto and incorporated herein by this reference (the "LAND") created
by the lease agreements referred to in Exhibit "A" (collectively referred to as
the "LEASE").
2.1.2 The interest that Trustor possesses in the buildings,
structures and improvements now or hereinafter located or constructed on the
Land, together with all water and water rights (whether riparian,
appropriative, or otherwise, and whether or not appurtenant), pumps and pumping
stations used in connection therewith and all shares of stock evidencing the
same, all machinery, equipment, appliances, fixtures and other property,
including, but not limited to, all storage tanks and pipe lines, all gas,
electric, heating, cooling air conditioning, filtration, hot water,
refrigeration, plumbing and lighting fixtures and equipment, all floor
coverings, all wells, pumps, pipes, motors, and engines and pumping apparatus
and equipment, which have been or may later be attached or affixed in any
manner to any building, structure or improvement now or hereafter located or
later to be constructed on the Land (collectively, the "IMPROVEMENTS");
2.1.3 All the rights, rights of way, easements, licenses,
profits, privileges, tenements, hereditaments and appurtenances, now or
hereafter in any way appertaining and belonging to or used in connection with
the Land, the Lease, the Improvements, and any part thereof or as a means of
access thereto, including, but not limited to, any claim at law or in equity,
and any after acquired title and reversion in or to each and every part of all
streets, roads, highways and alleys adjacent to and adjoining the same;
2.1.4 All leases, subleases, licenses and concessions or
other agreements relating to, or affecting the use, occupancy or maintenance
of, or services provided to, the Property, now or hereafter affecting the Lease
or any portion thereof (collectively, the "ANCILLARY RIGHTS").
2 SWI LEASEHOLD DEED OF TRUST
<PAGE> 3
2.1.5 Any strips or gores adjacent, used in connection with
or pertaining, to the Land or the Improvements.
2.1.6 All rentals, earnings, income, receipts, royalties,
revenues, issues and profits (the "RENTS") which, after the date hereof, and
while Secured Obligations remain unpaid, may accrue from the Leasehold Estate,
the Lease, the Improvements or any part of the foregoing, subject, however, to
the right, power and authority conferred upon Trustor to collect and apply such
proceeds set forth herein; and
2.1.7 All existing and future rights granted to Trustor to
extend the Lease or to acquire fee title to the Land or any portion thereof.
2.2 Personal Property Collateral. For the purpose of securing
payment and performance of the Secured Obligations, Trustor grants to
Beneficiary a security interest in all rights, title, interest, estates, powers
and privileges of Trustor in or to all of the following, now or hereafter
acquired, to the extent constituting personal property (the "PERSONAL PROPERTY
COLLATERAL"):
2.2.1 The Lease;
2.2.2 The Improvements;
2.2.3 All "goods" (as defined in Chapter 9 of the Uniform
Commercial Code of the State of Arizona (Title 47, Arizona Revised Statutes
("A.R.S.")) or any successor or similar statute (the "UCC"));
2.2.4 All (i) plans and specifications for the
Improvements, (ii) Trustor's rights, but not liability for any breach by
Trustor, under all commitments (including any commitment for financing to pay
any of the Secured Obligations (hereafter defined), insurance policies and
other contracts and general intangibles directly relating to the development or
operation of the Real Property Collateral (including, but not limited to
trademarks, trade names and symbols); (iii) deposits (including, but not
limited to Trustor's rights in tenants' security deposits, deposits with
respect to utility services to the Real Property Collateral, and any deposits
or reserves hereunder or under any other Loan Document, taxes, insurance or
otherwise), money, accounts, instruments, documents, notes and chattel paper
arising from or by virtue of any transactions related to the Real Property
Collateral; (iv) permits, licenses, franchises, certificates, development
rights, commitments and rights for utilities, and other rights and privileges
obtained in connection with the Real Property Collateral; (v) leases, rents,
royalties, bonuses, issues, profits, revenues and other benefits of the Real
Property Collateral; (vi) oil, gas and other hydrocarbons and other minerals
produced from or allocated to the Land and all products processed or obtained
therefrom, and the proceeds thereof; and (vii) engineering, accounting, title,
legal, and other technical or business data concerning the Real Property
Collateral which are in the possession of Trustor or in which Trustor can
otherwise grant a security interest;
2.2.5 All rights of Trustor under any policy or policies of
hazard or liability insurance relating to the Property and any and all riders,
amendments, extensions, renewals, supplements, or extensions thereof, and all
proceeds, loss payments, and premium refunds which may become payable with
respect to such insurance policies;
2.2.6 All construction, service, engineering, consulting,
architectural, and other similar contracts of any nature (including, but not
limited to, those of any general contractors and subcontractors) as such may be
modified, amended, or supplemented from time to time, concerning the
3 SWI LEASEHOLD DEED OF TRUST
<PAGE> 4
design, construction, management, operation, occupancy, use, and/or disposition
of any or all of the Real Property Collateral;
ARTICLE 3
SECURED OBLIGATIONS
Trustor has granted, conveyed, transferred and assigned its interest
in the Property in Article 2 above for the purpose of securing the following
obligations (collectively, the "SECURED OBLIGATIONS"):
3.1 Payment and performance of all obligations of Trustor
under the terms of the Credit Agreement (including, but not limited to, the
Revolving Credit Loan), together with all extensions, modifications,
substitutions or renewals thereof or other advances made thereunder;
3.2 Payment and performance of all obligations of Trustor
under the terms of the Revolving Credit Loan and the Note, and all other notes
given in substitution therefor, together with all extensions, modifications,
supplement, increase, substitutions, extensions, or renewals thereof or other
advances made thereunder, in whole or in part (such other Banks, or the
subsequent holders at the time in question of the Note or any of the Secured
Obligations being collectively herein called "HOLDERS" and individually a
"HOLDER";
3.3 All indebtedness and other obligations owed by
Trustor (or any of them) to any Holder now or hereafter incurred or arising
pursuant to or permitted by the provisions of the Notes, this Deed of Trust, or
any other document now or hereafter evidencing, governing, guaranteeing,
securing, or otherwise executed in connection with the loans evidenced by the
Notes, including, but not limited to any loan or credit agreement, tri-party
financing agreement or other agreement between Trustor (or any of them) and
Holders, or among Trustor (or any of them), Holders and any other party or
parties, pertaining to the repayment or use of the proceeds of the loan
evidenced by the Note or any of the Loan Documents.
3.4 All other loans and future advances made by any
Holder to any Trustor and/or Borrower (or any of them) and all other debts,
obligations and liabilities of Trustor of every kind and character now or
hereafter existing in favor of any Holder, and arising under the Credit
Agreement, the Note, or any of the other Loan Documents, and whether direct or
indirect, primary or secondary, joint or several, fixed or contingent, secured
or unsecured, and whether originally payable to such Holder or to a third party
and subsequently acquired by such Holder, it being contemplated that Trustor
may hereafter become indebted to one or more Holders for such other debts,
obligations and liabilities arising from the Credit Agreement, the Note, or any
of the other Loan Documents; provided, however, and notwithstanding the
foregoing provisions of this Section 3.4, this Deed of Trust shall not secure
any such other loan, advance, debt, obligation or liability with respect to
which any such Holder is by applicable law prohibited from obtaining a lien on
real estate nor shall this Section 3.4 operate or be effective to constitute or
require any assumption or payment by any person, in any way, of any debt of any
other person to the extent that the same would violate or exceed the limit
provided in any applicable usury or other law.
3.5 Payment and performance of every obligation, covenant
and agreement of Trustor contained in this Deed of Trust, together with all
extensions, modifications, substitutions or renewals hereof;
4 SWI LEASEHOLD DEED OF TRUST
<PAGE> 5
3.6 Payment and performance of every obligation, covenant
and agreement of Trustor contained in each of the other Loan Documents,
together with all extensions, modifications, substitutions or renewals thereof
or other advances made thereunder; and
3.7 Payment and performance of all other obligations and
liabilities of Trustor to Beneficiary, whether now existing or hereafter
incurred or created, whether voluntary or involuntary, whether due or not due,
whether absolute or contingent, or whether incurred directly or acquired by
Beneficiary by assignment or otherwise.
THE OBLIGATIONS SECURED BY THIS DEED OF TRUST MAY INCLUDE INTEREST AT A
VARIABLE RATE. SOME OF THE OBLIGATIONS SECURED BY THIS DEED OF TRUST INCLUDE A
SERIES OF ADVANCES THAT WILL BE OF A REVOLVING NATURE THAT MAY BE MADE, REPAID
AND REMADE FROM TIME TO TIME, EVEN IF THE UNPAID BALANCE OWED ON SUCH
OBLIGATION HAS PREVIOUSLY BEEN REDUCED TO ZERO.
ARTICLE 4
COVENANTS AND AGREEMENTS OF TRUSTOR
4.1 Payment of Secured Obligations. Trustor shall pay when due the
principal, interest and all other amounts due to Beneficiary as required of
Trustor under the Loan Documents and the other documents executed in connection
with the Secured Obligations.
4.2 Maintenance, Repair, Alterations. Trustor: (a) shall
maintain, keep and preserve the Property in good condition and repair, ordinary
wear and tear excepted; (b) except as permitted by the Credit Agreement, shall
not cause or permit any fixture or any article of Personal Property Collateral
to be removed from the Property without the prior written consent of
Beneficiary unless the same shall have been replaced in the ordinary course of
business by substantially equivalent property; and (c) shall comply with the
provisions of the Lease.
4.3 Insurance. Trustor shall obtain and maintain at Trustor's
sole expense: (1) all-risk insurance with respect to all insurable Property,
against loss or damage by fire, lighting, windstorm, explosion, hail, tornado
and such hazards as are presently included in so-called "all risk" coverage and
against such other insurable hazards as Beneficiary may require, in an amount
not less than 100% of the full replacement cost, including the cost of debris
removal, without deduction for depreciation and sufficient to prevent Trustor
and Beneficiary from becoming a coinsurer, such insurance to be in Builder's
Risk (non-reporting) form during and with respect to any construction on the
Land; (2) if and to the extent any portion of the Land is in a special flood
hazard area, a flood insurance policy in an amount equal to the lesser of the
principal face amount of the Notes or the maximum amount available; (3)
commercial general public liability insurance, on an "occurrence" basis, for
the benefit of Trustor and Beneficiary as named insured: (4) statutory workers'
compensation insurance with respect to any work on or about the Land; and (5)
such other insurance on the Property as may from time to time be reasonably
required by Beneficiary (including, but not limited to business interruption
insurance, boiler and machinery insurance, earthquake insurance, and war risk
insurance) and against other insurable hazards or casualties which at the time
are commonly insured against in the case of premises similarly situated, due
regard being given to the height, type, construction, location, use and
occupancy of buildings and improvements. All insurance policies shall be
issued and maintained by insurers, in amounts, with deductibles, and in form
satisfactory to Beneficiary, and shall require not less than thirty (30) days'
prior
5 SWI LEASEHOLD DEED OF TRUST
<PAGE> 6
written notice to Beneficiary of any cancellation or change of coverage. All
insurance policies maintained, or caused to be maintained, by Trustor with
respect to the Property, except for public liability insurance, shall provide
that each such policy shall be primary without right of contribution from any
other insurance that may be carried by Trustor or Beneficiary and that all of
the provisions thereof, except the limits of liability, shall operate in the
same manner as if there were a separate policy covering each insured. If any
insurer which has issued a policy of title, hazard, liability or other
insurance required pursuant to this Deed of Trust or any other Loan Document
becomes insolvent or the subject of any bankruptcy, receivership or similar
proceeding or if in the Beneficiary's reasonable opinion the financial
responsible of such insurer is or becomes inadequate, Trustor shall, in each
instance promptly upon the request of Beneficiary and at Trustor's expense,
obtain and deliver to Beneficiary a like policy (or, if and to the extent
permitted by Beneficiary, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Deed of Trust
or such other Loan Document, as the case may be. Without limiting the
discretion of Beneficiary with respect to required endorsements to insurance
policies for loss of or damage to the Property shall contain a standard
mortgage clause (without contribution) naming Beneficiary, as agent for the
Banks, as mortgagee with loss proceeds payable to Beneficiary notwithstanding
(i) any act, failure to act or negligence of or violation of any warranty,
declaration or condition contained in any such policy by any named insured;
(ii) the occupation or use of the Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Beneficiary under the Loan Documents; or (iv) any change in title to
or ownership of the Property or any portion thereof, such proceeds to be held
for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Beneficiary, a copy of
the original policy and a satisfactory certificate of insurance) shall be
delivered to Beneficiary at the time of execution of this Deed of Trust, with
premiums fully paid, and each renewal or substitute policy (or certificate)
shall be delivered to Beneficiary, with premiums fully paid, at least ten (10)
days before the termination of the policy it renews or replaces. Trustor shall
pay all premiums on policies required hereunder as they become due and payable
and promptly deliver to Beneficiary evidence satisfactory to Beneficiary of the
timely payment thereof. If any loss occurs at any time when Trustor has failed
to perform Trustor's covenants and agreements in this paragraph, Beneficiary
shall nevertheless be entitled to the benefit of all insurance covering the
loss and held by or for Trustor, to the same extent as if it had been made
payable to Beneficiary. Upon any foreclosure hereof or transfer of title to
the Property in extinguishment of the whole or any part of the secured
indebtedness, all of Trustor's right, title and interest in and to the
insurance policies referred to in this Article 4.3 (including unearned
premiums) and all proceeds payable thereunder shall thereupon vest in the
purchaser at foreclosure or other such transferee, to the extent permissible
under such policies. Beneficiary shall have the right (but not the obligation)
to make proof of loss for, settle and adjust any claim under, and receive the
proceeds of, all insurance for loss of or damage to the Property, and the
expenses incurred by Beneficiary in the adjustment and collection of insurance
proceeds shall be a part of the secured indebtedness and shall be due and
payable to Beneficiary on demand. Beneficiary shall not be, under any
circumstances, liable or responsible for the obtaining, maintaining or adequacy
of any insurance or for failure to collect or exercise diligence in the
collection of any of such proceeds or for failure to see to the proper
application of any amount paid over to Trustor. Any such proceeds received by
Beneficiary shall, after deduction therefrom of all reasonable expenses
actually incurred by Beneficiary, including attorneys' fees, at Beneficiary's
option be (1) released to Trustor, or (2) applied (upon compliance with such
terms and conditions as may be required by Beneficiary) to repair or
restoration, either partly or entirely, of the Property so damaged, or (3)
applied to the payment of the secured indebtedness in such order and manner as
Beneficiary, in its sole discretion, may elect, whether or not due. Trustor
shall at all times comply with the requirements of the insurance policies
required hereunder and of the issuers of such policies and of any board of fire
underwriters or similar body as applicable to or affecting the Property.
6 SWI LEASEHOLD DEED OF TRUST
<PAGE> 7
4.4 Casualties. Trustor shall give prompt written notice thereof
to Beneficiary after the happening of any casualty to or in connection with the
Property or any part thereof, whether or not covered by insurance if the
damages caused thereby exceed $25,000. In the event of such casualty, the
gross proceeds of the insurance relating to such Property (the "PROCEEDS"),
less all expenses (including, but not limited to, attorneys' fees) incurred in
the collection of such Proceeds, shall be payable to Beneficiary, and Trustor
hereby authorizes and directs any affected insurance company to make payment of
such Proceeds in such a case directly to Beneficiary. If Trustor receives any
Proceeds resulting from such casualty, Trustor shall promptly pay over such
Proceeds to Beneficiary. Beneficiary is hereby authorized and empowered by
Trustor, at Beneficiary's option and in Beneficiary's sole and absolute
discretion, as attorney-in-fact for Trustor, with full power of substitution,
to make proof of loss, to appear in and prosecute any action arising from any
policy or policies of insurance, and to settle, adjust, or compromise any claim
for loss, damage or destruction under any policy or policies of insurance. The
appointment granted herein shall be deemed to be a power coupled with an
interest. Trustor shall not settle, adjust or compromise any material claim
for loss, damage or destruction of the Property or any part thereof under any
policy or policies of insurance without the prior written consent of
Beneficiary to such settlement, adjustment or compromise, which consent shall
not be unreasonably withheld by Beneficiary. In the event of any damage to or
destruction of the Property, all, or any part, of the Proceeds may be applied
to the Secured Obligations or to the restoration and repair of the Property, as
Beneficiary may determine in its sole and absolute discretion; provided,
however, that if Beneficiary requires Trustor to restore and repair the
Property, then Beneficiary shall pay to Trustor all Proceeds up to the amount
required to complete such restoration and repair. Nothing herein contained
shall be deemed to excuse Trustor from repairing or maintaining the Property as
provided in Section 4.2 above, or restoring all damage or destruction to the
Property, regardless of whether or not there are Proceeds available to Trustor
or whether any such Proceeds are sufficient in amount; provided, however, if
Proceeds are applied to the restoration or repair of the Property by
Beneficiary, Trustor shall not be obligated to pay for repair and restoration
up to the amount of Proceeds so available, but shall be nevertheless liable for
any amounts exceeding available Proceeds for the restoration and repair of the
Property. Application or release by Beneficiary of any Proceeds shall not cure
or waive any default, notice of default or Event of Default under this Deed of
Trust or invalidate any act done pursuant to any notice of default.
4.5 Assignment of Policies Upon Foreclosure. In the event of a
trustee's sale, judicial foreclosure of this Deed of Trust or other transfer of
title or assignment of the Property in satisfaction, in whole or in part, of
the debt secured hereby, all right, title and interest of Trustor in and to all
policies of insurance required by Section 4.3 above and any unearned premiums
paid thereon shall, without further act, be assigned to and shall inure to the
benefit of and pass to the successor in interest to Trustor or the purchaser or
grantee of the Property, and Trustor hereby irrevocably appoints Beneficiary
its lawful attorney-in-fact, with full power of substitution, to execute an
assignment thereof and any other document necessary to effect such transfer.
The appointment granted herein shall be deemed to be a power coupled with an
interest.
7 SWI LEASEHOLD DEED OF TRUST
<PAGE> 8
4.6 Indemnification; Subrogation; Waiver of Offset.
4.6.1 If Beneficiary is made a party to any litigation, or
other action or proceeding, concerning this Deed of Trust, any of the other
Loan Documents, the Property or any part thereof or interest therein, or the
occupancy of the Property by Trustor or a tenant of Trustor, then Trustor shall
indemnify, protect, defend and hold Beneficiary harmless for, from and against
any and all liability by reason of said litigation, or other action or
proceeding, including, but not limited to, reasonable attorneys' fees and
expenses incurred by Beneficiary as a result of any such litigation, or other
action or proceeding, whether or not any such litigation, or other action or
proceeding, is prosecuted to judgment; provided, however, that Trustor's
obligations under this sentence shall not apply to liability to Beneficiary
arising as the sole result of the gross negligence or intentional or willful
misconduct of Beneficiary. Upon the occurrence of an Event of Default
hereunder, Beneficiary may employ an attorney or attorneys to protect its
rights hereunder and under the other Loan Documents, and in the event of such
employment following any breach by Trustor, Trustor shall pay Beneficiary's
reasonable attorneys' fees and expenses incurred by such Beneficiary, whether
or not an action is actually commenced against Trustor by reason of its breach.
4.6.2 Trustor waives any and all right to claim or recover
against Beneficiary, its officers, employees, agents and representatives, for
loss of or damage to Trustor, the Property, Trustor's property or the property
of others under Trustor's control from any cause insured against or required to
be insured against by the provisions of this Deed of Trust, unless such loss or
damage was caused solely by Beneficiary's gross negligence or willful
misconduct and then only to the extent that such loss or damage is not covered
by insurance proceeds; provided, however, that this waiver of subrogation shall
not be effective with respect to any policy of insurance permitted or required
by this Deed of Trust if: (i) such policy prohibits, or if coverage thereunder
would be reduced as a result of, such waiver of subrogation; and (ii) Trustor
is unable to obtain from a carrier issuing such insurance a policy that, by
special endorsement or otherwise, permits such a waiver of subrogation.
4.7 Taxes and Impositions. Trustor shall pay, or cause
to be paid prior to delinquency, all real property taxes and assessments,
general and special, levied by any governmental authority, whether federal,
state or local, and all other taxes and assessments of any kind or nature
whatsoever including, but not limited to, non- governmental levies or
assessments such as maintenance charges, levies or charges resulting from
covenants, conditions and restrictions affecting the Property, which are
assessed or imposed upon the Property, or upon Trustor as owner or operator of
the Property, or become due and payable, and which create, may create or appear
to create a lien upon the Property, or any part thereof, or upon any personal
property, equipment or other facility used in the operation or maintenance
thereof (all of the above hereinafter referred to, collectively, as
"IMPOSITIONS"). Notwithstanding the foregoing, no payment shall be required
under this Subsection 4.7 so long as such Imposition is diligently and
continuously contested in good faith.
4.8 Utilities. Trustor shall pay or shall cause to be
paid when due all utility charges which are incurred for the benefit of the
Property or which may become a charge or lien against the Property for gas,
electricity, water or sewer services furnished to the Property and all other
assessments or charges of a similar nature, whether public or private,
affecting or related to the Property or any portion thereof, whether or not
such taxes, assessments or charges are or may become liens thereon.
Notwithstanding the foregoing, no payment shall be required under this
Subsection 4.8 so long as such Imposition is diligently and continuously
contested in good faith.
8 SWI LEASEHOLD DEED OF TRUST
<PAGE> 9
4.9 Defense of Actions and Costs. Trustor, at no cost or
expense to Beneficiary or Trustee, shall appear in and defend any action or
proceeding purporting to affect the security or validity of this Deed of Trust
or of, the other Loan Documents, the interest of Beneficiary herein or therein,
or the rights, powers or duties of Beneficiary or Trustee hereunder or
thereunder. If Beneficiary and Trustee, or either of them, elects to become a
party to such action or proceeding, or is made a party thereto or to any other
action or proceeding, of whatever kind or nature, concerning this Deed of
Trust, any of the Loan Documents, the Property or any part thereof or interest
therein, or the occupancy thereof, Trustor shall indemnify, protect, defend and
hold Trustee and Beneficiary harmless for, from and against any and all
liability, damage, cost and expense incurred by Trustee and Beneficiary, or
either of them, by reason of said action or proceeding (including, but not
limited to, Trustee's reasonable fees and expenses, the reasonable fees and
expenses of attorneys for Trustee and for Beneficiary, and other expenses, of
whatever kind or nature, incurred by Trustee or Beneficiary, or either of them,
as a result of such action or proceeding), whether or not such action or
proceeding is prosecuted to judgment or decision. Immediately upon demand
therefor by Trustee or Beneficiary, Trustor shall pay thereto an amount equal
to Trustor's liability to such person under this Section 4.9, together with
interest thereon from date of expenditure at the default rate provided in the
Secured Obligations; and until paid, such sums shall be secured hereby.
4.10 Survival of Obligations and Warranties. Trustor
shall fully and faithfully satisfy and perform the obligations of Trustor
contained herein and in the other Loan Documents, each agreement of Trustor
incorporated by reference therein or herein and each agreement the performance
of which is secured hereby or thereby, and any modification or amendment hereof
or thereof. All obligations, representations, warranties and covenants of
Trustor contained herein or in any such other Loan Document between Trustor and
Beneficiary shall survive the execution and delivery hereof and shall remain
continuing obligations, representations, warranties and covenants of Trustor
during any time when any portion of the Secured Obligations remain outstanding.
4.11 Compliance with Lease. Trustor shall perform and
comply with all agreements, covenants, terms and conditions imposed on or
assumed by Trustor as lessee under the Lease, and if Trustor fails to do so,
Beneficiary may, but shall not be obligated to, take any action Beneficiary
deems reasonably necessary or desirable to prevent or to cure any default by
Trustor in the performance of or compliance with any of Trustor's covenants or
obligations under the Lease. On receipt by Beneficiary from Lessor of any
written notice of default by Trustor under the Lease, Beneficiary may rely
thereon and take any action as stated above to cure such default even though
the existence of such default or the nature thereof is questioned or denied by
Trustor or by any party on behalf of Trustor. Trustor expressly grants to
Beneficiary, and agrees that Beneficiary shall have, the absolute and immediate
right to enter in and on the Land to such extent and as often as Beneficiary,
in Beneficiary's sole discretion, deems necessary or desirable in order to
prevent or to cure any such default by Trustor. Except in circumstances of an
emergency or where Beneficiary determines that all or any part of the Property
is threatened or in jeopardy, Beneficiary will give reasonable written notice
to Trustor prior to such entry. Beneficiary may, but shall not be obligated
to, pay such reasonable sums of money as Beneficiary, in its sole discretion,
deems necessary for any such purpose, and Trustor agrees to pay to Beneficiary,
immediately and without demand, all such sums so paid by Beneficiary, together
with interest thereon from the date of each such payment at the default rate
provided in the Secured Obligations. All sums so paid and expended by
Beneficiary and the interest thereon shall be added to and be secured by the
lien created by this Deed of Trust.
4.12 Compliance with Legal Requirements. The Property and
the use, operation and maintenance thereof and all activities thereon do and
shall at all times comply with all applicable Legal
9 SWI LEASEHOLD DEED OF TRUST
<PAGE> 10
Requirements (defined below). The Property is not, and shall not be, dependent
on any other property or premises or any interest therein other than the
Property to fulfill any requirement of any Legal Requirement. Trustor shall
not, by act or omission, permit any building or other improvement not subject
to the lien of this Deed of Trust to rely on the Property or any interest
therein to fulfill any requirement of any Legal Requirement. No part of the
Property constitutes a non-conforming use under any zoning law or similar law
or ordinance applicable thereto. Trustor has obtained and shall preserve in
force all requisite zoning, utility, building, health and operating permits
from the governmental authorities having jurisdiction over the Property that
the Property, or any use, activity, operation or maintenance thereof or
thereon, is not in compliance with any Legal Requirement, Trustor will promptly
furnish a copy of such notice or claim to Beneficiary. Trustor has received no
notice and has no knowledge of any such noncompliance. As used in this Deed of
Trust: (i) the term "LEGAL REQUIREMENT" means any applicable local, state or
federal law, rule or regulation, agreement, covenant, restriction, easement or
condition.
4.13 No Release. No release or forbearance of Trustor's
obligations under the Lease, pursuant to the Lease or otherwise, shall release
Trustor from any of Trustor's obligations under this Deed of Trust.
4.14 No Merger. Unless Beneficiary shall otherwise
expressly consent in writing, the fee title to the Land and the leasehold
estate created by the Lease shall not merge, but shall always remain separate
and distinct, notwithstanding the union of such estates either in the Lessor or
in Trustor, or in a third party by purchase or otherwise. In case Trustor
acquires the fee title or any other estate, title or interest in the Land, this
Deed of Trust shall attach to and cover and be a lien upon the fee title or
such other estate so acquired, and such fee title or other estate shall,
without further assignment, mortgage or conveyance, become and be subject to
the lien of this Deed of Trust. Trustor shall notify Beneficiary of any such
acquisition by Trustor and, on written request by Beneficiary, shall cause to
be executed and recorded all such other and further assurances or other
instruments in writing as may in the opinion of Beneficiary be required to
carry out the intent and meaning hereof.
4.15 No Modification of Lease or Assignment of Leases and
Rents. Trustor shall not, without first obtaining the written consent of
Beneficiary: (a) cancel, surrender, abridge or otherwise materially modify the
Lease or permit any such cancellation, surrender abridgement or modification;
or (b) assign or attempt to assign the Leases and the Rents, other than to
Beneficiary.
4.16 Notice of Default under Lease; Other Notices.
Trustor shall promptly notify Beneficiary in writing of any default under the
Lease or of the receipt by Trustor of any notice of default from Lessor and
shall furnish Beneficiary any and all information which Beneficiary may
reasonably request concerning the performance by Trustor of its covenants and
obligations under the Lease. Trustor shall also deposit with Beneficiary an
exact copy of any notice, communication, plan, specifications, or other
instrument or document received or given by Trustor in any way relating to or
affecting the Lease.
4.17 Additional Obligation. The provisions of this Deed
of Trust shall be deemed to be obligations of Trustor in addition to Trustor's
obligations as lessee with respect to similar matters contained in the Lease,
and the inclusion herein of any covenants and agreements relating to similar
matters under which Trustor is obligated under the Lease shall not restrict or
limit Trustor's duties and obligations to keep and perform promptly all of its
covenants, agreements and obligations as lessee under the Lease.
10 SWI LEASEHOLD DEED OF TRUST
<PAGE> 11
4.18 Notice to Lessor. If required under the Lease,
Trustor has obtained the consent of the Lessor with respect to this Deed of
Trust. If such notice is not required, Trustor shall, in any event, promptly
after the execution and delivery of this Deed of Trust or of any instrument or
agreement supplemental thereto, notify the Lessor in writing of the execution
and delivery thereof and deliver to Lessor a copy of this Deed of Trust, such
instrument or such agreement, as the case may be.
4.19 Transfer of Property by Trustor. Trustor agrees
that, except as otherwise provided in the Credit Agreement, in the event that
the interest of Trustor in the Property, or any part thereof, or any interest
therein is sold, agreed to be sold, conveyed, alienated, encumbered, leased,
assigned, conveyed or otherwise transferred by Trustor, whether by operation of
law or otherwise, the Secured Obligations, irrespective of the maturity dates
expressed therein, at the option of Beneficiary, and without demand or notice
shall immediately become due and payable. In the event that Beneficiary does
not elect to declare such Secured Obligations immediately due and payable,
then, unless indicated otherwise in writing by Beneficiary, Trustor shall
nevertheless remain primarily liable for such Secured Obligations. This
provision shall apply to each and every sale, transfer or conveyance,
regardless whether or not Beneficiary has consented to, or waived,
Beneficiary's rights hereunder, whether by action or non-action in connection
with any previous sale, transfer or conveyance. Notwithstanding the preceding
provisions of this Section 4.19, to the extent permitted by the Credit
Agreement, Trustor shall be entitled to dispose of items of Personal Property
Collateral which become inadequate, obsolete, worn out, unsuitable, undesirable
or unnecessary for the operation of the Property, provided that Trustor
immediately substitutes and installs replacement Personal Property Collateral
of at least comparable worth, value and utility. All such substituted items
shall be installed free of all liens and encumbrances and shall become a part
of the Property as Personal Property Collateral. Trustor will cooperate with
Beneficiary and Trustee and will pay all costs, including, but not limited to,
reasonable attorneys' fees, incurred in subjecting to the lien hereof all items
so substituted and Beneficiary will cooperate with Trustor in securing, if
necessary, a release from the lien hereof of the Personal Property Collateral
for which the substitution is made and in providing such other documents as may
be required to facilitate the removal and substitution.
4.20 Beneficiary's Approval. Other than the Lease,
Trustor shall not enter into any lease or sublease of any portion of the
Property, without the prior written approval of Beneficiary. Beneficiary may
refuse such approval for any reason or may condition its approval upon such
events or occurrences as Beneficiary deems appropriate, in its sole and
unfettered discretion. Notwithstanding the foregoing, Trustor may enter into a
lease or sublease for the Property on market terms and rates for terms of five
(5) years or less (inclusive of all extensions and renewal options) upon prior
written approval of Beneficiary, which approval shall not be unreasonably
withheld.
ARTICLE 5
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
5.1 Assignment of Rents, Issues and Profits. Trustor hereby
grants, transfers and assigns to Beneficiary all of the Rents of the Property
and hereby gives to and confers upon Beneficiary the right, power and authority
to collect such Rents. Upon an Event of Default, Trustor irrevocably appoints
Beneficiary its true and lawful attorney-in- fact, with full power of
substitution, at the option of Beneficiary, at any time and from time to time,
to demand, receive and enforce payment, to give receipts, releases and
satisfactions, and to sue, in its name or in the name of Trustor, for all such
Rents, and apply the same to the Secured Obligations; provided, however, that
Trustor shall have the right to collect such
11 SWI LEASEHOLD DEED OF TRUST
<PAGE> 12
Rents (but not more than one month in advance unless the written approval of
Beneficiary has first been obtained), and to retain and enjoy the same, so long
as an Event of Default, or an event or condition in which, with notice or lapse
of time would constitute an Event of Default, shall not have occurred hereunder
and be continuing. The assignment of the Rents in this Section 5.1 is intended
to be an absolute assignment from Trustor to Beneficiary and not merely the
passing of a security interest. The appointment granted herein shall be deemed
to be a power coupled with an interest.
5.2 Collection Upon Default. To the extent permitted by law, upon
the occurrence of an Event of Default hereunder, Beneficiary may, at any time
without notice, either in person, by agent, or by a receiver appointed by a
court, and without regard to the adequacy of any security for the Secured
Obligations, enter upon and take possession of the Property, or any part
thereof, and, with or without taking possession of the Property or any portion
thereof, in its own name sue for or otherwise collect such Rents (including,
but not limited to, those past due and unpaid, and all prepaid rents and all
other monies which may have been or may hereafter be deposited with Trustor by
any lessee or tenant of Trustor to secure the payment of any rent or for any
services thereafter to be rendered by Trustor for any other obligation of any
tenant to Trustor arising under any lease, and Trustor agrees that, upon the
occurrence of any Event of Default hereunder, Trustor upon the request of
Beneficiary shall promptly deliver all such Rents and other monies to
Beneficiary), and Beneficiary may apply the same, less reasonable costs and
expenses of operation and collection, including, but not limited to, reasonable
attorneys' fees and expenses, whether or not suit is brought or prosecuted to
judgment, upon any of the Secured Obligations, notwithstanding that the Secured
Obligation or the performance of the Secured Obligation may not then be due.
The collection of such Rents, or the entering upon and taking possession of the
Property, or the application thereof as aforesaid, shall not cure or waive any
default, notice of default or Event of Default hereunder or invalidate any act
done in response to such default or Event of Default or pursuant to such notice
of default and shall not be deemed or construed to make Beneficiary a
mortgagee-in-possession of the Property or any portion thereof.
ARTICLE 6
ENVIRONMENTAL
6.1 Definitions. In addition to any terms defined elsewhere in
this Deed of Trust, as used in this Article 6:
6.1.1 "HAZARDOUS SUBSTANCE" means any substance, material,
vapor, or waste which is or becomes designated, classified or regulated as
being "toxic" or "hazardous" or a "pollutant," or which is or becomes similarly
designated, classified or regulated, under any federal, state or local law,
regulation or ordinance, or any derivative or mixture thereof, or any petroleum
products, including, but not limited to, crude oil and any product derived
directly or indirectly from, or any fraction or distillate of, crude oil.
6.1.2 "INDEMNIFIED COSTS" means all actual or threatened
liabilities, claims, actions, causes of action, judgments, orders, damages
(including, but not limited to, foreseeable and unforeseeable consequential
damages), costs, expenses, fines, penalties and losses (including, but not
limited to, sums paid in settlement of claims and all consultant, expert and
reasonable legal fees and expenses of Beneficiary's counsel), including, but
not limited to, those incurred in connection with any investigation of site
conditions (at, above or below the surface) or any clean-up, remedial, removal
or
12 SWI LEASEHOLD DEED OF TRUST
<PAGE> 13
restoration work (whether of the Property or any other property), or any
resulting damages, harm or injuries to the person or property of any third
parties or to any natural resources.
6.1.3 "INDEMNIFIED PARTIES" means and includes Beneficiary,
Trustee, their respective Subsidiaries and Affiliates, assignees of any of
Beneficiary's or Trustee's interest in the Loan Documents, owners of
participation or other interests in the Loan Documents, any purchasers of the
Property at any trustee's sale or judicial foreclosure sale or from
Beneficiary, and the officers, directors, employees, attorneys and agents of
each of them.
6.2 Indemnity Regarding Hazardous Substances. Trustor indemnifies
and holds the Indemnified Parties harmless for, from and against any and all
Indemnified Costs incurred by Indemnified Parties and directly or indirectly
arising out of or resulting from any Hazardous Substance being present or
released in, on or around any part of the Property, or in the soil, groundwater
or soil vapor on or under the Property, including, but not limited to:
6.2.1 Any claim for such Indemnified Costs asserted by any
federal, state or local governmental agency, including, but not limited to, the
United States Environmental Protection Agency and the Arizona Department of
Environmental Quality, and including, but not limited to, any claim that any
Indemnified Party is liable for any such Indemnified Costs as an "owner" or
"operator" of the Property under any law relating to Hazardous Substances; and
6.2.2 Any such Indemnified Costs claimed against any
Indemnified Party by any person other than a governmental agency, including,
but not limited to, any person who may purchase or lease all or any portion of
the Property from Trustor, from any Indemnified Party, or from any other
purchaser or lessee; any person who may at any time have any interest in all or
any portion of the Property; any person who may at any time be responsible for
any clean-up costs or other Indemnified Costs relating to the Property; and any
person claiming to have been injured in any way as a result of exposure to any
Hazardous Substance; and
6.2.3 Any such Indemnified Costs which any Indemnified
Party reasonably believes at any time must be incurred to comply with any law,
judgment, order, regulation or regulatory directive relating to Hazardous
Substances, or which any Indemnified Party reasonably believes at any time must
be incurred to protect the Property or any Indemnified Party from any liability
or loss; and
6.2.4 Any such Indemnified Costs resulting from currently
existing conditions in, on or around the Property, whether known or unknown by
Trustor or the Indemnified Parties at the time this Deed of Trust is executed,
and any such Indemnified Costs resulting from the activities of Trustor,
Trustor's lessors or tenants, or any other person in, on or around the
Property.
6.3 Indemnity Regarding Construction and Other Risks. Trustor
indemnifies and holds the Indemnified Parties harmless for, from and against
any and all Indemnified Costs directly or indirectly arising out of or
resulting from construction of any improvements on the Property, including, but
not limited to, any defective workmanship or materials; or any failure to
satisfy any requirements of any laws, regulations, ordinances, governmental
policies or standards, reports, subdivision maps or development agreements that
apply or pertain to the Property; or breach of any representation or warranty
made or given by Trustor to any of the Indemnified Parties or to any
prospective or actual buyer or lessee of all or any portion of the Property; or
any claim or cause of action of any kind by any party that any Indemnified
Party is liable for any act or omission of Trustor or any other person or
entity in connection with the possession, sublease, operation or development of
the Property.
13 SWI LEASEHOLD DEED OF TRUST
<PAGE> 14
6.4 Defense of Indemnified Parties. Upon demand by any
Indemnified Party, Trustor shall defend any investigation, action or proceeding
involving any Indemnified Costs which is brought or commenced against any
Indemnified Party, whether alone or together with Trustor or any other person,
all at Indemnitor's own cost and by counsel to be approved by the Indemnified
Party in the exercise of its sole and absolute discretion. In the alternative,
any Indemnified Party may elect to conduct its own defense at the expense of
Trustor.
6.5 Representation and Warranty Regarding Hazardous Substances.
Trustor represents and warrants to Beneficiary that to the best of Trustor's
knowledge, no Hazardous Substance has been disposed of or released, or
otherwise now exists, in, on, under or around the Property, except as to use,
generation, manufacture, storage, treatment, disposal or release of Hazardous
Substances that are: (a) generally recognized to be appropriate to the normal
business uses of Trustor; and (b) in compliance with applicable local, state
and federal laws, rules and regulations.
6.6 Compliance Regarding Hazardous Substances. Trustor has
complied, and shall comply and cause all tenants and any other persons who may
come upon the Property to comply, with all laws, regulations and ordinances
governing or applicable to Hazardous Substances, including, but not limited to,
those requiring disclosures to prospective and actual purchasers of an interest
in all or any portion of the Property.
6.7 Notices Regarding Hazardous Substances. Trustor shall
promptly notify Beneficiary if it knows, suspects or believes there may be any
Hazardous Substance in the vicinity of the Property and reasonably likely to
affect the Property, at the Property, or in the soil, groundwater or soil vapor
on or under the Property, or that Trustor or the Property may be subject to any
threatened or pending investigation by any governmental agency under any law,
regulation or ordinance pertaining to any Hazardous Substance; provided,
however, that no such notice is required if the Hazardous Substance is: (a)
generally recognized to be appropriate to Trustor's normal business uses; and
(b) in compliance with applicable local, state and federal laws, rules and
regulations.
6.8 Site Visits, Observations and Testing. After providing
reasonable notice, the Indemnified Parties and their agents and representatives
shall have the right at any reasonable time to enter and visit the Property for
the purposes of observing the Property, taking and removing soil or groundwater
samples, and conducting tests on any part of the Property. The Indemnified
Parties have no duty, however, to visit or observe the Property or to conduct
tests, and no site visit, observation or testing by any Indemnified Party shall
impose any liability on any Indemnified Party. In no event shall any site
visit, observation or testing by any Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any law, regulation or
ordinance pertaining to Hazardous Substances or any other applicable
governmental law. Neither Trustor, nor any other party, is entitled to rely on
any site visit, observation or testing by any Indemnified Party. The
Indemnified Parties owe no duty of care to protect Trustor or any other party
against, or to inform Trustor or any other party of, any Hazardous Substances
or any other adverse condition affecting the Property. The Indemnified Party
shall make reasonable efforts to avoid interfering with Trustor's use of the
Property in exercising any rights provided in this Section 6.8.
6.9 Survival. The provisions of this Article 6 shall survive the
repayment and performance of the Secured Obligations and satisfaction of this
Deed of Trust, trustee's sale or judicial foreclosure of this Deed of Trust.
Notwithstanding anything to the contrary contained in this Article 6, Trustor
shall have no obligation to indemnify any Indemnified Party for Indemnified
Costs solely resulting from such
14 SWI LEASEHOLD DEED OF TRUST
<PAGE> 15
Indemnified Party's gross negligence or willful misconduct, or for any
Indemnified Costs arising solely from actions taken after the Property has been
conveyed via Trustee's sale or judicial foreclosure.
ARTICLE 7
[OMITTED]
ARTICLE 8
EVENTS OF DEFAULT;
REMEDIES UPON EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" hereunder:
8.1.1 Failure of Trustor to make any payment of principal,
interest or other amounts when due and payable hereunder or under the Credit
Agreement, subject to applicable notice and cure periods.
8.1.2 Failure of Trustor to comply with any other term,
obligation, covenant or condition contained in this Deed of Trust within
fifteen (15) days following the due date thereof, or within the applicable cure
period, if any, whichever is less.
8.1.3 Failure of Trustor to comply with any term,
obligation, covenant or condition contained in the Lease within the applicable
cure period, if any.
8.1.4 The occurrence of an "Event of Default" as defined in
the Credit Agreement or any of the other Loan Documents.
8.2 Acceleration Upon Default; Additional Remedies. Upon the
occurrence of an Event of Default hereunder, Beneficiary may, at its option,
declare the Secured Obligations to be immediately due and payable without any
presentment, demand, protest or notice of any kind. Notice of acceleration to
Trustor shall not be required. Whether or not Beneficiary exercises said
option, Beneficiary may, to the extent permitted by law, either in person or by
agent, with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its security, enter
upon and take possession of the Property, or any part thereof, in its own name
or in the name of the Trustee, and do any act which it deems necessary or
desirable to preserve the value, marketability or rentability of the Property,
or part thereof or interest therein, increase the income therefrom or protect
the security thereof and, with or without taking possession of the Property,
sue for or otherwise collect the Rents including, but not limited to, those
past due and unpaid, and apply the same, less reasonable costs and expenses of
operation and collection, including, but not limited to, attorneys' fees and
expenses, upon the Secured Obligations all in such order as Beneficiary may
determine. The entering upon and taking possession of the Property, the
collection of such Rents, and the application thereof as aforesaid, shall not
cure or waive any default, notice of default or Event of Default hereunder or
invalidate any act done in response to such default or Event of Default, or
pursuant to such notice of default and, notwithstanding the continuance in
possession by Trustee, Beneficiary or a receiver of all or any portion of the
Property or the collection, receipt and application of any of the Rents
thereby, the Trustee or Beneficiary shall be entitled to exercise every right
provided for in any of the Loan Documents or by law upon occurrence of any
Event of Default, including, but not limited to, the right to exercise the
power of sale. Beneficiary
15 SWI LEASEHOLD DEED OF TRUST
<PAGE> 16
may also exercise all other rights and remedies provided herein, in any Loan
Document or in any other document or agreement now or hereafter securing all or
any portion of the Secured Obligations, or provided by law.
8.3 Trustee's Sale. If any Event of Default hereunder occurs,
Beneficiary may invoke the power of sale by delivering to Trustee a written
statement of breach or non-performance. Trustee shall then record a Notice of
Sale in the Recorder's Office of the county in which the Property is located
and shall mail copies of the Notice of Sale and any other notice as prescribed
by applicable law to Trustor and to the other persons as prescribed by
applicable law. After such time as required by applicable law, and after
publication and posting of the Notice of Sale in accordance with applicable
law, Trustee, without demand on Trustor, shall sell the Property at public
auction to the highest bidder for cash at the time and place designated in the
Notice of Sale. Trustee may postpone sale of the Property by public
declaration at the time and place of any previously scheduled sale unless
otherwise required by applicable law. Beneficiary shall be entitled to a
credit against its bid up to and including the entire amount of the Secured
Obligations, to the extent permitted by law. Trustee shall deliver to the
purchaser its Trustee's deed conveying the Property without any covenant or
warranty, expressed or implied. The proceeds of the sale shall be applied in
the following order: (i) to all reasonable expenses of the sale, including, but
not limited to, Trustee's reasonable fees and reasonable attorneys' fees; (ii)
to the Secured Obligations; and (iii) any excess to the person or persons
legally entitled to it or to the County Treasurer of the county in which the
sale took place, or as otherwise provided by law.
8.4 Judicial Foreclosure. If any Event of Default hereunder
occurs, Beneficiary may commence an action to judicially foreclose this Deed of
Trust in the manner provided by law for foreclosure of a mortgage.
8.5 Appointment of Receiver. If an Event of Default hereunder
shall have occurred and be continuing, Beneficiary, as a matter of right, and
without notice to Trustor or anyone claiming under Trustor, and without regard
to the then value of the Property or the interest of Trustor therein, shall
have the right to apply to any court having jurisdiction to appoint a receiver
or receivers of the Property, and Trustor hereby irrevocably consents to such
appointment and waives notice of any application therefor. Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Beneficiary in case of entry as
provided herein and shall continue as such and exercise all such powers until
the date of the sale of the Property unless such receivership is sooner
terminated.
8.6 Application of Funds After Event of Default. Upon the
occurrence of an Event of Default hereunder, Beneficiary may, at any time
without notice, apply any or all sums or amounts received and held by
Beneficiary to pay rent on the or other sums due Lease, insurance premiums,
Impositions, or any of them, or as rents or income of the Property, or as
insurance or condemnation proceeds, and all other sums or amounts received by
Beneficiary from or on account of Trustor or the Property, or otherwise, upon
any Secured Obligation, in such manner and order as Beneficiary may elect,
notwithstanding that such Secured Obligation may not yet be due. The receipt,
use or application of any such sum or amount shall not be construed to affect
the maturity of any Secured Obligations, or any of the rights or powers of
Beneficiary or Trustee under the terms of the other Loan Documents, or any of
the obligations of Trustor under this Deed of Trust or the other Loan
Documents, or to cure or waive any default, notice of default or Event of
Default hereunder or under any of the other Loan Documents; or to invalidate
any act of Trustee or Beneficiary.
16 SWI LEASEHOLD DEED OF TRUST
<PAGE> 17
8.7 Costs of Enforcement. If any Event of Default hereunder
occurs, Beneficiary and Trustee, and each of them, may employ attorneys to
protect their rights hereunder. Trustor promises to pay to Beneficiary, on
demand, the reasonable fees and expenses of such attorneys and all other costs
of enforcing the Secured Obligations, including, but not limited to, recording
fees, the expense of a Trustee's Sale Guarantee, Trustee's fees and expenses,
receivers' fees and expenses, and all other expenses, of whatever kind or
nature, incurred by Beneficiary and Trustee, and each of them, in connection
with the enforcement of the Secured Obligations, whether or not such
enforcement includes the filing of a lawsuit. Until paid, shall bear interest,
from date of expenditure, at the highest rate provided in the Secured
Obligations, and shall be secured hereby.
8.8 Remedies Not Exclusive. Trustee and Beneficiary, and each of
them, shall be entitled to enforce payment and performance of any Secured
Obligation and to exercise all rights and powers under this Deed of Trust or
under any other Loan Document or other agreement or any law now or hereafter in
force, notwithstanding some or all of the said Secured Obligations may now or
hereafter be otherwise secured, whether by guaranty, mortgage, deed of trust,
pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of
Trust, nor its enforcement, whether by court action or pursuant to the power of
sale or other powers herein contained, shall prejudice or in any manner affect
Trustee's or Beneficiary's right to realize upon or enforce any other security
now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee
and Beneficiary, and each of them, shall be entitled to enforce this Deed of
Trust and any other security now or hereafter held by Beneficiary or Trustee in
such order and manner as they may in their absolute discretion determine. No
remedy herein conferred upon or reserved to Trustee or Beneficiary is intended
to be exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given hereby or by any of the other Loan Documents to Trustee
or Beneficiary or to which either of them may be otherwise entitled may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Trustee or Beneficiary, and either of them may pursue
remedies as each in their sole discretion shall deem appropriate.
ARTICLE 9
[OMITTED]
ARTICLE 10
MISCELLANEOUS COVENANTS AND AGREEMENTS
10.1 Amendments. This Deed of Trust cannot be waived, changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change, discharge or
termination is sought.
10.2 Trustor's Waiver of Rights. Trustor hereby waives, to the
extent permitted by law: (a) the benefit of all laws now existing or that may
hereafter be enacted providing for any appraisement before sale of any portion
of the Property, and, whether now existing or hereafter arising or created; (b)
all rights of redemption, valuation, stay of execution, notice of election to
mature or declare due the whole of the Secured Obligations and marshaling in
the event of trustee's sale of judicial foreclosure of the liens hereby
created; and (c) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of Arizona pertaining to the rights
and remedies of sureties.
17 SWI LEASEHOLD DEED OF TRUST
<PAGE> 18
10.3 Reconveyance by Trustee. Upon the written request of
Beneficiary stating that all Secured Obligations have been paid and fully
performed, and upon payment by Trustor of Trustee's fees and the costs and
expenses of executing and recording any requested reconveyance, Trustee shall
reconvey to Trustor, or to the person or persons legally entitled thereto,
without warranty, any portion of the Property then held hereunder. The
recitals in any such reconveyance of any matter or fact shall be conclusive
proof of the truthfulness thereof. The grantee in any such reconveyance may be
described as "the person or persons legally entitled thereto." Beneficiary
agrees to execute all documents, instruments, agreements and financing
statements in connection with any such reconveyance of the Property and the
security interest granted pursuant to Section 2.2 above.
10.4 Notices. Any notice or other communication with respect to
this Deed of Trust shall: (a) be in writing; (b) be effective on the day of
hand-delivery thereof to the party to whom directed, one day following the day
of deposit thereof with delivery charges prepaid, with a national overnight
delivery service, or two days following the day of deposit thereof with postage
prepaid, with the United States Postal Service, by regular first class,
certified or registered mail; (c) if directed to Beneficiary, be addressed to
Beneficiary at the address of Beneficiary set forth above, or to such other
address as Beneficiary shall have specified to Trustor or Trustee by like
notice, with a copy to Jenkens & Gilchrist Groce, Locke & Hebdon, 1800 Frost
Bank Tower, 100 West Houston Street, San Antonio, Texas 78205- 1497, Attention:
Norm Nevins, Esq.; (d) if directed to Trustee, be addressed to Trustee at the
address of Trustee set forth above, or to such other address as Trustee shall
have specified to Trustor or Beneficiary by like notice, with a copy to Jenkens
& Gilchrist Groce, Locke & Hebdon, 1800 Frost Bank Tower, 100 West Houston
Street, San Antonio, Texas 78205-1497, Attention: Norm Nevins, Esq.; and (e)
if directed to Trustor, be addressed to Trustor at the address for Trustor set
forth above, or to such other address as Trustor shall have specified to
Beneficiary or Trustee by like notice.
10.5 Invalidity of Certain Provisions. Every provision of this
Deed of Trust is intended to be severable. In the event any term or provision
hereof is declared to be illegal, invalid or unenforceable for any reason
whatsoever by a court of competent jurisdiction, such illegality, invalidity,
or unenforceability shall not affect the balance of the terms and provisions
hereof, which terms and provisions shall remain binding and enforceable. If
the lien of this Deed of Trust is invalid or unenforceable as to any part of
the debt, or if the lien is invalid or unenforceable as to any part of the
Property, the unsecured or partially secured portion of the debt shall be
completely paid prior to the payment of the remaining and secured or partially
secured portion of the debt, and all payments made on the debt, whether
voluntary or by trustee's sale, judicial foreclosure or other enforcement
action or procedure, shall be considered to have been first paid on and applied
to the full payment of that portion of the debt which is not secured or fully
secured by the lien of this Deed of Trust.
10.6 No Merger of Lease. Upon the trustee's sale or judicial
foreclosure of the lien created by this Deed of Trust on the Property pursuant
to the provisions hereof, any lease or sublease or rental agreement then
existing and affecting all or any portion of the Property shall not be
destroyed or terminated by application of the law of merger or as a matter of
law or as a result of such trustee's sale or judicial foreclosure unless
Beneficiary or any purchaser at such trustee's sale or judicial foreclosure
sale shall so elect. No act by or on behalf of Beneficiary or any such
purchaser shall constitute a termination of any lease or sublease unless
Beneficiary or such purchaser shall give written notice thereof to such tenant
or subtenant. If both the lessor's and lessee's estate under any lease or any
portion thereof which constitutes a part of the Property shall at any time
become vested in one owner, this Deed of Trust and the lien created hereby
shall not be destroyed or terminated by application of the doctrine of merger
unless Beneficiary so elects as evidenced by recording a written declaration so
stating, and, unless and
18 SWI LEASEHOLD DEED OF TRUST
<PAGE> 19
until Beneficiary so elects, Beneficiary shall continue to have and enjoy all
of the rights and privileges of Beneficiary hereunder as to the separate
estates, except as otherwise provided by law.
10.7 Governing Law. This Deed of Trust, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law,
except to the extent of procedural and substantive matters relating only to the
creation and perfection of liens and security interests in, and the enforcement
of rights and remedies against, the Property, which matters shall be governed
by the laws of the State of Arizona.
10.8 Further Assurances. Trustor agrees to do or to cause to be
done such further acts and things and to execute and deliver or to cause to be
executed and delivered such additional assignments, agreements, powers and
instruments, as any of them may reasonably require or deem advisable to keep
valid and effective the charges and lien hereof, to carry into effect the
purposes of this Deed of Trust or to better assure and confirm unto Beneficiary
or Trustee their rights, powers and remedies hereunder; and, upon request by
Beneficiary or Trustee, shall supply evidence of fulfillment of each of the
covenants herein contained concerning which a request for such evidence has
been made. In the event that Trustor fails or refuses to execute and deliver
any assignments, agreements, powers or instruments pursuant to this Section
10.8, Trustor irrevocably appoints Beneficiary or Trustee, as applicable, its
true and lawful attorney-in-fact, with full power of substitution, to execute
and deliver any such assignments, agreements, powers and instruments. The
appointment granted herein shall be deemed to be a power coupled with an
interest.
10.9 Execution of Instruments by Trustee. At any time, and from
time to time, without liability therefor and without notice, upon written
request of Beneficiary and without affecting the personal liability of any
person for payment of the indebtedness or the performance of any other
obligation secured hereby, Trustee may: (a) release and reconvey any part of
said Property; (b) consent in writing to the making of any map or plat thereof;
(c) join in granting any easement thereon; or (d) join in any extension
agreement, agreement subordinating the lien or charge hereof, or other
agreement or instrument relating hereto or to the Property or any portion
thereof.
10.10 Appointment of Successor Trustee. Beneficiary may, from time
to time remove Trustee and appoint a successor Trustee to any Trustee appointed
hereunder. A Notice of Substitution of Trustee in the form required by
applicable law shall be recorded with the County Recorder of the county in
which the Land is located.
10.11 Successors and Assigns. Subject to Section 4.18 above, this
Deed of Trust applies to, inures to the benefit of and binds Trustor, Trustee
and Beneficiary and their respective successors and assigns.
10.12 Priority. Except as otherwise expressly provided in the
Credit Agreement, this Deed of Trust is intended to have and retain priority
over all other liens and encumbrances upon the Property, excepting only: (a)
such Impositions as have, or by law gain, priority over the lien created
hereby; (b) covenants, conditions, restrictions, easements, and rights of way
which are of record or disclosed of record affecting the Property that have
been approved by Beneficiary in writing; and (c) Leases, liens, encumbrances
and other matters as to which Beneficiary hereafter expressly subordinates the
lien of this Deed of Trust by written instrument in recordable form. Under no
circumstance shall Beneficiary be obligated or required to subordinate the lien
hereof to any Lease, lien, encumbrance, covenant or other matter affecting the
Property or any portion thereof. Beneficiary may, however, at Beneficiary's
option, exercisable in its sole and absolute discretion, subordinate the lien
of this Deed of Trust, in whole or in
19 SWI LEASEHOLD DEED OF TRUST
<PAGE> 20
part, to any or all Leases, liens, or encumbrances by executing and recording
with the County Recorder of the county in which the Land is located, a
unilateral declaration of such subordination specifying the Lease, lien,
encumbrance or other matter or matters to which this Deed of Trust shall
thereafter be subordinate.
10.13 No Waiver. No waiver by Beneficiary of any Event of Default,
default or breach by Trustor hereunder shall be implied from any omission by
Beneficiary to take action on account of such Event of Default, default or
breach if such Event of Default, default or breach persists or is repeated, and
no express waiver shall affect any Event of Default, default or breach other
than the particular Event of Default, default or breach referred to in such
waiver and such waiver shall be operative only for the time and to the extent
therein stated. Waivers of any covenant, term or condition contained herein
shall not be construed as a waiver of any subsequent breach of the same
covenant, term or condition. The consent or approval by Beneficiary to or of
any act by Trustor requiring further consent or approval shall not be deemed to
waive or render unnecessary the consent or approval to or of any subsequent
similar act.
10.14 Bankruptcy. In the event of the commencement of a bankruptcy
case by or against Trustor or involving any of the Property, Beneficiary, to
the extent not already provided for herein, shall be entitled to recover, and
Trustor shall be obligated to pay, Beneficiary's attorneys' fees and costs
incurred in connection with: (a) any determination of the applicability of the
bankruptcy laws to the terms of this Deed of Trust or the other Loan Documents
or Beneficiary's rights hereunder or thereunder; (b) any attempt by Beneficiary
to enforce or preserve its rights under the bankruptcy laws, or to prevent
Trustor or any other person from seeking to deny Beneficiary its rights
thereunder; (c) any effort by Beneficiary to protect, preserve, or enforce its
rights against the Property, or seeking authority to modify the automatic stay
of 11 U.S.C. Section 362 or otherwise seeking to engage in such protection,
preservation, or enforcement; or (d) any civil proceeding(s) arising under the
bankruptcy laws, or arising in or related to a case under the bankruptcy laws.
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be
executed by its duly authorized officers as of the date first above written.
"TRUSTOR"
SOUTHWESTERN ICE, INC., a Texas
corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
20 SWI LEASEHOLD DEED OF TRUST
<PAGE> 21
WITNESS
In accordance with the requirements of A.R.S. Section 14-5503, the
undersigned has executed this Deed of Trust solely for the purpose of
witnessing the grant of a power of attorney by Trustor to Beneficiary as
described in this Deed of Trust.
---------------------------------
---------------------------------
STATE OF TEXAS )
)
COUNTY OF BEXAR )
The foregoing instrument was acknowledged before me this ___ day of
September, 1997, by James F. Stuart, as President of SOUTHWESTERN ICE, INC., a
Texas corporation, on behalf of said corporation.
--------------------------------
Notary Public
My commission expires:
- ------------------------
21 SWI LEASEHOLD DEED OF TRUST
<PAGE> 22
EXHIBIT "A"
All of Tenant's right, title, and interest in the real property
described below, arising out of:
(1) That certain lease agreement dated January 15, 1997 between Public
Storage Properties XI, INC., a California corporation, as Lessor and
Southwestern Ice, Inc., an Arizona corporation, as Lessee, recorded on
September ___, 1997 in the official records of Maricopa County, Arizona at
instrument number _____________________.
SWI LEASEHOLD DEED OF TRUST
<PAGE> 23
EXHIBIT "A"
All of Tenant's right, title, and interest in the real property
described below, arising out of:
(1) That certain lease agreement dated September 1, 1996 between James
Weller, Inc., as Lessor and Southwestern Ice, Inc., as Lessee, recorded on
September ___, 1997 in the official records of Maricopa County, Arizona at
instrument number _________________.
(2) That certain lease agreement dated March 1, 1992 between Robert Grant
Miller as Lessor and Southwestern Ice, Inc., as Lessee, recorded on September
___, 1997 in the official records of Maricopa County, Arizona at instrument
number ______________________.
SWI LEASEHOLD DEED OF TRUST
<PAGE> 1
EXHIBIT 10.27
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296-1400
ATTENTION: Pat Mascorro
Loan Department
Location RB-2
APN:
- --------------------------------------------------------------------------------
PARCEL:
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF RENTS AND FIXTURE FILING
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THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND
FIXTURE FILING ("DEED OF TRUST" and/or "MORTGAGE") is made this 15th day of
September, 1997, by SOUTHWESTERN ICE, INC., a Texas corporation ("TRUSTOR"),
whose address is 8572 Katy Freeway, Suite 101, Houston, Texas 77024; JIMMY R.
LOCKE, ("TRUSTEE"); whose address is P.O. Box 1600, San Antonio, Texas 78296;
and THE FROST NATIONAL BANK, a national banking association, agent for each of
the banks under the Credit Agreement (as defined below), ("BENEFICIARY") whose
address is P.O. Box 1600, San Antonio, Texas 78205.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
1.1 CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition to the
other terms defined herein, each of the following terms shall have the meaning
assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWERS": Packaged Ice, Inc., a Texas Corporation.
"TRUSTOR": Southwestern Ice, Inc., a Texas Corporation, and its
successors and assigns.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrowers, the Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
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"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrowers jointly and severally
payable to the order of any Bank, evidencing loans advanced to Borrowers under
the Credit Agreement, in an aggregate principal face amount of $20,000,000,
bearing interest as therein provided, containing a provision for the payment of
a reasonable additional amount as attorneys' fees, and finally maturing on
April 15, 2003, together with any renewals, increases, extensions,
restatements, or modifications thereof.
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
1.2 MORTGAGED PROPERTY. Trustor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: The real
estate (herein called the "LAND") described in Exhibit "A" attached hereto and
incorporated herein by this reference, and (i) all improvements now or
hereafter situated or to be situated on the Land (hereinafter together called
the "IMPROVEMENTS"); and (ii) all right, title and interest of Trustor in and
to (1) all streets, roads, alleys, easements, rights-of-way, licenses, rights
of ingress and egress, vehicle parking rights and public places, existing or
proposed, abutting, adjacent, used in connection with or pertaining to the Land
or the Improvements; (2) any strips or gores between the Land and abutting or
adjacent properties; and (3) all water, and water rights, timber, crops and
mineral interests on or pertaining to the Land or the Improvements (the Land,
Improvements and other rights, titles and interests referred to in this clause
(a) being herein sometimes collectively called the "PREMISES"); (b) all
fixtures, equipment, systems, machinery, furniture, furnishings, appliances,
inventory, goods, building and construction materials, supplies, and articles
of personal property, of every kind and in, on or about the Land or the
Improvements, or used in or necessary to the complete and proper planning,
development, use, occupancy or operation thereof, or acquired (whether
delivered to the Land or stored elsewhere) for use or installation in or on the
Land or the Improvements, and all renewals and replacements of substitutions
for and additions to the foregoing (the properties referred to in this clause
(b) being herein sometimes collectively called the "ACCESSORIES", all of which
are hereby declared to be permanent accessions to the Land); (c) all (i) plans
and specifications for the Improvements; (ii) Trustor's rights, but not
liability for any breach by Trustor, under all commitments (including any
commitment for financing to pay any of the secured indebtedness, as defined
below), insurance policies and other contracts and general intangibles
(including, but not limited to trademarks, trade names and symbols) related to
the Premises or tenants' security deposits, deposits with respect to utility
services to the Premises, and any deposits or reserves hereunder or under any
other Loan Document, taxes, insurance or otherwise), money, accounts,
instruments, documents, notes and chattel paper arising from or by virtue of
any transactions related to the Premises or Accessories (without derogation of
ARTICLE 3 hereof); (iv) permits, licenses, franchises, certificates,
development rights, commitments and rights for utilities, and other rights and
privileges obtained in connection with the Premises or the Accessories; (v)
leases, rents, royalties, bonuses, issues, profits, revenues and other benefits
of the Premises and the Accessories (without derogation of ARTICLE 3 hereof,
and herein sometimes collectively called the "RENTS AND PROFITS"); (vi) oil,
gas and other hydrocarbons and other minerals produced from or allocated to the
Land and all products processed or obtained therefrom, and the proceeds
thereof; and (vi) engineering, accounting, title, legal and other technical or
business data concerning the Mortgaged Property which are in the possession of
Trustor or in which Trustor can otherwise grant a security interest; and (d)
all (i) proceeds of or arising from the properties, rights, titles and
interests referred to above in this SECTION 1.2, including, but not limited to
proceeds of any sale, lease or other disposition thereof, proceeds of each
policy of insurance relating thereto (including premium refunds), proceeds of
the taking thereof or of any rights appurtenant thereto, including change of
grade of streets, curb cuts or other rights of access, by eminent domain or
transfer in lieu thereof for public or quasi-public use under any law, and
proceeds arising out of any damage thereto; and (ii) other
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interest of every kind and character which Trustor now has or hereafter
acquires in, or to or for the benefit of the properties, rights, titles and
interests referred to above in this SECTION 1.2 and all property used or useful
in connection therewith, including, but not limited to rights of ingress and
egress and remainders, reversions and reversionary rights or interests; and if
the estate of Trustor in any of the property referred to above in this SECTION
1.2 is leasehold estate, this conveyance shall include, and the lien and
security interest created hereby shall encumber and extend to, all other or
additional title, estates, interests or rights which are now owned or may
hereafter be acquired by Trustor in or to the property demised under the lease
creating the leasehold estate; TO HAVE AND TO HOLD the foregoing rights,
interests and properties, and all rights, estates, powers and privileges
appurtenant thereto (herein collectively called the "MORTGAGED PROPERTY" or
"PROPERTY"), unto Trustee, and to his successors or substitutes in this trust,
and to his or their successors and assigns, in trust, however, upon the terms,
provisions and conditions herein set forth.
1.3 SECURITY INTEREST. Trustor hereby grants to Agent, as agent
for the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business Code,
or under the Uniform Commercial Code in force in any other state to the extent
the same is applicable law.
1.4 NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage is
made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities and all renewals,
extensions, supplements, increases, and modifications thereof in whole or in
part from time to time:
(i) the Promissory Notes and all other notes given in
substitution therefor or in modification, supplement, increase, renewal or
extension thereof, in whole or in part (such notes, as from time to time
renewed, extended, supplemented, increased, or modified and all other notes
given in substitution therefor, or in modification, renewal or extension
thereof, in whole or in part, being hereinafter collectively called the
"NOTES," and individually a "NOTE," and Agent and the other Banks, or the
subsequent holders at the time in question of the Notes or any of the secured
indebtedness, as hereinafter defined, being collectively herein called
"HOLDERS" and individually a "HOLDER"); (ii) all indebtedness and other
obligations owed by any of the Borrowers (or all of them) to any Holder now or
hereafter incurred or arising pursuant to or permitted by the provisions of the
Notes, this Mortgage, or any other document now or hereafter evidencing,
governing, guaranteeing, securing, or otherwise executed in connection with the
loans evidenced by the Notes, including, but not limited to any loan or credit
agreement, tri-party financing agreement or other agreement between any of the
Borrowers (or all of them) and Holders, or among any of the Borrowers or all of
them), Holders and any other party or parties, pertaining to the repayment or
use of the proceeds of the loan evidenced by the Notes (the Credit Agreement,
the Notes, this Mortgage, any other "LOAN PAPERS" (as such term is defined in
the Credit Agreement), and such other documents as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS").
The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY" or the "INDEBTEDNESS."
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ARTICLE 2
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF TRUSTOR
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2.1 WARRANTIES OF TRUSTOR. Trustor, for itself and its successors
and assigns, does hereby represent, warrant and covenant to and with
Beneficiary, its successors and assigns, that:
(a) Trustor has full power and lawful authority to grant,
assign, transfer and mortgage its interest in the Property in the manner and
form hereby done. Trustor shall preserve its interest in and to the Property
and shall forever warrant and defend the same to Trustee and shall forever
warrant and defend the validity and priority of the lien hereof against the
claims of all persons and parties whomsoever. Trustor shall promptly and
completely observe, perform and discharge each and every obligation, covenant,
condition, restriction and agreement applicable to Trustor and affecting the
Property, whether the same is prior and superior or subject and subordinate
hereto. (The foregoing warranty of title shall survive the foreclosure of this
Deed of Trust and shall inure to the benefit of and be enforceable by any
person who may acquire title to the Property pursuant to any foreclosure.);
(b) No bankruptcy or insolvency proceedings are pending
or contemplated by Trustor or, to Trustor's knowledge, against Trustor or by or
against any endorser, cosigner or guarantor of the Promissory Notes;
(c) The execution and delivery of this Deed of Trust, the
Note and all of the other Loan Documents do not contravene, result in a breach
of or constitute a default under any contract or agreement to which Trustor is
a party or by which Trustor or any of its properties may be bound and, to the
best of Trustor's knowledge, do not violate or contravene any law, order,
decree, rule or regulation to which Trustor is subject;
(d) Trustor has not entered into any other contract,
agreement or commitment which would materially impair Trustor's ability to
perform the covenants and obligations required to be performed by it under the
Loan Documents.
(e) There are no judicial or administrative actions,
suits or proceedings pending or, to the best of Trustor's knowledge, threatened
against or affecting Trustor or the Property that would materially impair
either the Property or Trustor's ability to perform the covenants or
obligations required to be performed under the Loan Documents;
(f) All reports, certificates, affidavits, statements and
other data furnished by Trustor to Beneficiary in connection with the loan
evidenced by the Promissory Notes are true and correct in all material respects
and do not omit to state any material fact or circumstance necessary to make
the statements contained therein not misleading;
(g) All financial statements furnished by Trustor to
Beneficiary in connection with the loan evidenced by the Note fairly present
the financial condition of the Trustor as at the date specified therein, and
since said date, there has been no material adverse change in the financial
condition, property or business of Trustor.
(h) To the best of Trustor's knowledge, the Property and
the intended use thereof by Trustor complies in all material respects with all
applicable restrictive covenants, zoning ordinances, subdivision and building
codes, flood disaster laws, applicable health and environmental laws and
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regulations, and all other statutes laws, ordinances, orders and requirements
issued by state, federal or municipal authorities having or claiming
jurisdiction over the Property;
(i) The Property is free from damage caused by fire,
earthquake, flood or other casualty;
(j) No part of the Property has been taken in
condemnation, eminent domain or similar proceedings nor are any such
proceedings pending or, to the best of Trustor's knowledge, threatened;
(k) Trustor is a corporation, duly authorized to do
business, and in good standing under the laws of the State of Texas;
(l) Trustor has the power and authority to own its
properties and assets and to carry on its business as it is currently being
conducted, including the power and authority to enter into this Deed of Trust
and all of the other Loan Documents;
(m) The person signing this Deed of Trust on behalf of
Trustor is the Trustor.
The representations and warranties set forth in this SECTION 2.1 are
made for the benefit of Beneficiary, and its participants, successors and
assigns, and shall not inure to the benefit of (nor may they be enforced by)
any purchaser of the Property at any foreclosure sale or any transferee of the
Property by deed in lieu of foreclosure (other than Beneficiary itself).
If there is any conflict between the provisions of this SECTION 2.1
and the representations and warranties specified in the Credit Agreement, the
representations and warranties in the Credit Agreement shall control.
2.2 DEFENSE OF TITLE. Without limiting or waiving any other
rights and remedies of Beneficiary hereunder, if, while this Deed of Trust is
in force, the title to the Property described herein or the interest of
Beneficiary therein shall be in the subject, directly or indirectly, of any
action at law or in equity or be attached directly or indirectly, or
endangered, clouded or adversely affected in any manner, Trustor shall,
immediately upon receipt of written notice from Beneficiary, take all
reasonably necessary and proper steps for the defense of said title or
interest, including the employment of counsel, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title
or interest. If Trustor fails to so defend such title or interest to the
reasonable satisfaction of Beneficiary, Trustor hereby authorizes Beneficiary,
at Trustor's expense, to take all reasonably necessary and proper steps to
defend such title or interest.
2.3 PERFORMANCE OF OBLIGATIONS. Trustor shall pay when due the
principal of and the interest on the Indebtedness secured hereby and all
charges, fees and other sums as provided in the Loan Documents, and shall
observe, perform and discharge all obligations, covenants and agreements that
are secured by this Deed of Trust in accordance with their terms. Further,
Trustor shall promptly and strictly perform and comply with all covenants,
conditions, obligations and prohibitions required of Trustor in connection with
any other encumbrance affecting the Property, or any part thereof, regardless
of whether such encumbrance is superior or subordinate to the lien hereof.
2.4 INSURANCE. Trustor shall obtain and maintain at Trustor's
sole expense: (1) all risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning,
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windstorm, explosion, hail, tornado and such hazards as are presently included
in so-called "all risk" coverage and against such other insurable hazards as
Agent may require, in an amount not less than 100% of the full replacement
cost, including the cost of debris removal, without deduction for depreciation
and sufficient to prevent Trustor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (2) if and to the extent any portion of
the Property is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Trustor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Property; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Trustor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Trustor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Trustor shall, in each instance promptly upon the request of Agent and at
Trustor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance), issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss or damage to the Mortgaged Property shall contain a standard
mortgage clause (without contribution) naming Agent, as agent for the Banks, as
mortgagee with loss proceeds payable to Agent notwithstanding (i) any act,
failure in act or negligence of or violation of any warranty, declaration or
condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Trustor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Trustor has failed to perform Trustor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Trustor, to the
same extent as if it had been made payable to Agent. Upon any foreclosure
hereof or transfer of title to the Mortgaged Property in extinguishment of the
whole or any part of the secured indebtedness, all of Trustor's right, title
and interest in and to the insurance policies referred to in this Section
(including unearned premiums) and all proceeds payable thereunder shall
thereupon vest in the purchaser at foreclosure or
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other such transferee, to the extent permissible under such policies. Agent
shall have the right (but not the obligation) to make proof of loss for, settle
and adjust any claim under, and receive the proceeds of, all insurance for loss
or damage to the Mortgaged Property, and the expenses incurred by Agent in the
adjustment and collection of insurance proceeds shall be a part of the secured
indebtedness and shall be due and payable to Agent on demand. Agent shall not
be, under any circumstances, liable or responsible for the obtaining,
maintaining or adequacy of any insurance or for failure to collect or exercise
diligence in the collection of any of such proceeds or for failure to see to
the proper application of any amount paid over to Trustor. Any such proceeds
received by Agent shall, after deduction therefrom of all reasonable expenses
actually incurred by Agent, including attorneys' fees, at Agent's option be (1)
released to Trustor, or (2) applied (upon compliance with such terms and
conditions as may be required by Agent) to repair or restoration, either partly
or entirely, of the Mortgaged Property so damaged, or (3) applied to the
payment of the secured indebtedness in such order and manner as Agent, in its
sole discretion, may elect, whether or not due. Trustor shall at all times
comply with the requirements of the insurance policies required hereunder and
of the issues of such policies and of any board of fire underwriters or similar
body as applicable to or affecting the Mortgaged Property.
2.5 PAYMENT OF TAXES. Trustor shall pay or cause to be paid,
except to the extent provision is actually made therefor pursuant to SECTION
2.6 of this Deed of Trust, all taxes and assessments that are or may become a
lien on the Property or that are assessed against or imposed upon the Property.
Trustor shall furnish Beneficiary with receipts showing payment of such taxes
and assessments prior to the applicable delinquency date therefor, except that
Trustor may in good faith, by appropriate proceedings, contest, so long as such
contest is diligently pursued, the validity, applicability or amount of any
asserted tax or assessment; and pending such contest, Trustor shall not be
deemed in default hereunder by reason of nonpayment of such asserted tax or
assessment if Beneficiary determines, in its reasonable opinion, that
nonpayment of such tax or assessment shall not result in the loss, forfeiture
or diminution of the Property or any part thereof or any interest of
Beneficiary therein and if, prior to delinquency of the asserted tax or
assessment, Trustor establishes an escrow acceptable to Beneficiary adequate to
cover the payment of such tax or assessment and a reasonable additional sum to
cover possible interest, cost and penalties (which escrow shall be returned to
Trustor upon payment of all such taxes, assessments, interest, costs and
penalties or upon a final determination that such taxes are not, in fact,
payable), and if Trustor promptly causes to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final; provided,
however, that in any event each such contest shall be concluded and the taxes,
assessments, interests, costs and penalties shall be paid, prior to the date
any writ or order is issued under which the Property may be sold. Trustor
shall have the right to require that any such escrow established with
Beneficiary be applied to the payment of any such taxes, assessments, interest,
costs and penalties. In the event Trustor fails to pay any installment of real
property taxes prior to delinquency and has not made other, adequate
arrangements with Beneficiary, Beneficiary may at any time thereafter (subject
to notice and cure provisions set forth in SECTION 3.1(B) hereof), but shall
not be obligated to, pay such delinquent taxes, interest and penalties and
Trustor shall pay all sums to Beneficiary promptly upon demand by Beneficiary
together with interest thereon from the date(s) advanced by Beneficiary at the
Default Rate defined in the Note; any such sums advanced by Beneficiary for the
payment of taxes and penalties, together with such interest thereon, shall be
secured by this Deed of Trust.
2.6 RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence and continuance of an Event of Default and upon written request of
Agent, to secure certain of Trustor's obligations in paragraphs 2.4 and 2.5
above, but not in lieu of such obligations, Trustor will deposit with Agent a
sum equal to ad valorem taxes, assessments and charges (which charges for the
purpose of this paragraph shall include without limitation any recurring charge
which could result in a lien against the
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Mortgaged Property) against the Mortgaged Property for the current year and the
premiums for such policies of insurance for the current year, all as estimated
by Agent and prorated to the end of the calendar month following the month
during which Agent's request is made, and thereafter will deposit with Agent,
on each date when an installment of principal and/or interest is due on the
Notes, sufficient funds (as estimated from time to time by Agent) to permit
Agent to pay at least fifteen (15) days prior to the due date thereof, the next
maturing ad valorem taxes, assessments and charges and premiums for such
policies of insurance. Agent shall have the right to rely upon tax information
furnished by applicable taxing authorities in the payment of such taxes or
assessments and shall have no obligation to make any protest of any such taxes
or assessments. Any excess over the amounts required for such purposes shall
be held by Agent for future use, applied to any secured indebtedness or
refunded to Trustor, at Agent's option, and any deficiency in such funds so
deposited shall be made up by Trustor upon demand of Agent. All such funds so
deposited shall bear no interest, may be mingled with the general funds of
Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Trustor (which statements, shall be presented by Trustor to Agent a
reasonable time before the applicable amount is due); provided, however, that
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Trustor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Trustor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
2.7 CONDEMNATION. Trustor shall notify Agent immediately after
Trustor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Trustor shall, at Trustor's expense, diligently prosecute any
such proceedings. Agent shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its own
choice. Agent shall be entitled to receive all sums which may be awarded or
become payable to Trustor for the condemnation of the Mortgaged Property, or
any part thereof, for public or quasi-public use, or by virtue of private sale
in lieu thereof, and any such which may be awarded or become payable to Trustor
for injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Trustor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option (1) released to
Trustor, or (2) applied (upon compliance with such terms and conditions as may
be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any
circumstances, liable or responsible for failure to collect or to exercise
diligence in the collection of any such sum or for failure to see to the proper
application of any amount paid over to Trustor. Agent is hereby authorized, in
the name of Trustor, to execute and deliver valid acquittances for, and to
appeal from any such award, judgment or decree. All reasonable costs and
expenses (including but not limited to reasonable attorneys fees) incurred by
Agent in connection with any condemnation shall be a demand obligation owing by
Trustor (which Trustor hereby promises to pay) to Agent pursuant to this
Mortgage.
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2.8 MECHANICS' LIENS AND UTILITIES. Trustor shall pay when due
all claims and demands of mechanics, materialmen, laborers and others for any
work performed or materials delivered for the Property; provided, however, that
Trustor shall have the right to contest in good faith any such claim or demand,
provided that it does so diligently and without prejudice to Beneficiary. In
the event Trustor shall contest any such claim or demand, Trustor shall, upon
Beneficiary's written request, promptly provide a bond, cash deposit or other
security reasonably satisfactory to Beneficiary to protect Beneficiary's
interest and security should the contest be unsuccessful. If Trustor shall
fail to immediately discharge or provide security against any such claim or
demand as aforesaid, subject to the notice and cure provisions set forth in
SECTION 3.1(B) hereof, Beneficiary may do so, and any and all expenses incurred
by Beneficiary together with interest thereon at the Default Rate as defined in
the Promissory Notes shall be immediately reimbursed by Trustor on written
demand. Trustor shall pay when due all utility charges that are incurred by
Trustor or that may become a charge or lien against the Property for gas,
electricity, water and sewer services furnished to the Property and all other
assessments or charges of a similar nature, whether public or private,
affecting the Property or any portion thereof, whether or not such taxes,
assessments or charges are or may become liens thereon.
2.9 RENTS AND PROFITS. As additional and collateral security for
the payment of the Indebtedness secured hereby and cumulative of any and all
rights and remedies herein provided for, Trustor hereby absolutely and
currently assigns to Beneficiary all existing and future Rents and Profits and,
with respect to said existing and future Rents and Profits, Trustor hereby
grants to Beneficiary the sole, exclusive and immediate right to demand,
collect (by suit or otherwise), receive and give valid and sufficient receipts
for any and all of said Rents and Profits, for which purpose Trustor does
hereby irrevocably make, constitute and appoint Beneficiary its
attorney-in-fact with full power to appoint substitutes or a trustee to
accomplish such purpose (which power of attorney shall be irrevocable, shall be
deemed to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Trustor) it being understood that Beneficiary shall
be without liability for any loss that may arise from uncollectible Rents and
Profits, proceeds or other payments so long as Beneficiary shall act on the
Property with ordinary prudence. Trustor irrevocably consents that the
respective payors of the Rents and Profits shall, upon demand and notice from
Beneficiary of Trustor's default hereunder, pay said Rents and Profits to
Beneficiary without liability to such payor for the determination of the actual
existence of any default claimed by Beneficiary. However, until the occurrence
of an Event of Default under this Deed of Trust, Trustor shall have a license
to collect and receive the Rents and Profits. Upon the occurrence of an Event
of Default hereunder, Trustor's license shall automatically terminate without
notice to Trustor and Beneficiary may thereafter, without taking possession of
the Property, collect the Rents and Profits itself or by an agent or receiver.
From and after such termination, Trustor shall be the agent of Beneficiary in
collection of the Rents and Profits and all of the Rents and Profits so
collected by Trustor shall be held in trust by Trustor for the sole and
exclusive benefit of Beneficiary, and Trustor shall, promptly after receipt of
any Rents and Profits, pay the same to Beneficiary to be applied by Beneficiary
as hereinafter set forth. Beneficiary is obligated to account only for such
Rents and Profits as are actually collected or received by Beneficiary.
Possession by a court-appointed receiver shall not be considered possession by
Beneficiary. All Rents and Profits collected by Beneficiary or a receiver
shall be applied first to pay all reasonable expenses of collection, and then
to the payment of all reasonable costs of operation and management of the
Property, and then to the payment of the Indebtedness and obligations secured
hereby in whatever order Beneficiary directs in its absolute discretion and
without regard to the adequacy of its security. In the event that Trustor has
executed a separate Assignment of Rents and Leases concurrently herewith in
favor of Beneficiary covering all of the right, title and interest of Trustor,
as landlord, lessor or licensor, in and to any leases, licenses and occupancy
agreements relating to all or portions of the Property, all rights and remedies
granted to
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Beneficiary under such Assignment of Rents and Leases shall be in addition to
and cumulative of all rights and remedies granted to Beneficiary under this
SECTION 2.9.
2.10 LEASES AND LICENSES.
(a) Trustor shall furnish to Beneficiary, within ten (10)
days after a written request by Beneficiary to do so, but not more frequently
than semi-annually, a written statement containing the names of all tenants,
lessees and licensees of the Property, the terms of their respective leases,
licenses or occupancy agreements, the spaces occupied and the rentals or fees
payable thereunder and a copy of each such lease, license and occupancy
agreement.
(b) Upon the occurrence of an Event of Default hereunder,
whether before or after the whole principal sum secured hereby is declared to
be immediately due or whether before or after the institution of legal
proceedings to foreclose this Deed of Trust, forthwith, upon demand of
Beneficiary, Trustor shall surrender to Beneficiary and Beneficiary shall be
entitled to take actual possession of the Property or any part thereof
personally, or by its agent or attorneys. Beneficiary shall have, and Trustor
hereby gives and grants to Beneficiary, the right, power and authority to make
and enter into leases of the Property or portions thereof for such rents and
for such periods of occupancy and upon conditions and provisions as Beneficiary
may deem desirable, and Trustor expressly acknowledges and agrees that the term
of any such lease may extend beyond the date of any foreclosure sale of the
Property; it being the intention of Trustor that in such event, Beneficiary
shall be deemed to be and shall be the attorney-in-fact of Trustor for the
purpose of making and entering into leases of parts or portions of the Property
for the rents and upon the terms, conditions and provisions deemed desirable to
Beneficiary and with like effect as if such leases had been made by Trustor as
the owner in fee simple of the Property free and clear of any conditions or
limitations established by this Deed of Trust. The power and authority hereby
given and granted by Trustor to Beneficiary shall be deemed to be coupled with
an interest and shall not be revocable by Trustor. In connection with any
action taken by Beneficiary pursuant to this SECTION 2.10(B), Beneficiary shall
not be liable for any loss sustained by Trustor resulting from any failure to
let the Property, or any part thereof, or from any other act or omission of
Beneficiary in managing the Property unless such loss is caused by the gross
negligence or willful misconduct of Beneficiary, nor shall Beneficiary be
obligated to perform or discharge any obligation, duty or liability under any
lease or tenancy agreement covering the Property or any part thereof or under
or by reason of this instrument or the exercise of rights or remedies
hereunder. Trustor shall, and does hereby, agree to indemnify Beneficiary for,
and to hold Beneficiary harmless from, any and all liabilities, loss or damage
(including, without limitation, attorneys' fees and costs) that may or might be
incurred by Beneficiary under any such lease or tenancy agreement or under this
Deed of Trust or by the exercise of rights or remedies hereunder and from any
and all claims and demands whatsoever that may be asserted against Beneficiary
by reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any such lease
agreement, except for acts of gross negligence or willful misconduct by
Beneficiary. Should Beneficiary incur any such liability, the amount thereof,
including, without limitation, reasonable costs, expenses and attorneys' fees,
together with interest thereon at the Default Rate defined in the Note, shall
be secured hereby and shall be a demand obligation hereunder. Nothing in this
SECTION 2.10(B) shall impose any duty, obligation or responsibility upon
Beneficiary for the control, care, management or repair of the Property, or for
the carrying out of any of the terms and conditions of any such lease
agreement, nor shall it operate to make Beneficiary responsible or liable for
any waste committed on the Property by the tenants or by any other parties or
for any dangerous or defective condition of the Property, or for any negligence
in the management, upkeep, repair or control of the Property resulting in loss
or injury or death to any tenant, licensee,
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employee or stranger, except during the period of Beneficiary's actual
possession and operation of the Property pursuant hereto.
2.11 ALIENATION AND FURTHER ENCUMBRANCES. In the event Trustor
shall sell, convey, transfer, dispose of, alienate, or lease for a period of
greater than thirty five (35) years the Property, or any part thereof or any
interest therein, or shall be divested of its title or any interest therein, in
any manner or way, whether voluntarily or involuntarily (any of the foregoing
being individually called a "TRANSFER"), without the written consent of
Beneficiary being first obtained, which consent may not be unreasonably
withheld, Beneficiary shall have the right at its option to declare any
Indebtedness or obligation secured hereby, irrespective of the maturity date
specified in any note evidencing the same, immediately due and payable unless
said transfer is permitted under the Credit Agreement. Acceptance by
Beneficiary of any payment or payments on the Promissory Notes or other sums
secured by this Deed of Trust by one other than Trustor shall not constitute
(i) any notice to Beneficiary of any Transfer or proposed Transfer of any
interest in the Property covered by this Deed of Trust or (ii) any consent or
waiver of the right to consent to such Transfer or proposed Transfer of any
interest in the Property.
2.12 ACCESS PRIVILEGES AND INSPECTIONS. Representatives of
Beneficiary shall have full and free access to the Property at all reasonable
times, upon reasonable prior written notice to Trustor, for the purposes of
inspecting the Property and determining compliance with the terms and
conditions of this Deed of Trust and the other Loan Documents.
2.13 WASTE. Trustor shall not commit, suffer or permit any waste
on the Property nor take any actions that might invalidate any insurance
carried on the Property. Trustor shall maintain the Property in good condition
and repair. No Improvements may be removed or demolished without the prior
written consent of Beneficiary unless otherwise permitted by the Credit
Agreement. No personal property in which Beneficiary has a security interest
may be removed from the Property unless it is immediately replaced by similar
property of at least equivalent value in which Beneficiary shall immediately
have a valid first lien and security interest unless otherwise permitted by the
Credit Agreement.
2.14 ZONING. Without the prior written consent of Beneficiary,
which consent will not be unreasonably withheld or delayed, Trustor shall not
seek, make, suffer or consent to or acquiesce in any change in the zoning or
conditions of use of the Property. Trustor shall comply with and make all
payments required under the provisions of any covenants, conditions or
restrictions affecting the Property. Trustor shall comply with all existing
and future requirements of all governmental authorities having jurisdiction
over the Property.
2.15 BOOKS AND RECORDS. Trustor shall keep accurate books and
records of account of the Property and of its own financial affairs sufficient
to permit the preparation of financial statements therefrom in accordance with
generally accepted accounting principles, consistently applied. Beneficiary
and its duly authorized representatives at all reasonable times shall have full
access to and shall have the right to examine, copy and audit Trustor's records
and books of account relating to the Property and Trustor's financial
condition. So long as this Deed of Trust continues in effect, Trustor shall
provide Beneficiary with financial information as required by the Credit
Agreement. Trustor shall also provide to Beneficiary such additional financial
and other information as may be reasonably requested by Beneficiary.
2.16 FURTHER DOCUMENTATION. Trustor shall, on the request of
Beneficiary promptly (a) correct any defect, error or omission that may be
discovered in the contents of this Deed of Trust or in
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the contents of any of the other Loan Documents; (b) execute, acknowledge,
deliver and record or file such further instruments (including, without
limitation, further deeds of trust, security agreements, financing statements,
continuation statements and assignments of rents or leases) and do such further
acts as may be reasonably necessary, desirable or proper to carry out more
effectively the purposes of this Deed of Trust and the other Loan Documents and
to subject to the liens and security interest hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements or appurtenances to the Property; (c) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by
Beneficiary to protect the lien or the security interest hereunder against the
rights or interests of third persons; and (d) furnish to Beneficiary, upon
Beneficiary's request, a duly acknowledged written statement setting forth all
amounts due on the Indebtedness secured by this Deed of Trust and stating
whether any offsets or defenses exist, and containing such other matters as
Beneficiary may reasonably require.
2.17 REIMBURSEMENT TO BENEFICIARY. Trustor shall promptly notify
Beneficiary in writing of any litigation or threatened (in writing) litigation
affecting the Property, or any other written demand or claim which, if
enforced, could materially impair or threaten to impair Beneficiary's security
hereunder. Without limiting or waiving any other rights and remedies of
Beneficiary hereunder, if Trustor fails to perform any of its covenants or
agreements contained in this Deed of Trust, or if any action or proceeding of
any kind (including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is commenced
that might materially affect Beneficiary's or Trustee's interest in the
Property or Beneficiary's right to enforce its security, or any claims or
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Property and/or any Improvements thereon or any
nuisance made or suffered thereon, then Beneficiary and/or Trustee may, at
their option (subject to the notice and cure provisions provided in SECTION
3.1(B) hereof, make any appearances, disburse any sums and take any actions as
may be reasonably necessary or desirable to protect or enforce the security of
this Deed of Trust or to remedy the failure of Trustor to perform its covenants
(without, however, waiving any default of Trustor). Trustor agrees to pay all
reasonable out-of-pocket expenses of Beneficiary and Trustee thus incurred
(including, but not limited to, attorneys' fees and costs), together with
interest thereon at the Default Rate defined in the Note from and after the
date of Beneficiary's or Trustee's making such payment until reimbursement
thereof by Trustor. Any sums disbursed by Beneficiary or Trustee, together
with interest thereon, shall be additional Indebtedness of Trustor secured
hereby and shall be payable upon written demand. This SECTION 2.17 shall not
be construed to require Beneficiary or Trustee to incur any expenses, make any
appearances or take any actions.
2.18 PERSONAL PROPERTY AND FIXTURES. This Deed of Trust is also
intended to and does hereby encumber and create a security interest in: (a)
all right, title and interest of Trustor in and to all instruments, documents,
contracts, general intangibles (including trademarks, trade names and symbols
used in connection with the Improvements or the Land), now existing or
hereafter arising from or by virtue of any transaction related to the
Improvements or the Land, permits, licenses, franchises, certificates and other
rights and privileges now or hereafter obtained in connection with the
Improvements or the Land; and (b) any and all property that is personal
property and fixtures owned by Trustor and now or hereafter located on or used
in connection with the Land, including, but not limited to, all equipment,
fixtures, furniture, furnishings, appliances, carpets, drapes and articles of
personal property owned by Trustor and now or hereafter located on, attached to
or used in and about the Improvements that are reasonably necessary to the
complete and comfortable use and occupancy of the
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Improvements for all purposes for which they are intended, including, but not
limited to, all machines, engines, boilers, dynamos, elevators, stokers, tanks,
cabinets, awnings, screens, shades, blinds, carpets, draperies, lawn mowers,
and all appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Trustor as are ever to be used or furnished in operating the
Improvements, or the activities conducted therein, and all warranties and
guaranties relating thereto; and (c) all renewals or replacements of any of the
aforementioned items, or articles in substitution therefor, whether or not the
same shall be attached to the Improvements in any manner, and all building
materials and equipment hereafter situated on or about the Land. It is hereby
agreed that to the extent permitted by law, all of the foregoing property and
fixtures are to be deemed and held to be a part of and affixed to the Land.
The foregoing security interest shall also cover Trustor's leasehold interest
in any of the foregoing items that are leased by Trustor. Trustor shall, from
time to time upon the written request of Beneficiary, supply Beneficiary with a
current inventory of all of the personal property in which Beneficiary is
granted a security interest hereunder, in such detail as Beneficiary may
require but in no event more often than semi-annually.
2.19 SECURITY AGREEMENT AND FIXTURE FILING. This Deed of Trust
constitutes a Security Agreement and Fixture Filing between Trustor and
Beneficiary with respect to all personal property in which Beneficiary is
granted a security interest hereunder, and, cumulative of all other rights and
remedies of Beneficiary hereunder, Beneficiary shall have all of the rights and
remedies of a secured party under the California Uniform Commercial Code.
Trustor hereby agrees to execute and deliver on demand and hereby irrevocably
constitutes and appoints Beneficiary the attorney-in-fact of Trustor to execute
and deliver, and if appropriate, to file with the appropriate filing officer or
office such security agreements, financing statements, fixture filings,
continuation statements or other instruments as Beneficiary may request or
require in order to impose, perfect or continue the perfection of the lien or
security interest created hereby. Upon the occurrence of any default
hereunder, Beneficiary shall have the right, at its option, to take appropriate
steps to cause any of the Property that is personal property and subject to the
security interest of Beneficiary hereunder to be sold at any one or more public
or private sales as permitted by applicable law, including at a sale held in
conjunction with the sale of the Property by Trustee as provided for in this
Deed of Trust, and apply the proceeds of such sale against the Indebtedness
secured hereby in whatever order Beneficiary shall direct in its absolute
discretion, and Beneficiary shall further have all other rights and remedies as
are available to secured creditors under applicable law. Any such disposition
may be conducted by an employee or agent of Beneficiary or Trustee. Any
person, including both Trustor and Beneficiary, shall be eligible to purchase
any part or all of such property at any such disposition. Expenses of retaking
holding, preparing for sale, selling or the like shall be borne by Trustor and
shall include Beneficiary's and Trustee's attorneys' fees and costs together
with interest thereon at the Default Rate defined in the Promissory Notes.
Trustor, upon demand of Beneficiary, shall assemble such personal property and
make it available to Beneficiary at the Property, a place that is hereby deemed
to be reasonably convenient to Beneficiary and Trustor. If notice is required
by law, Beneficiary shall give Trustor at least ten (10) days' prior written
notice of the time and place of any public sale of such property or of the time
of or after which any private sale or any other intended disposition is to be
made; and if such notice is sent to Trustor, as the same is provided for the
mailing of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Trustor. Any sale made pursuant to the provisions of this
SECTION 2.19 shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the sale under
the power of sale granted in SECTION 4.2 hereof upon giving the same notice with
respect to the sale of the personal property hereunder as is required under
said SECTION 4.2. Furthermore, in conjunction with, in addition to or in
substitution for the rights and remedies available to Beneficiary pursuant to
the California Uniform Commercial Code: (a) in the event of a foreclosure
sale, whether
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made by Trustee under the terms hereof or under judgment of a court, the
Property may, at the option of Beneficiary, be sold as a whole; and (b) it
shall not be necessary that Beneficiary take possession of the aforementioned
personal property or any part thereof prior to the time that any sale pursuant
to the provisions of this Section 2.19 conducted and it shall not be necessary
that said personal property or any part thereof be present at the location of
such sale; and (c) Beneficiary may appoint or delegate any one or more persons
as agent to perform any act or acts reasonably necessary or incident to any
sale held by Beneficiary, including the sending of notices and the conduct of
the sale, but in the name and on behalf of Beneficiary.
In the event that Trustor has executed a separate Security Agreement
concurrently herewith in favor of Beneficiary, all rights and remedies granted
to Beneficiary under such Security Agreement shall be in addition to and
cumulative of all rights and remedies granted to Beneficiary under this SECTION
2.19.
2.20 MAINTENANCE OF THE PROPERTY; COMPLIANCE WITH LAWS. Trustor
shall at all times maintain the Property in good condition and repair, and
shall, upon Beneficiary's reasonable direction, promptly repair, restore,
replace or rebuild any part of the Property that may be affected by any
casualty or any public or private taking of or injury to the Property. Trustor
shall at all times comply with all statutes, ordinances, regulations and other
governmental or quasi-governmental requirements and private covenants relating
to the ownership, use or operation of the Property, including, but not limited
to, any environmental or ecological requirements; provided that so long as
Trustor is not otherwise in default hereunder, Trustor may, upon providing
Beneficiary with security reasonably satisfactory to Beneficiary, proceed
diligently and in good faith to contest the validity or applicability of any
such statute, ordinance, regulation or requirement.
2.21 HAZARDOUS WASTES AND OTHER SUBSTANCES. Trustor hereby
represents and warrants to Beneficiary that, as of the date hereof: (a) to the
best of Trustor's knowledge, the Property is not in direct or indirect
violation of any local, state or federal law, rule or regulation pertaining to
environmental regulation, contamination or clean-up (collectively,
"ENVIRONMENTAL LAWS"), including, without limitation, "CERCLA", "RCRA", state
super-lien and environmental clean-up statutes; and (b) the Property is not
subject to any private or governmental lien or judicial or administrative
notice or action relating to hazardous and/or toxic substances, wastes,
materials, pollutants or contaminants (including, without limitation, asbestos
and raw materials which include hazardous constituents) and any other
substances or materials which are included under or regulated by Environmental
Laws, including, without limitation, "hazardous substances" as defined in
Section 2929.5 of the California Civil Code (collectively, "HAZARDOUS
SUBSTANCES"). Trustor shall not allow any Hazardous Substance to be stored,
located, discharged, possessed, managed, processed or otherwise handled on the
Property, (except in compliance with all laws, ordinances and regulations
pertaining thereto) and Trustor shall comply with all Environmental Laws.
Trustor shall promptly notify Beneficiary if Trustor shall become aware of the
release or threat of release on the Property of any Hazardous Substances and/or
if Trustor shall become aware that the Property is in direct or indirect
violation of any Environmental Laws, in which event Trustor shall remove such
Hazardous Substances and/or cure such violations to the extent and in the
manner required by governmental authorities having jurisdiction over the
Property, as applicable, promptly after Trustor becomes aware of the same, at
Trustor's sole expense. In the event Trustor fails to do so after thirty (30)
days' written notice from Beneficiary, then, Beneficiary may cause the Property
to be freed from any Hazardous Substances or otherwise brought into conformance
with Environmental Laws and any cost incurred in connection therewith shall be
paid by Trustor on demand and, if not so paid, shall be added to the
outstanding principal balance of the Note (even if such addition results in the
outstanding principal balance being in excess of the face amount of the
Promissory Notes), shall bear
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interest thereafter until actually paid by Trustor at the Default Rate defined
in the Note and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the Indebtedness. Subject to the notice and cure
provisions set forth in SECTION 3.1(B) hereof, Trustor hereby grants to
Beneficiary and its agents and employees access to the Property at all
reasonable times and a license to remove any items deemed by Beneficiary to be
Hazardous Substances and to do all things Beneficiary shall deem reasonably
necessary to bring the Property in conformance with Environmental Laws.
Beneficiary shall have all rights of entry and inspection with respect to the
Property and such other rights as are provided in Section 2929.5 of the
California Civil Code, or any successor statute. Trustor hereby indemnifies
Beneficiary and holds Beneficiary harmless from and against any and all
expenses, damages, penalties, fines, and costs, including, without limitation,
attorneys' fees and consequential damages (collectively "COSTS"), incurred by
Beneficiary as a result of the existence of any Hazardous Substances on, in or
under the Property and/or as a result of the failure of the Property to comply
with any Environmental Laws. The foregoing indemnity shall not apply with
respect to any Costs incurred by Beneficiary resulting from the presence of
Hazardous Substances on, in or under the Property or the failure of the
Property to comply with any Environmental Laws which arise due to the presence
of Hazardous Substances on, in or under the Property, or the failure of the
Property to comply with any Environmental Laws which relate only to acts,
omissions or events which occur subsequent to the earlier of the date that
Beneficiary (or its assignee or any purchaser at a foreclosure sale or
transferee under a deed-in-lieu thereof) either takes possession of the
Property (which includes the appointment of a receiver) or acquires title to
the Property (except to the extent that Trustor is in possession). In the
event that Trustor has executed a separate Indemnity Agreement concurrently
herewith in favor of Beneficiary, whether secured or unsecured, all rights and
remedies granted to Beneficiary under such Indemnity Agreement shall be in
addition to and cumulative of all rights and remedies granted to Beneficiary
under this SECTION 2.21, but in the event of any inconsistency or discrepancy
between the provisions hereof and the provisions of such Indemnity Agreement,
the provisions of such Indemnity Agreement shall control.
2.22 ADDITIONAL TAXES. In the event of the enactment after the
date of this Deed of Trust of any law of the State of California or of any
other governmental entity deducting from the value of the Property for the
purpose of taxation any lien or security interest thereon, or imposing upon
Beneficiary the payment of the whole or any part of the taxes or assessments or
charges or liens herein required to be paid by Trustor, or changing in any way
the laws relating to the taxation of deeds of trust or mortgages or security
agreements or debts secured by deeds of trust or mortgages or security
agreements or he interest of the mortgagee or secured party in the property
covered thereby, or the manner of collection of such taxes, so as to affect
this Deed of Trust or the Indebtedness secured hereby or Beneficiary, then, and
in any such event, Trustor, upon demand by Beneficiary, shall pay such taxes,
assessments, charges or liens, or reimburse Beneficiary therefor, provided,
however, that if in the opinion of counsel for Beneficiary (a) it might be
unlawful to require Trustor to make such payment, or (b) the making of such
payment might result in the imposition of interest beyond the maximum amount
permitted by law, then and in either such event, Beneficiary may elect, by
notice in writing given to Trustor, to declare all of the Indebtedness secured
hereby to be and become due and payable in full ninety (90) days from the
giving of such notice.
2.23 SECURED INDEBTEDNESS. It is understood and agreed that this
Deed of Trust shall secure payment of not only the Indebtedness but also any
and all renewals and extensions of the Promissory Notes, any and all other
indebtedness and obligations arising pursuant to the terms hereof, and any and
all other indebtedness and obligations arising pursuant to the terms of any of
the other Loan Documents.
2.24 TRUSTOR'S WAIVERS. To the full extent Trustor may do so,
Trustor agrees that Trustor shall not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or
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hereafter in force providing for any appraisal, valuation, moratorium or
extension; and Trustor, for Trustor and Trustor's successors and assigns, and
for any and all persons ever claiming any interest in the Property, to the
extent permitted by law, hereby waives and releases all rights of valuation,
appraisal, and all rights to a marshalling of the assets of Trustor, including
the Property, to a sale in inverse order of alienation, or to direct the order
in which any of the Property shall be sold in the event of foreclosure of the
liens and security interests hereby created. Trustor shall not have or assert
any right under any statute or rule of law pertaining to the marshalling of
assets, sale in inverse order or alienation, the exemption of homestead, the
administration of estates of decedents or other matters whatever to defeat,
reduce or affect the right of Beneficiary under the terms of this Deed of Trust
to a sale of the Property, for the collection of the Indebtedness secured
hereby without any prior or different resort for collection, or the right of
Beneficiary under the terms of this Deed of Trust to the payment of such
Indebtedness out of the proceeds of sale of the Property in preference to every
other claimant whatever.
ARTICLE 3
EVENTS OF DEFAULT
3.1 An "EVENT OF DEFAULT" shall have occurred under this Deed of
Trust if any of the following events occurs:
(a) The occurrence of an Event of Default under the Note
or any of the other Loan Documents subject to applicable notice and cure
periods; or
(b) Trustor fails to perform any covenant, agreement or
obligation contained in this Deed of Trust on or before the date such covenant,
agreement or obligation is required to be performed unless Trustor cures the
same (i) within any stated grace or cure period set forth herein; or (ii) if
there is not stated grace or cure period, then within (A) ten (10) days after
giving written notice of such failure if and to the extent such failure can be
cured solely by the payment of money; or (B) thirty (30) days after giving
written notice of such failure if such failure cannot be cured solely by the
payment of money, unless such default is of a nature which cannot be cured, in
which event there shall be no cure period (for example, a default under SECTION
2.11 resulting from the unauthorized Transfer of the Property); or
(c) Trustor, or any guarantor of the Promissory Notes,
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally or shall make a general
assignment for the benefit of its creditor; or
(d) If any proceeding shall be instituted by or against
Trustor or any guarantor of the Note seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of Trustor or any guarantor of
the Promissory Notes, or their debts, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for the appointment of a receiver, trustee, custodian or similar official
with respect to Trustor, or any guarantor of the Note, or for any substantial
part of their respective properties (provided that if any of the foregoing
actions instituted against Trustor or any guarantor of the Promissory Notes are
dismissed within thirty (30) days thereafter, then no Event of Default shall be
deemed to have occurred); or
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ARTICLE 4
REMEDIES
--------
4.1 REMEDIES AVAILABLE. If an Event of Default has occurred under
this Deed of Trust, Beneficiary may, at its option at any time thereafter do
any one or more of the following:
(a) Declare any or all of the Indebtedness secured hereby
to be immediately due and payable without presentment, demand, protest or
notice of any kind; and/or
(b) Either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court and
without regard to the adequacy of its security, enter upon and take possession
of the Property, or any part thereof, and do any and all acts that may be
desirable in Beneficiary's reasonable judgment to complete any unfinished
construction on the Property, to preserve the value, marketability or
rentability of the Property, to increase the income therefrom, to manage and
operate the Property or to protect the security hereof and, with or without
taking possession of the Property, sue for or otherwise collect the Rents and
Profits, including those past due and unpaid, and apply the same, less
reasonable costs and expenses of operation and collection, including, without
limitation, attorneys' fees, against the Indebtedness secured hereby in such
order as Beneficiary may determine, without in any way curing or waiving any
default of Trustor; and/or
(c) Commence an action to foreclose this Deed of Trust or
to specifically enforce its provisions or any of the obligations secured by
this Deed of Trust; and/or
(d) Deliver to Trustee a written declaration of default
and demand for sale, and a written notice of default and of election to cause
the Property to be sold, and cause any or all of the Property to be sold under
the power of sale granted by this Deed of Trust in any manner permitted by
applicable law; and/or
(e) Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.
4.2 SALE. Should Beneficiary elect to foreclose by exercise of
the power of sale herein contained, Beneficiary shall notify Trustee as above
provided and shall deposit with Trustee this Deed of Trust, the Note, all other
notes, if any, secured hereby and all documents evidencing expenditures secured
hereby.
(a) Trustee shall cause Beneficiary's written notice of
default and of election to cause the Property to be sold to be filed for
record. After the lapse of such time as may then be required by law following
the recordation of said notice of default, and notice of sale having been given
as then required by law, Trustee, without demand on Trustor, shall sell the
Property at the time and place fixed by Trustee in said notice of sale, either
as a whole or in separate parcels, and in such order as Trustee may determine,
at public auction to the highest bidder for cash in lawful money of the United
States, payable at the time of sale. Trustee may postpone the sale of all or
any portion of the Property by public announcement at the time and place of
sale, and from time to time thereafter may postpone such sale by public
announcement at the time fixed by the preceding postponement. Trustee shall
deliver to such purchaser its deed conveying the Property, or portion thereof,
so sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustor, Trustee or Beneficiary,
may purchase at such sale.
SWI California Deed of Trust
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<PAGE> 18
(b) The proceeds of any sale under this Deed of Trust
shall be applied in the following manner:
FIRST: Payment of the reasonable costs and expenses
of the sale, including, but not limited to, Trustee's legal fees and
disbursements, title charges and transfer taxes, and payment of all expenses,
liabilities and advances of Trustee.
SECOND: Payment of all reasonable sums expended by
Beneficiary under the terms of this Deed of Trust and not yet repaid, together
with interest on such sums at the Default Rate defined in the Promissory Notes.
THIRD: Payment of the obligations of Trustor secured
by this Deed of Trust, including, without limitation, interest at the Default
Rate defined in the Note, in any order that Beneficiary chooses.
FOURTH: The remainder, if any, to the person or
persons legally entitled thereto.
4.3 RECEIVER. In addition to all other remedies herein provided
for, Trustor agrees that upon the occurrence of an Event of Default hereunder,
Beneficiary shall, as a matter of right, be entitled to the appointment of a
receiver or receivers for all or any part of the Property, whether such
receivership be incident to a proposed sale of the Property or otherwise, and
without regard to the value of the Property or the solvency of Trustor or any
person or persons liable for the payment of the Indebtedness secured hereby,
and Trustor does hereby consent to the appointment of such receiver or
receivers, waives any and all notices of and defenses to such appointment and
agrees not to oppose any application therefor by Beneficiary, but nothing
herein is to be construed to deprive Beneficiary of any other right, remedy or
privilege it may now have under the law to have a receiver appointed; provided,
however, that the appointment of such receiver, trustee or other appointee by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Beneficiary to receive payment of the Rents and
Profits pursuant to other terms and provisions hereof. Any money advanced by
Beneficiary in connection with any such receivership shall be a demand
obligation owing by Trustor to Beneficiary, shall bear interest from the date
of making such advancement by Beneficiary until paid at the Default Rate
defined in the Promissory Notes, shall be a part of the Indebtedness secured
hereby and by every other instrument securing the Indebtedness. The receiver
or his agents shall be entitled to enter upon and take possession of any and
all of the Property to the same extent and in the same manner as Trustor might
lawfully do. The receiver, personally or through its agents or attorneys, may
exclude Trustor and its agents, servants and employees wholly from the Property
and may have, hold, use, operate, manage and control the same and each and
every part thereof, and in the name of Trustor or Trustor's agents, may
exercise all of their rights and powers and use all of the then existing
materials, current supplies, stores and assets and, at the expense of the
Property, maintain, restore, insure and keep insured the properties, equipment,
and apparatus provided or required for use in connection with the business or
businesses operated on the Property and may make all such reasonably necessary
and proper repairs, renewals and replacements and all such useful alterations,
additions, betterments and improvements as the receiver may deem judicious.
Such receivership shall, at the option of Beneficiary, continue until full
payment of all sums hereby secured or until title to the Property shall have
passed by foreclosure sale under this Deed of Trust.
4.4 OCCUPANCY AFTER FORECLOSURE. In the event there is a
foreclosure sale hereunder and at the time of such sale, Trustor or Trustor's
representatives, successors or assigns, or any other persons
SWI California Deed of Trust
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<PAGE> 19
claiming any interest in the Property by, through or under Trustor are
occupying or using the Property, or any part thereof, each and all shall, at
the option of Beneficiary or the purchaser at such sale, as the case may be,
immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day-to-day, terminable at the will of either landlord
or tenant, at a reasonable rental per day based upon the value of the Property
occupied, or used, such rental to be due daily to purchaser. In the event the
tenant fails to surrender possession of the Property upon the termination of
such tenancy, the purchaser shall be entitled to institute and maintain an
action for unlawful detainer of the Property in the appropriate court of
Imperial County, State of California.
4.5 CUMULATIVE REMEDIES. All remedies contained in this Deed of
Trust are cumulative, and Beneficiary also has all other remedies provided at
law or in equity or in any other of the Loan Documents between Trustor and
Beneficiary. No act of Beneficiary shall be construed as an election to
proceed under any particular provision of this Deed of Trust to the exclusion
of any other provision of this Deed of Trust or as an election of remedies to
the exclusion of any other remedy that may then or thereafter be available to
Beneficiary. No delay or failure by Beneficiary to exercise any right or
remedy under this Deed of Trust shall be construed to be a waiver of that right
or remedy or of any default by Trustor. Beneficiary may exercise any one or
more of its right and remedies at its option without regard to the adequacy of
its security.
4.6 PAYMENT OF EXPENSES. Trustor shall pay all of Beneficiary's
and Trustee's reasonable expenses incurred in any efforts to enforce any terms
of this Deed of Trust, whether or not any lawsuit is filed, including, but not
limited to, attorneys' fees and disbursements, foreclosure costs and title
charges together with interest thereon at the Default Rate defined in the Note.
ARTICLE 5
MISCELLANEOUS TERMS AND CONDITIONS
----------------------------------
5.1 TIME OF ESSENCE. Time is of the essence with respect to all
provisions of this Deed of Trust.
5.2 CERTAIN POWERS OF TRUSTEE. At any time or from time to time,
without liability therefor and without notice, upon written request of
Beneficiary and presentation of this Deed of Trust and the Promissory Notes,
and without affecting the personal liability of any person for payment of the
Indebtedness secured hereby or the effect of this Deed of Trust upon the
remainder of the Property, Trustee may (a) reconvey any part of the Property;
(b) consent in writing to the making of any subdivision map or plat thereof;
(c) join in granting any easement thereon; or (d) join in any extension
agreement or any agreement subordinating the lien hereof.
5.3 CERTAIN RIGHTS OF BENEFICIARY. Without affecting Trustor's
liability for the payment of any of the obligations secured by this Deed of
Trust, Beneficiary may from time to time and without notice to Trustor (a)
release any person liable for the payment of the Indebtedness secured hereby;
(b) extend or modify the terms of payment of said Indebtedness; or (c) accept
additional real or personal property of any kind as security or later,
substitute or release any property securing said Indebtedness.
5.4 ACCEPTANCE BY TRUSTEE. Trustee accepts this Trust when this
Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law. Trustee is not obligated to notify any party hereto of
pending sale under any other deed of trust or of any action or proceeding in
which Trustor, Beneficiary or Trustee shall be a party unless brought by
Trustee.
SWI California Deed of Trust
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<PAGE> 20
5.5 SUBSTITUTED TRUSTEE. Beneficiary may, from time to time, by
instrument in writing, substitute a successor or successors to any Trustee
named herein or acting hereunder, which instrument, executed and acknowledged
by Beneficiary and recorded in the office of the recorder of the county or
counties where the Land is situated, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall, without
conveyance from the Trustee predecessor, succeed to all its title, estate,
rights, powers and duties. Said instrument must contain the name and address
of the new Trustee.
5.6 NOTICES. All notices required or permitted to be given
pursuant to this Deed of Trust, the Promissory Notes, or under any of the other
Loan Documents (unless otherwise expressly provided therein) shall be in
writing, and shall be delivered either personally, by overnight delivery
service (such as Federal Express) or by U.S. certified mail, postage prepaid,
return-receipt requested and addressed to the parties at their respective
addresses shown in this Deed of Trust. The parties may change their addresses
for notice by giving notice of such change in accordance with this section.
Notices sent by overnight delivery service shall be deemed received on the
business day following the date of deposit with the delivery service. Mailed
notices shall be deemed received upon the earlier of the date of delivery shown
on the return receipt, or the second business day after the date of mailing.
5.7 SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and
conditions hereof shall be binding upon Trustor and the successors and assigns
of Trustor, including all successors in interest of Trustor in and to all or
any part of the Property, and shall inure to the benefit of Trustee and
Beneficiary and their respective successors and assigns and shall constitute
covenants running with the land. Provided, however, that nothing herein shall
be deemed to be a consent to any Transfer of the Property, or any part thereof,
by Trustor in violation of the provisions of SECTION 2.11 hereof. All
references in this Deed of Trust to Trustor, Trustee or Beneficiary shall be
deemed to include all such parties' successors and assigns; and the term
"Beneficiary" as used herein shall also mean and refer to any lawful holder or
owner, including pledgees and participants, of any of the Indebtedness secured
hereby. If Trustor consists of more than one person or entity, each shall be
jointly and severally liable to perform the obligations of Trustor.
5.8 SEVERABILITY. A determination that any provision of this Deed
of Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this Deed of Trust to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
5.9 GENDER. Within this Deed of Trust, words of any gender shall
be held and construed to include any other gender, and words in the singular
shall be held and construed to include the plural, and vice versa unless the
context otherwise requires.
5.10 WAIVER. Beneficiary shall not be deemed to have waived any
provision of this Deed of Trust, or the Note secured hereby or of any of the
other Loan Documents unless such waiver is in writing and is signed by
Beneficiary. Without limiting the generality of the preceding sentence,
Beneficiary's acceptance of any payment with knowledge of a default by Trustor
shall not be deemed a waiver of such default. No waiver by Beneficiary of any
default on the part of Trustor or breach of any of the provisions of this Deed
of Trust shall be considered a waiver of any other or subsequent default or
breach, and no delay or omission in exercising or enforcing the rights and
powers herein granted shall be construed as a waiver of such rights and powers,
and every such right and power may be exercised from time to time.
SWI California Deed of Trust
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<PAGE> 21
5.11 SECTION HEADINGS. The headings of the sections and paragraphs
of this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
5.12 GOVERNING LAW. This Deed of Trust, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law,
except to the extent of procedural and substantive matters relating only to the
creation and perfection of liens and security interests in, and the enforcement
of rights and remedies against, the Mortgaged Property, which matters shall be
governed by the laws of the State of California.
5.13 COUNTING OF DAYS. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the State of Texas, the period shall be deemed to end
on the next succeeding business day.
5.14 RELATIONSHIP OF THE PARTIES. The relationship between Trustor
and Beneficiary is that of a borrower and a lender only; and neither of those
parties is, nor shall it hold itself out to be, the agent, employee, joint
venturer or partner of the other party.
5.15 ENTIRE AGREEMENT AND MODIFICATIONS. This Deed of Trust and
the other Loan Documents contain the entire agreements between the parties
relating to the subject matter hereof and thereof and all prior agreements
relative hereto and thereto which are not contained herein or therein are
terminated. This Deed of Trust and the other Loan Documents may not be
amended, revised, waived, discharged, released or terminated orally but only by
a written instrument or instruments executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision, waiver, discharge,
release or termination which is not so documented shall not be effective as to
any party.
5.16 REQUEST FOR NOTICE OF DEFAULT. In accordance with Section
2924b of the California Civil Code, request is hereby made by Trustor that a
copy of any Notice of Default and a copy of any Notice of Sale under this Deed
of Trust be mailed to Trustee at the following address 8572 Katy Freeway, Suite
101, Houston, Texas 77024.
5.17 RECONVEYANCE. Upon the payment in full of all sums secured by
this Deed of Trust, Beneficiary agrees to request Trustee to reconvey the
Mortgaged Property. Upon payment of Trustee's fees and all other sums owing to
it under this Deed of Trust, Trustee will reconvey the Mortgaged Property to
the person or persons legally entitled thereto. Such person or persons must
pay all costs and expenses in connection therewith. The recitals of any facts
in the reconveyance will be conclusive on all persons. The grantee in the
reconveyance may be described as "the person or persons legally entitled
thereto."
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first above written.
"TRUSTOR"
SOUTHWESTERN ICE, INC., a Texas corporation
By:_________________________________
James F. Stuart, Chief Executive Officer
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<PAGE> 22
STATE OF TEXAS Section
Section
COUNTY OF BEXAR Section
On September ___, 1997, before me, _______________________________,
Notary Public, personally appeared James F. Stuart, Chief Executive Officer of
SOUTHWESTERN ICE, Inc., a Texas corporation, personally known to me/proved to
me on the basis of satisfactory evidence to be the person[s] whose name[s]
[is/are] subscribed to the within DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND FIXTURE FILING and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity, and that by his/her/their
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------
NOTARY
[SEAL]
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<PAGE> 23
LEGAL DESCRIPTION
SWI California Deed of Trust
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<PAGE> 1
EXHIBIT 10.28
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296-1400
ATTENTION: Pat Mascorro
Loan Department
Location RB-2
APN:
- --------------------------------------------------------------------------------
PARCEL:
LEASEHOLD
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF RENTS AND FIXTURE FILING
--------------------------------------
THIS LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING ("DEED OF TRUST" and/or "MORTGAGE") is made this 15th day of
September, 1997, by SOUTHWESTERN ICE, INC., a Texas corporation ("TRUSTOR"),
whose address is 8572 Katy Freeway, Suite 101, Houston, Texas 77024; JIMMY R.
LOCKE, ("TRUSTEE"); whose address is P.O. Box 1600, San Antonio, Texas 78296;
and THE FROST NATIONAL BANK, a national banking association, agent for each of
the banks under the Credit Agreement (as defined below), ("BENEFICIARY") whose
address is P.O. Box 1600, San Antonio, Texas 78296.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
1.1 CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition to the
other terms defined herein, each of the following terms shall have the meaning
assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWERS": Packaged Ice, Inc., a Texas Corporation.
"TRUSTOR": Southwestern Ice, Inc., a Texas Corporation, and its
successors and assigns.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrowers, the Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
SWI California Leasehold Deed of Trust
<PAGE> 2
"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrowers jointly and severally
payable to the order of any Bank, evidencing loans advanced to Borrowers under
the Credit Agreement, in an aggregate principal face amount of $20,000,000,
bearing interest as therein provided, containing a provision for the payment of
a reasonable additional amount as attorneys' fees, and finally maturing on
April 15, 2003, together with any renewals, increases, extensions,
restatements, or modifications thereof.
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
1.2 MORTGAGED PROPERTY. Trustor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: The
leasehold estate (herein called the "LAND") created by the Lease Agreement
described in Exhibit "A" attached hereto and incorporated herein by this
reference, and (i) all improvements now or hereafter situated or to be situated
on the Land (hereinafter together called the "IMPROVEMENTS"); and (ii) all
right, title and interest of Trustor in and to (1) all streets, roads, alleys,
easements, rights-of-way, licenses, rights of ingress and egress, vehicle
parking rights and public places, existing or proposed, abutting, adjacent,
used in connection with or pertaining to the Land or the Improvements; (2) any
strips or gores between the Land and abutting or adjacent properties; and (3)
all water, and water rights, timber, crops and mineral interests on or
pertaining to the Land or the Improvements (the Land, Improvements and other
rights, titles and interests referred to in this clause (a) being herein
sometimes collectively called the "PREMISES"); (b) all fixtures, equipment,
systems, machinery, furniture, furnishings, appliances, inventory, goods,
building and construction materials, supplies, and articles of personal
property, of every kind and in, on or about the Land or the Improvements, or
used in or necessary to the complete and proper planning, development, use,
occupancy or operation thereof, or acquired (whether delivered to the Land or
stored elsewhere) for use or installation in or on the Land or the
Improvements, and all renewals and replacements of substitutions for and
additions to the foregoing (the properties referred to in this clause (b) being
herein sometimes collectively called the "ACCESSORIES", all of which are hereby
declared to be permanent accessions to the Land); (c) all (i) plans and
specifications for the Improvements; (ii) Trustor's rights, but not liability
for any breach by Trustor, under all commitments (including any commitment for
financing to pay any of the secured indebtedness, as defined below), insurance
policies and other contracts and general intangibles (including, but not
limited to trademarks, trade names and symbols) related to the Premises or
tenants' security deposits, deposits with respect to utility services to the
Premises, and any deposits or reserves hereunder or under any other Loan
Document, taxes, insurance or otherwise), money, accounts, instruments,
documents, notes and chattel paper arising from or by virtue of any
transactions related to the Premises or Accessories (without derogation of
ARTICLE 3 hereof); (iv) permits, licenses, franchises, certificates,
development rights, commitments and rights for utilities, and other rights and
privileges obtained in connection with the Premises or the Accessories; (v)
leases, rents, royalties, bonuses, issues, profits, revenues and other benefits
of the Premises and the Accessories (without derogation of ARTICLE 3 hereof,
and herein sometimes collectively called the "RENTS AND PROFITS"); (vi) oil,
gas and other hydrocarbons and other minerals produced from or allocated to the
Land and all products processed or obtained therefrom, and the proceeds
thereof; and (vi) engineering, accounting, title, legal and other technical or
business data concerning the Mortgaged Property which are in the possession of
Trustor or in which Trustor can otherwise grant a security interest; and (d)
all (i) proceeds of or arising from the properties, rights, titles and
interests referred to above in this SECTION 1.2, including, but not limited to
proceeds of any sale, lease or other disposition thereof, proceeds of each
policy of insurance relating thereto (including premium refunds), proceeds of
the taking thereof or of any rights appurtenant thereto, including change of
grade of streets, curb cuts or other rights of access, by eminent domain or
transfer in
SWI California Leasehold Deed of Trust
2
<PAGE> 3
lieu thereof for public or quasi-public use under any law, and proceeds arising
out of any damage thereto; and (ii) other interest of every kind and character
which Trustor now has or hereafter acquires in, or to or for the benefit of the
properties, rights, titles and interests referred to above in this SECTION 1.2
and all property used or useful in connection therewith, including, but not
limited to rights of ingress and egress and remainders, reversions and
reversionary rights or interests; and if the estate of Trustor in any of the
property referred to above in this SECTION 1.2 is leasehold estate, this
conveyance shall include, and the lien and security interest created hereby
shall encumber and extend to, all other or additional title, estates, interests
or rights which are now owned or may hereafter be acquired by Trustor in or to
the property demised under the lease creating the leasehold estate; TO HAVE AND
TO HOLD the foregoing rights, interests and properties, and all rights,
estates, powers and privileges appurtenant thereto (herein collectively called
the "MORTGAGED PROPERTY" or "PROPERTY"), unto Trustee, and to his successors or
substitutes in this trust, and to his or their successors and assigns, in
trust, however, upon the terms, provisions and conditions herein set forth.
1.3 SECURITY INTEREST. Trustor hereby grants to Agent, as agent for
the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business Code,
or under the Uniform Commercial Code in force in any other state to the extent
the same is applicable law.
1.4 NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage is made
to secure and enforce the payment and performance of the following promissory
notes, obligations, indebtedness and liabilities and all renewals, extensions,
supplements, increases, and modifications thereof in whole or in part from time
to time:
(i) the Promissory Notes and all other notes given in
substitution therefor or in modification, supplement, increase, renewal or
extension thereof, in whole or in part (such notes, as from time to time
renewed, extended, supplemented, increased, or modified and all other notes
given in substitution therefor, or in modification, renewal or extension
thereof, in whole or in part, being hereinafter collectively called the
"NOTES," and individually a "NOTE," and Agent and the other Banks, or the
subsequent holders at the time in question of the Notes or any of the secured
indebtedness, as hereinafter defined, being collectively herein called
"HOLDERS" and individually a "HOLDER"); (ii) all indebtedness and other
obligations owed by any of the Borrowers (or all of them) to any Holder now or
hereafter incurred or arising pursuant to or permitted by the provisions of the
Notes, this Mortgage, or any other document now or hereafter evidencing,
governing, guaranteeing, securing, or otherwise executed in connection with the
loans evidenced by the Notes, including, but not limited to any loan or credit
agreement, tri-party financing agreement or other agreement between any of the
Borrowers (or all of them) and Holders, or among any of the Borrowers or all of
them), Holders and any other party or parties, pertaining to the repayment or
use of the proceeds of the loan evidenced by the Notes (the Credit Agreement,
the Notes, this Mortgage, any other "Loan Papers" (as such term is defined in
the Credit Agreement), and such other documents as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS").
The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY" or the "INDEBTEDNESS."
SWI California Leasehold Deed of Trust
3
<PAGE> 4
ARTICLE 2
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF TRUSTOR
------------------------
2.1 WARRANTIES OF TRUSTOR. Trustor, for itself and its successors
and assigns, does hereby represent, warrant and covenant to and with
Beneficiary, its successors and assigns, that:
(a) Trustor has full power and lawful authority to grant,
assign, transfer and mortgage its interest in the Property in the manner and
form hereby done. Trustor shall preserve its interest in and to the Property
and shall forever warrant and defend the same to Trustee and shall forever
warrant and defend the validity and priority of the lien hereof against the
claims of all persons and parties whomsoever. Trustor shall promptly and
completely observe, perform and discharge each and every obligation, covenant,
condition, restriction and agreement applicable to Trustor and affecting the
Property, whether the same is prior and superior or subject and subordinate
hereto. (The foregoing warranty of title shall survive the foreclosure of this
Deed of Trust and shall inure to the benefit of and be enforceable by any
person who may acquire title to the Property pursuant to any foreclosure.);
(b) No bankruptcy or insolvency proceedings are pending
or contemplated by Trustor or, to Trustor's knowledge, against Trustor or by or
against any endorser, cosigner or guarantor of the Promissory Notes;
(c) The execution and delivery of this Deed of Trust, the
Note and all of the other Loan Documents do not contravene, result in a breach
of or constitute a default under any contract or agreement to which Trustor is
a party or by which Trustor or any of its properties may be bound and, to the
best of Trustor's knowledge, do not violate or contravene any law, order,
decree, rule or regulation to which Trustor is subject;
(d) Trustor has not entered into any other contract,
agreement or commitment which would materially impair Trustor's ability to
perform the covenants and obligations required to be performed by it under the
Loan Documents.
(e) There are no judicial or administrative actions,
suits or proceedings pending or, to the best of Trustor's knowledge, threatened
against or affecting Trustor or the Property that would materially impair
either the Property or Trustor's ability to perform the covenants or
obligations required to be performed under the Loan Documents;
(f) All reports, certificates, affidavits, statements and
other data furnished by Trustor to Beneficiary in connection with the loan
evidenced by the Promissory Notes are true and correct in all material respects
and do not omit to state any material fact or circumstance necessary to make
the statements contained therein not misleading;
(g) All financial statements furnished by Trustor to
Beneficiary in connection with the loan evidenced by the Note fairly present
the financial condition of the Trustor as at the date specified therein, and
since said date, there has been no material adverse change in the financial
condition, property or business of Trustor.
(h) To the best of Trustor's knowledge, the Property and
the intended use thereof by Trustor complies in all material respects with all
applicable restrictive covenants, zoning ordinances, subdivision and building
codes, flood disaster laws, applicable health and environmental laws and
SWI CALIFORNIA LEASEHOLD DEED OF TRUST
4
<PAGE> 5
regulations, and all other statutes laws, ordinances, orders and requirements
issued by state, federal or municipal authorities having or claiming
jurisdiction over the Property;
(i) The Property is free from damage caused by fire,
earthquake, flood or other casualty;
(j) No part of the Property has been taken in
condemnation, eminent domain or similar proceedings nor are any such
proceedings pending or, to the best of Trustor's knowledge, threatened;
(k) Trustor is a corporation, duly authorized to do
business, and in good standing under the laws of the State of Texas;
(l) Trustor has the power and authority to own its
properties and assets and to carry on its business as it is currently being
conducted, including the power and authority to enter into this Deed of Trust
and all of the other Loan Documents;
(m) The person signing this Deed of Trust on behalf of
Trustor is the Trustor.
The representations and warranties set forth in this SECTION 2.1 are
made for the benefit of Beneficiary, and its participants, successors and
assigns, and shall not inure to the benefit of (nor may they be enforced by)
any purchaser of the Property at any foreclosure sale or any transferee of the
Property by deed in lieu of foreclosure (other than Beneficiary itself).
If there is any conflict between the provisions of this SECTION 2.1
and the representations and warranties specified in the Credit Agreement, the
representations and warranties in the Credit Agreement shall control.
2.2 DEFENSE OF TITLE. Without limiting or waiving any other
rights and remedies of Beneficiary hereunder, if, while this Deed of Trust is
in force, the title to the Property described herein or the interest of
Beneficiary therein shall be in the subject, directly or indirectly, of any
action at law or in equity or be attached directly or indirectly, or
endangered, clouded or adversely affected in any manner, Trustor shall,
immediately upon receipt of written notice from Beneficiary, take all
reasonably necessary and proper steps for the defense of said title or
interest, including the employment of counsel, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title
or interest. If Trustor fails to so defend such title or interest to the
reasonable satisfaction of Beneficiary, Trustor hereby authorizes Beneficiary,
at Trustor's expense, to take all reasonably necessary and proper steps to
defend such title or interest.
2.3 PERFORMANCE OF OBLIGATIONS. Trustor shall pay when due the
principal of and the interest on the Indebtedness secured hereby and all
charges, fees and other sums as provided in the Loan Documents, and shall
observe, perform and discharge all obligations, covenants and agreements that
are secured by this Deed of Trust in accordance with their terms. Further,
Trustor shall promptly and strictly perform and comply with all covenants,
conditions, obligations and prohibitions required of Trustor in connection with
any other encumbrance affecting the Property, or any part thereof, regardless
of whether such encumbrance is superior or subordinate to the lien hereof.
2.4 INSURANCE. Trustor shall obtain and maintain at Trustor's
sole expense: (1) all risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning,
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windstorm, explosion, hail, tornado and such hazards as are presently included
in so-called "all risk" coverage and against such other insurable hazards as
Agent may require, in an amount not less than 100% of the full replacement
cost, including the cost of debris removal, without deduction for depreciation
and sufficient to prevent Trustor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (2) if and to the extent any portion of
the Property is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Trustor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Property; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Trustor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Trustor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Trustor shall, in each instance promptly upon the request of Agent and at
Trustor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance), issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss or damage to the Mortgaged Property shall contain a standard
mortgage clause (without contribution) naming Agent, as agent for the Banks, as
mortgagee with loss proceeds payable to Agent notwithstanding (i) any act,
failure in act or negligence of or violation of any warranty, declaration or
condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Trustor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Trustor has failed to perform Trustor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Trustor, to the
same extent as if it had been made payable to Agent. Upon any foreclosure
hereof or transfer of title to the Mortgaged Property in extinguishment of the
whole or any part of the secured indebtedness, all of Trustor's right, title
and interest in and to the insurance policies referred to in this Section
(including unearned premiums) and all proceeds payable thereunder shall
thereupon vest in the purchaser at foreclosure or
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other such transferee, to the extent permissible under such policies. Agent
shall have the right (but not the obligation) to make proof of loss for, settle
and adjust any claim under, and receive the proceeds of, all insurance for loss
or damage to the Mortgaged Property, and the expenses incurred by Agent in the
adjustment and collection of insurance proceeds shall be a part of the secured
indebtedness and shall be due and payable to Agent on demand. Agent shall not
be, under any circumstances, liable or responsible for the obtaining,
maintaining or adequacy of any insurance or for failure to collect or exercise
diligence in the collection of any of such proceeds or for failure to see to
the proper application of any amount paid over to Trustor. Any such proceeds
received by Agent shall, after deduction therefrom of all reasonable expenses
actually incurred by Agent, including attorneys' fees, at Agent's option be (1)
released to Trustor, or (2) applied (upon compliance with such terms and
conditions as may be required by Agent) to repair or restoration, either partly
or entirely, of the Mortgaged Property so damaged, or (3) applied to the
payment of the secured indebtedness in such order and manner as Agent, in its
sole discretion, may elect, whether or not due. Trustor shall at all times
comply with the requirements of the insurance policies required hereunder and
of the issues of such policies and of any board of fire underwriters or similar
body as applicable to or affecting the Mortgaged Property.
2.5 PAYMENT OF TAXES. Trustor shall pay or cause to be paid,
except to the extent provision is actually made therefor pursuant to SECTION
2.6 of this Deed of Trust, all taxes and assessments that are or may become a
lien on the Property or that are assessed against or imposed upon the Property.
Trustor shall furnish Beneficiary with receipts showing payment of such taxes
and assessments prior to the applicable delinquency date therefor, except that
Trustor may in good faith, by appropriate proceedings, contest, so long as such
contest is diligently pursued, the validity, applicability or amount of any
asserted tax or assessment; and pending such contest, Trustor shall not be
deemed in default hereunder by reason of nonpayment of such asserted tax or
assessment if Beneficiary determines, in its reasonable opinion, that
nonpayment of such tax or assessment shall not result in the loss, forfeiture
or diminution of the Property or any part thereof or any interest of
Beneficiary therein and if, prior to delinquency of the asserted tax or
assessment, Trustor establishes an escrow acceptable to Beneficiary adequate to
cover the payment of such tax or assessment and a reasonable additional sum to
cover possible interest, cost and penalties (which escrow shall be returned to
Trustor upon payment of all such taxes, assessments, interest, costs and
penalties or upon a final determination that such taxes are not, in fact,
payable), and if Trustor promptly causes to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final; provided,
however, that in any event each such contest shall be concluded and the taxes,
assessments, interests, costs and penalties shall be paid, prior to the date
any writ or order is issued under which the Property may be sold. Trustor
shall have the right to require that any such escrow established with
Beneficiary be applied to the payment of any such taxes, assessments, interest,
costs and penalties. In the event Trustor fails to pay any installment of real
property taxes prior to delinquency and has not made other, adequate
arrangements with Beneficiary, Beneficiary may at any time thereafter (subject
to notice and cure provisions set forth in SECTION 3.1(B) hereof), but shall
not be obligated to, pay such delinquent taxes, interest and penalties and
Trustor shall pay all sums to Beneficiary promptly upon demand by Beneficiary
together with interest thereon from the date(s) advanced by Beneficiary at the
Default Rate defined in the Note; any such sums advanced by Beneficiary for the
payment of taxes and penalties, together with such interest thereon, shall be
secured by this Deed of Trust.
2.6 RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence and continuance of an Event of Default and upon written request of
Agent, to secure certain of Trustor's obligations in paragraphs 2.4 and 2.5
above, but not in lieu of such obligations, Trustor will deposit with Agent a
sum equal to ad valorem taxes, assessments and charges (which charges for the
purpose of this paragraph shall include without limitation any recurring charge
which could result in a lien against the
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Mortgaged Property) against the Mortgaged Property for the current year and the
premiums for such policies of insurance for the current year, all as estimated
by Agent and prorated to the end of the calendar month following the month
during which Agent's request is made, and thereafter will deposit with Agent,
on each date when an installment of principal and/or interest is due on the
Notes, sufficient funds (as estimated from time to time by Agent) to permit
Agent to pay at least fifteen (15) days prior to the due date thereof, the next
maturing ad valorem taxes, assessments and charges and premiums for such
policies of insurance. Agent shall have the right to rely upon tax information
furnished by applicable taxing authorities in the payment of such taxes or
assessments and shall have no obligation to make any protest of any such taxes
or assessments. Any excess over the amounts required for such purposes shall
be held by Agent for future use, applied to any secured indebtedness or
refunded to Trustor, at Agent's option, and any deficiency in such funds so
deposited shall be made up by Trustor upon demand of Agent. All such funds so
deposited shall bear no interest, may be mingled with the general funds of
Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Trustor (which statements, shall be presented by Trustor to Agent a
reasonable time before the applicable amount is due); provided, however, that
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Trustor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Trustor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
2.7 CONDEMNATION. Trustor shall notify Agent immediately after
Trustor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Trustor shall, at Trustor's expense, diligently prosecute any
such proceedings. Agent shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its own
choice. Agent shall be entitled to receive all sums which may be awarded or
become payable to Trustor for the condemnation of the Mortgaged Property, or
any part thereof, for public or quasi-public use, or by virtue of private sale
in lieu thereof, and any such which may be awarded or become payable to Trustor
for injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Trustor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option (1) released to
Trustor, or (2) applied (upon compliance with such terms and conditions as may
be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any
circumstances, liable or responsible for failure to collect or to exercise
diligence in the collection of any such sum or for failure to see to the proper
application of any amount paid over to Trustor. Agent is hereby authorized, in
the name of Trustor, to execute and deliver valid acquittances for, and to
appeal from any such award, judgment or decree. All reasonable costs and
expenses (including but not limited to reasonable attorneys fees) incurred by
Agent in connection with any condemnation shall be a demand obligation owing by
Trustor (which Trustor hereby promises to pay) to Agent pursuant to this
Mortgage.
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2.8 MECHANICS' LIENS AND UTILITIES. Trustor shall pay when due
all claims and demands of mechanics, materialmen, laborers and others for any
work performed or materials delivered for the Property; provided, however, that
Trustor shall have the right to contest in good faith any such claim or demand,
provided that it does so diligently and without prejudice to Beneficiary. In
the event Trustor shall contest any such claim or demand, Trustor shall, upon
Beneficiary's written request, promptly provide a bond, cash deposit or other
security reasonably satisfactory to Beneficiary to protect Beneficiary's
interest and security should the contest be unsuccessful. If Trustor shall
fail to immediately discharge or provide security against any such claim or
demand as aforesaid, subject to the notice and cure provisions set forth in
SECTION 3.1(B) hereof, Beneficiary may do so, and any and all expenses incurred
by Beneficiary together with interest thereon at the Default Rate as defined in
the Promissory Notes shall be immediately reimbursed by Trustor on written
demand. Trustor shall pay when due all utility charges that are incurred by
Trustor or that may become a charge or lien against the Property for gas,
electricity, water and sewer services furnished to the Property and all other
assessments or charges of a similar nature, whether public or private,
affecting the Property or any portion thereof, whether or not such taxes,
assessments or charges are or may become liens thereon.
2.9 RENTS AND PROFITS. As additional and collateral security for
the payment of the Indebtedness secured hereby and cumulative of any and all
rights and remedies herein provided for, Trustor hereby absolutely and
currently assigns to Beneficiary all existing and future Rents and Profits and,
with respect to said existing and future Rents and Profits, Trustor hereby
grants to Beneficiary the sole, exclusive and immediate right to demand,
collect (by suit or otherwise), receive and give valid and sufficient receipts
for any and all of said Rents and Profits, for which purpose Trustor does
hereby irrevocably make, constitute and appoint Beneficiary its
attorney-in-fact with full power to appoint substitutes or a trustee to
accomplish such purpose (which power of attorney shall be irrevocable, shall be
deemed to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Trustor) it being understood that Beneficiary shall
be without liability for any loss that may arise from uncollectible Rents and
Profits, proceeds or other payments so long as Beneficiary shall act on the
Property with ordinary prudence. Trustor irrevocably consents that the
respective payors of the Rents and Profits shall, upon demand and notice from
Beneficiary of Trustor's default hereunder, pay said Rents and Profits to
Beneficiary without liability to such payor for the determination of the actual
existence of any default claimed by Beneficiary. However, until the occurrence
of an Event of Default under this Deed of Trust, Trustor shall have a license
to collect and receive the Rents and Profits. Upon the occurrence of an Event
of Default hereunder, Trustor's license shall automatically terminate without
notice to Trustor and Beneficiary may thereafter, without taking possession of
the Property, collect the Rents and Profits itself or by an agent or receiver.
From and after such termination, Trustor shall be the agent of Beneficiary in
collection of the Rents and Profits and all of the Rents and Profits so
collected by Trustor shall be held in trust by Trustor for the sole and
exclusive benefit of Beneficiary, and Trustor shall, promptly after receipt of
any Rents and Profits, pay the same to Beneficiary to be applied by Beneficiary
as hereinafter set forth. Beneficiary is obligated to account only for such
Rents and Profits as are actually collected or received by Beneficiary.
Possession by a court-appointed receiver shall not be considered possession by
Beneficiary. All Rents and Profits collected by Beneficiary or a receiver
shall be applied first to pay all reasonable expenses of collection, and then
to the payment of all reasonable costs of operation and management of the
Property, and then to the payment of the Indebtedness and obligations secured
hereby in whatever order Beneficiary directs in its absolute discretion and
without regard to the adequacy of its security. In the event that Trustor has
executed a separate Assignment of Rents and Leases concurrently herewith in
favor of Beneficiary covering all of the right, title and interest of Trustor,
as landlord, lessor or licensor, in and to any leases, licenses and occupancy
agreements relating to all or portions of the Property, all rights and remedies
granted to Beneficiary under such Assignment of Rents and Leases shall be in
addition to and cumulative of all rights and remedies granted to
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Beneficiary under this SECTION 2.9.
2.10 LEASES AND LICENSES.
(a) Trustor shall furnish to Beneficiary, within ten (10)
days after a written request by Beneficiary to do so, but not more frequently
than semi-annually, a written statement containing the names of all tenants,
lessees and licensees of the Property, the terms of their respective leases,
licenses or occupancy agreements, the spaces occupied and the rentals or fees
payable thereunder and a copy of each such lease, license and occupancy
agreement.
(b) Upon the occurrence of an Event of Default hereunder,
whether before or after the whole principal sum secured hereby is declared to
be immediately due or whether before or after the institution of legal
proceedings to foreclose this Deed of Trust, forthwith, upon demand of
Beneficiary, Trustor shall surrender to Beneficiary and Beneficiary shall be
entitled to take actual possession of the Property or any part thereof
personally, or by its agent or attorneys. Beneficiary shall have, and Trustor
hereby gives and grants to Beneficiary, the right, power and authority to make
and enter into leases of the Property or portions thereof for such rents and
for such periods of occupancy and upon conditions and provisions as Beneficiary
may deem desirable, and Trustor expressly acknowledges and agrees that the term
of any such lease may extend beyond the date of any foreclosure sale of the
Property; it being the intention of Trustor that in such event, Beneficiary
shall be deemed to be and shall be the attorney-in-fact of Trustor for the
purpose of making and entering into leases of parts or portions of the Property
for the rents and upon the terms, conditions and provisions deemed desirable to
Beneficiary and with like effect as if such leases had been made by Trustor as
the owner in fee simple of the Property free and clear of any conditions or
limitations established by this Deed of Trust. The power and authority hereby
given and granted by Trustor to Beneficiary shall be deemed to be coupled with
an interest and shall not be revocable by Trustor. In connection with any
action taken by Beneficiary pursuant to this SECTION 2.10(B), Beneficiary shall
not be liable for any loss sustained by Trustor resulting from any failure to
let the Property, or any part thereof, or from any other act or omission of
Beneficiary in managing the Property unless such loss is caused by the gross
negligence or willful misconduct of Beneficiary, nor shall Beneficiary be
obligated to perform or discharge any obligation, duty or liability under any
lease or tenancy agreement covering the Property or any part thereof or under
or by reason of this instrument or the exercise of rights or remedies
hereunder. Trustor shall, and does hereby, agree to indemnify Beneficiary for,
and to hold Beneficiary harmless from, any and all liabilities, loss or damage
(including, without limitation, attorneys' fees and costs) that may or might be
incurred by Beneficiary under any such lease or tenancy agreement or under this
Deed of Trust or by the exercise of rights or remedies hereunder and from any
and all claims and demands whatsoever that may be asserted against Beneficiary
by reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any such lease
agreement, except for acts of gross negligence or willful misconduct by
Beneficiary. Should Beneficiary incur any such liability, the amount thereof,
including, without limitation, reasonable costs, expenses and attorneys' fees,
together with interest thereon at the Default Rate defined in the Note, shall
be secured hereby and shall be a demand obligation hereunder. Nothing in this
SECTION 2.10(B) shall impose any duty, obligation or responsibility upon
Beneficiary for the control, care, management or repair of the Property, or for
the carrying out of any of the terms and conditions of any such lease
agreement, nor shall it operate to make Beneficiary responsible or liable for
any waste committed on the Property by the tenants or by any other parties or
for any dangerous or defective condition of the Property, or for any negligence
in the management, upkeep, repair or control of the Property resulting in loss
or injury or death to any tenant, licensee,
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employee or stranger, except during the period of Beneficiary's actual
possession and operation of the Property pursuant hereto.
2.11 ALIENATION AND FURTHER ENCUMBRANCES. In the event Trustor
shall sell, convey, transfer, dispose of, alienate, or lease for a period of
greater than thirty five (35) years the Property, or any part thereof or any
interest therein, or shall be divested of its title or any interest therein, in
any manner or way, whether voluntarily or involuntarily (any of the foregoing
being individually called a "TRANSFER"), without the written consent of
Beneficiary being first obtained, which consent may not be unreasonably
withheld, Beneficiary shall have the right at its option to declare any
Indebtedness or obligation secured hereby, irrespective of the maturity date
specified in any note evidencing the same, immediately due and payable unless
said transfer is permitted under the Credit Agreement. Acceptance by
Beneficiary of any payment or payments on the Promissory Notes or other sums
secured by this Deed of Trust by one other than Trustor shall not constitute
(i) any notice to Beneficiary of any Transfer or proposed Transfer of any
interest in the Property covered by this Deed of Trust or (ii) any consent or
waiver of the right to consent to such Transfer or proposed Transfer of any
interest in the Property.
2.12 ACCESS PRIVILEGES AND INSPECTIONS. Representatives of
Beneficiary shall have full and free access to the Property at all reasonable
times, upon reasonable prior written notice to Trustor, for the purposes of
inspecting the Property and determining compliance with the terms and
conditions of this Deed of Trust and the other Loan Documents.
2.13 WASTE. Trustor shall not commit, suffer or permit any waste
on the Property nor take any actions that might invalidate any insurance
carried on the Property. Trustor shall maintain the Property in good condition
and repair. No Improvements may be removed or demolished without the prior
written consent of Beneficiary unless otherwise permitted by the Credit
Agreement. No personal property in which Beneficiary has a security interest
may be removed from the Property unless it is immediately replaced by similar
property of at least equivalent value in which Beneficiary shall immediately
have a valid first lien and security interest unless otherwise permitted by the
Credit Agreement.
2.14 ZONING. Without the prior written consent of Beneficiary,
which consent will not be unreasonably withheld or delayed, Trustor shall not
seek, make, suffer or consent to or acquiesce in any change in the zoning or
conditions of use of the Property. Trustor shall comply with and make all
payments required under the provisions of any covenants, conditions or
restrictions affecting the Property. Trustor shall comply with all existing
and future requirements of all governmental authorities having jurisdiction
over the Property.
2.15 BOOKS AND RECORDS. Trustor shall keep accurate books and
records of account of the Property and of its own financial affairs sufficient
to permit the preparation of financial statements therefrom in accordance with
generally accepted accounting principles, consistently applied. Beneficiary
and its duly authorized representatives at all reasonable times shall have full
access to and shall have the right to examine, copy and audit Trustor's records
and books of account relating to the Property and Trustor's financial
condition. So long as this Deed of Trust continues in effect, Trustor shall
provide Beneficiary with financial information as required by the Credit
Agreement. Trustor shall also provide to Beneficiary such additional financial
and other information as may be reasonably requested by Beneficiary.
2.16 FURTHER DOCUMENTATION. Trustor shall, on the request of
Beneficiary promptly (a) correct any defect, error or omission that may be
discovered in the contents of this Deed of Trust or in
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the contents of any of the other Loan Documents; (b) execute, acknowledge,
deliver and record or file such further instruments (including, without
limitation, further deeds of trust, security agreements, financing statements,
continuation statements and assignments of rents or leases) and do such further
acts as may be reasonably necessary, desirable or proper to carry out more
effectively the purposes of this Deed of Trust and the other Loan Documents and
to subject to the liens and security interest hereof and thereof any property
intended by the terms hereof and thereof to be covered hereby and thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements or appurtenances to the Property; (c) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by
Beneficiary to protect the lien or the security interest hereunder against the
rights or interests of third persons; and (d) furnish to Beneficiary, upon
Beneficiary's request, a duly acknowledged written statement setting forth all
amounts due on the Indebtedness secured by this Deed of Trust and stating
whether any offsets or defenses exist, and containing such other matters as
Beneficiary may reasonably require.
2.17 REIMBURSEMENT TO BENEFICIARY. Trustor shall promptly notify
Beneficiary in writing of any litigation or threatened (in writing) litigation
affecting the Property, or any other written demand or claim which, if
enforced, could materially impair or threaten to impair Beneficiary's security
hereunder. Without limiting or waiving any other rights and remedies of
Beneficiary hereunder, if Trustor fails to perform any of its covenants or
agreements contained in this Deed of Trust, or if any action or proceeding of
any kind (including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is commenced
that might materially affect Beneficiary's or Trustee's interest in the
Property or Beneficiary's right to enforce its security, or any claims or
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Property and/or any Improvements thereon or any
nuisance made or suffered thereon, then Beneficiary and/or Trustee may, at
their option (subject to the notice and cure provisions provided in SECTION
3.1(B) hereof, make any appearances, disburse any sums and take any actions as
may be reasonably necessary or desirable to protect or enforce the security of
this Deed of Trust or to remedy the failure of Trustor to perform its covenants
(without, however, waiving any default of Trustor). Trustor agrees to pay all
reasonable out-of-pocket expenses of Beneficiary and Trustee thus incurred
(including, but not limited to, attorneys' fees and costs), together with
interest thereon at the Default Rate defined in the Note from and after the
date of Beneficiary's or Trustee's making such payment until reimbursement
thereof by Trustor. Any sums disbursed by Beneficiary or Trustee, together
with interest thereon, shall be additional Indebtedness of Trustor secured
hereby and shall be payable upon written demand. This SECTION 2.17 shall not
be construed to require Beneficiary or Trustee to incur any expenses, make any
appearances or take any actions.
2.18 PERSONAL PROPERTY AND FIXTURES. This Deed of Trust is also
intended to and does hereby encumber and create a security interest in: (a)
all right, title and interest of Trustor in and to all instruments, documents,
contracts, general intangibles (including trademarks, trade names and symbols
used in connection with the Improvements or the Land), now existing or
hereafter arising from or by virtue of any transaction related to the
Improvements or the Land, permits, licenses, franchises, certificates and other
rights and privileges now or hereafter obtained in connection with the
Improvements or the Land; and (b) any and all property that is personal
property and fixtures owned by Trustor and now or hereafter located on or used
in connection with the Land, including, but not limited to, all equipment,
fixtures, furniture, furnishings, appliances, carpets, drapes and articles of
personal property owned by Trustor and now or hereafter located on, attached to
or used in and about the Improvements that are reasonably necessary to the
complete and comfortable use and occupancy of the
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<PAGE> 13
Improvements for all purposes for which they are intended, including, but not
limited to, all machines, engines, boilers, dynamos, elevators, stokers, tanks,
cabinets, awnings, screens, shades, blinds, carpets, draperies, lawn mowers,
and all appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Trustor as are ever to be used or furnished in operating the
Improvements, or the activities conducted therein, and all warranties and
guaranties relating thereto; and (c) all renewals or replacements of any of the
aforementioned items, or articles in substitution therefor, whether or not the
same shall be attached to the Improvements in any manner, and all building
materials and equipment hereafter situated on or about the Land. It is hereby
agreed that to the extent permitted by law, all of the foregoing property and
fixtures are to be deemed and held to be a part of and affixed to the Land.
The foregoing security interest shall also cover Trustor's leasehold interest
in any of the foregoing items that are leased by Trustor. Trustor shall, from
time to time upon the written request of Beneficiary, supply Beneficiary with a
current inventory of all of the personal property in which Beneficiary is
granted a security interest hereunder, in such detail as Beneficiary may
require but in no event more often than semi-annually.
2.19 SECURITY AGREEMENT AND FIXTURE FILING. This Deed of Trust
constitutes a Security Agreement and Fixture Filing between Trustor and
Beneficiary with respect to all personal property in which Beneficiary is
granted a security interest hereunder, and, cumulative of all other rights and
remedies of Beneficiary hereunder, Beneficiary shall have all of the rights and
remedies of a secured party under the California Uniform Commercial Code.
Trustor hereby agrees to execute and deliver on demand and hereby irrevocably
constitutes and appoints Beneficiary the attorney-in-fact of Trustor to execute
and deliver, and if appropriate, to file with the appropriate filing officer or
office such security agreements, financing statements, fixture filings,
continuation statements or other instruments as Beneficiary may request or
require in order to impose, perfect or continue the perfection of the lien or
security interest created hereby. Upon the occurrence of any default
hereunder, Beneficiary shall have the right, at its option, to take appropriate
steps to cause any of the Property that is personal property and subject to the
security interest of Beneficiary hereunder to be sold at any one or more public
or private sales as permitted by applicable law, including at a sale held in
conjunction with the sale of the Property by Trustee as provided for in this
Deed of Trust, and apply the proceeds of such sale against the Indebtedness
secured hereby in whatever order Beneficiary shall direct in its absolute
discretion, and Beneficiary shall further have all other rights and remedies as
are available to secured creditors under applicable law. Any such disposition
may be conducted by an employee or agent of Beneficiary or Trustee. Any
person, including both Trustor and Beneficiary, shall be eligible to purchase
any part or all of such property at any such disposition. Expenses of retaking
holding, preparing for sale, selling or the like shall be borne by Trustor and
shall include Beneficiary's and Trustee's attorneys' fees and costs together
with interest thereon at the Default Rate defined in the Promissory Notes.
Trustor, upon demand of Beneficiary, shall assemble such personal property and
make it available to Beneficiary at the Property, a place that is hereby deemed
to be reasonably convenient to Beneficiary and Trustor. If notice is required
by law, Beneficiary shall give Trustor at least ten (10) days' prior written
notice of the time and place of any public sale of such property or of the time
of or after which any private sale or any other intended disposition is to be
made; and if such notice is sent to Trustor, as the same is provided for the
mailing of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Trustor. Any sale made pursuant to the provisions of this
SECTION 2.19 shall be deemed to have been a public sale conducted in a
commercially reasonable manner if held contemporaneously with the sale under
the power of sale granted in SECTION 4.2 hereof upon giving the same notice
with respect to the sale of the personal property hereunder as is required
under said SECTION 4.2. Furthermore, in conjunction with, in addition to or in
substitution for the rights and remedies available to Beneficiary pursuant to
the California Uniform Commercial Code: (a) in the event of a foreclosure
sale, whether
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made by Trustee under the terms hereof or under judgment of a court, the
Property may, at the option of Beneficiary, be sold as a whole; and (b) it
shall not be necessary that Beneficiary take possession of the aforementioned
personal property or any part thereof prior to the time that any sale pursuant
to the provisions of this SECTION 2.19 conducted and it shall not be necessary
that said personal property or any part thereof be present at the location of
such sale; and (c) Beneficiary may appoint or delegate any one or more persons
as agent to perform any act or acts reasonably necessary or incident to any
sale held by Beneficiary, including the sending of notices and the conduct of
the sale, but in the name and on behalf of Beneficiary.
In the event that Trustor has executed a separate Security Agreement
concurrently herewith in favor of Beneficiary, all rights and remedies granted
to Beneficiary under such Security Agreement shall be in addition to and
cumulative of all rights and remedies granted to Beneficiary under this SECTION
2.19.
2.20 MAINTENANCE OF THE PROPERTY; COMPLIANCE WITH LAWS. Trustor
shall at all times maintain the Property in good condition and repair, and
shall, upon Beneficiary's reasonable direction, promptly repair, restore,
replace or rebuild any part of the Property that may be affected by any
casualty or any public or private taking of or injury to the Property. Trustor
shall at all times comply with all statutes, ordinances, regulations and other
governmental or quasi-governmental requirements and private covenants relating
to the ownership, use or operation of the Property, including, but not limited
to, any environmental or ecological requirements; provided that so long as
Trustor is not otherwise in default hereunder, Trustor may, upon providing
Beneficiary with security reasonably satisfactory to Beneficiary, proceed
diligently and in good faith to contest the validity or applicability of any
such statute, ordinance, regulation or requirement.
2.21 HAZARDOUS WASTES AND OTHER SUBSTANCES. Trustor hereby
represents and warrants to Beneficiary that, as of the date hereof: (a) to the
best of Trustor's knowledge, the Property is not in direct or indirect
violation of any local, state or federal law, rule or regulation pertaining to
environmental regulation, contamination or clean-up (collectively,
"ENVIRONMENTAL LAWS"), including, without limitation, "CERCLA", "RCRA", state
super-lien and environmental clean-up statutes; and (b) the Property is not
subject to any private or governmental lien or judicial or administrative
notice or action relating to hazardous and/or toxic substances, wastes,
materials, pollutants or contaminants (including, without limitation, asbestos
and raw materials which include hazardous constituents) and any other
substances or materials which are included under or regulated by Environmental
Laws, including, without limitation, "hazardous substances" as defined in
Section 2929.5 of the California Civil Code (collectively, "HAZARDOUS
SUBSTANCES"). Trustor shall not allow any Hazardous Substance to be stored,
located, discharged, possessed, managed, processed or otherwise handled on the
Property, (except in compliance with all laws, ordinances and regulations
pertaining thereto) and Trustor shall comply with all Environmental Laws.
Trustor shall promptly notify Beneficiary if Trustor shall become aware of the
release or threat of release on the Property of any Hazardous Substances and/or
if Trustor shall become aware that the Property is in direct or indirect
violation of any Environmental Laws, in which event Trustor shall remove such
Hazardous Substances and/or cure such violations to the extent and in the
manner required by governmental authorities having jurisdiction over the
Property, as applicable, promptly after Trustor becomes aware of the same, at
Trustor's sole expense. In the event Trustor fails to do so after thirty (30)
days' written notice from Beneficiary, then, Beneficiary may cause the Property
to be freed from any Hazardous Substances or otherwise brought into conformance
with Environmental Laws and any cost incurred in connection therewith shall be
paid by Trustor on demand and, if not so paid, shall be added to the
outstanding principal balance of the Note (even if such addition results in the
outstanding principal balance being in excess of the face amount of the
Promissory Notes), shall bear
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interest thereafter until actually paid by Trustor at the Default Rate defined
in the Note and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the Indebtedness. Subject to the notice and cure
provisions set forth in SECTION 3.1(B) hereof, Trustor hereby grants to
Beneficiary and its agents and employees access to the Property at all
reasonable times and a license to remove any items deemed by Beneficiary to be
Hazardous Substances and to do all things Beneficiary shall deem reasonably
necessary to bring the Property in conformance with Environmental Laws.
Beneficiary shall have all rights of entry and inspection with respect to the
Property and such other rights as are provided in Section 2929.5 of the
California Civil Code, or any successor statute. Trustor hereby indemnifies
Beneficiary and holds Beneficiary harmless from and against any and all
expenses, damages, penalties, fines, and costs, including, without limitation,
attorneys' fees and consequential damages (collectively "COSTS"), incurred by
Beneficiary as a result of the existence of any Hazardous Substances on, in or
under the Property and/or as a result of the failure of the Property to comply
with any Environmental Laws. The foregoing indemnity shall not apply with
respect to any Costs incurred by Beneficiary resulting from the presence of
Hazardous Substances on, in or under the Property or the failure of the
Property to comply with any Environmental Laws which arise due to the presence
of Hazardous Substances on, in or under the Property, or the failure of the
Property to comply with any Environmental Laws which relate only to acts,
omissions or events which occur subsequent to the earlier of the date that
Beneficiary (or its assignee or any purchaser at a foreclosure sale or
transferee under a deed-in-lieu thereof) either takes possession of the
Property (which includes the appointment of a receiver) or acquires title to
the Property (except to the extent that Trustor is in possession). In the
event that Trustor has executed a separate Indemnity Agreement concurrently
herewith in favor of Beneficiary, whether secured or unsecured, all rights and
remedies granted to Beneficiary under such Indemnity Agreement shall be in
addition to and cumulative of all rights and remedies granted to Beneficiary
under this SECTION 2.21, but in the event of any inconsistency or discrepancy
between the provisions hereof and the provisions of such Indemnity Agreement,
the provisions of such Indemnity Agreement shall control.
2.22 ADDITIONAL TAXES. In the event of the enactment after the
date of this Deed of Trust of any law of the State of California or of any
other governmental entity deducting from the value of the Property for the
purpose of taxation any lien or security interest thereon, or imposing upon
Beneficiary the payment of the whole or any part of the taxes or assessments or
charges or liens herein required to be paid by Trustor, or changing in any way
the laws relating to the taxation of deeds of trust or mortgages or security
agreements or debts secured by deeds of trust or mortgages or security
agreements or he interest of the mortgagee or secured party in the property
covered thereby, or the manner of collection of such taxes, so as to affect
this Deed of Trust or the Indebtedness secured hereby or Beneficiary, then, and
in any such event, Trustor, upon demand by Beneficiary, shall pay such taxes,
assessments, charges or liens, or reimburse Beneficiary therefor, provided,
however, that if in the opinion of counsel for Beneficiary (a) it might
be unlawful to require Trustor to make such payment, or (b) the making of such
payment might result in the imposition of interest beyond the maximum amount
permitted by law, then and in either such event, Beneficiary may elect, by
notice in writing given to Trustor, to declare all of the Indebtedness secured
hereby to be and become due and payable in full ninety (90) days from the
giving of such notice.
2.23 SECURED INDEBTEDNESS. It is understood and agreed that this
Deed of Trust shall secure payment of not only the Indebtedness but also any
and all renewals and extensions of the Promissory Notes, any and all other
indebtedness and obligations arising pursuant to the terms hereof, and any and
all other indebtedness and obligations arising pursuant to the terms of any of
the other Loan Documents.
2.24 TRUSTOR'S WAIVERS. To the full extent Trustor may do so,
Trustor agrees that Trustor shall not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or
15 SWI California Leasehold Deed of Trust
<PAGE> 16
hereafter in force providing for any appraisal, valuation, moratorium or
extension; and Trustor, for Trustor and Trustor's successors and assigns, and
for any and all persons ever claiming any interest in the Property, to the
extent permitted by law, hereby waives and releases all rights of valuation,
appraisal, and all rights to a marshalling of the assets of Trustor, including
the Property, to a sale in inverse order of alienation, or to direct the order
in which any of the Property shall be sold in the event of foreclosure of the
liens and security interests hereby created. Trustor shall not have or assert
any right under any statute or rule of law pertaining to the marshalling of
assets, sale in inverse order or alienation, the exemption of homestead, the
administration of estates of decedents or other matters whatever to defeat,
reduce or affect the right of Beneficiary under the terms of this Deed of Trust
to a sale of the Property, for the collection of the Indebtedness secured
hereby without any prior or different resort for collection, or the right of
Beneficiary under the terms of this Deed of Trust to the payment of such
Indebtedness out of the proceeds of sale of the Property in preference to every
other claimant whatever.
ARTICLE 3
EVENTS OF DEFAULT
-----------------
3.1 An "EVENT OF DEFAULT" shall have occurred under this Deed of
Trust if any of the following events occurs:
(a) The occurrence of an Event of Default under the Note
or any of the other Loan Documents subject to applicable notice and cure
periods; or
(b) Trustor fails to perform any covenant, agreement or
obligation contained in this Deed of Trust on or before the date such covenant,
agreement or obligation is required to be performed unless Trustor cures the
same (i) within any stated grace or cure period set forth herein; or (ii) if
there is not stated grace or cure period, then within (A) ten (10) days after
giving written notice of such failure if and to the extent such failure can be
cured solely by the payment of money; or (B) thirty (30) days after giving
written notice of such failure if such failure cannot be cured solely by the
payment of money, unless such default is of a nature which cannot be cured, in
which event there shall be no cure period (for example, a default under SECTION
2.11 resulting from the unauthorized Transfer of the Property); or
(c) Trustor, or any guarantor of the Promissory Notes,
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally or shall make a general
assignment for the benefit of its creditor; or
(d) If any proceeding shall be instituted by or against
Trustor or any guarantor of the Note seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of Trustor or any guarantor of
the Promissory Notes, or their debts, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for the appointment of a receiver, trustee, custodian or similar official
with respect to Trustor, or any guarantor of the Note, or for any substantial
part of their respective properties (provided that if any of the foregoing
actions instituted against Trustor or any guarantor of the Promissory Notes are
dismissed within thirty (30) days thereafter, then no Event of Default shall be
deemed to have occurred); or
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ARTICLE 4
REMEDIES
--------
4.1 REMEDIES AVAILABLE. If an Event of Default has occurred under
this Deed of Trust, Beneficiary may, at its option at any time thereafter do
any one or more of the following:
(a) Declare any or all of the Indebtedness secured hereby
to be immediately due and payable without presentment, demand, protest or
notice of any kind; and/or
(b) Either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court and
without regard to the adequacy of its security, enter upon and take possession
of the Property, or any part thereof, and do any and all acts that may be
desirable in Beneficiary's reasonable judgment to complete any unfinished
construction on the Property, to preserve the value, marketability or
rentability of the Property, to increase the income therefrom, to manage and
operate the Property or to protect the security hereof and, with or without
taking possession of the Property, sue for or otherwise collect the Rents and
Profits, including those past due and unpaid, and apply the same, less
reasonable costs and expenses of operation and collection, including, without
limitation, attorneys' fees, against the Indebtedness secured hereby in such
order as Beneficiary may determine, without in any way curing or waiving any
default of Trustor; and/or
(c) Commence an action to foreclose this Deed of Trust or
to specifically enforce its provisions or any of the obligations secured by
this Deed of Trust; and/or
(d) Deliver to Trustee a written declaration of default
and demand for sale, and a written notice of default and of election to cause
the Property to be sold, and cause any or all of the Property to be sold under
the power of sale granted by this Deed of Trust in any manner permitted by
applicable law; and/or
(e) Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.
4.2 SALE. Should Beneficiary elect to foreclose by exercise of
the power of sale herein contained, Beneficiary shall notify Trustee as above
provided and shall deposit with Trustee this Deed of Trust, the Note, all other
notes, if any, secured hereby and all documents evidencing expenditures secured
hereby.
(a) Trustee shall cause Beneficiary's written notice of
default and of election to cause the Property to be sold to be filed for
record. After the lapse of such time as may then be required by law following
the recordation of said notice of default, and notice of sale having been given
as then required by law, Trustee, without demand on Trustor, shall sell the
Property at the time and place fixed by Trustee in said notice of sale, either
as a whole or in separate parcels, and in such order as Trustee may determine,
at public auction to the highest bidder for cash in lawful money of the United
States, payable at the time of sale. Trustee may postpone the sale of all or
any portion of the Property by public announcement at the time and place of
sale, and from time to time thereafter may postpone such sale by public
announcement at the time fixed by the preceding postponement. Trustee shall
deliver to such purchaser its deed conveying the Property, or portion thereof,
so sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustor, Trustee or Beneficiary,
may purchase at such sale.
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<PAGE> 18
(b) The proceeds of any sale under this Deed of Trust
shall be applied in the following manner:
FIRST: Payment of the reasonable costs and expenses
of the sale, including, but not limited to, Trustee's legal fees and
disbursements, title charges and transfer taxes, and payment of all expenses,
liabilities and advances of Trustee.
SECOND: Payment of all reasonable sums expended by
Beneficiary under the terms of this Deed of Trust and not yet repaid, together
with interest on such sums at the Default Rate defined in the Promissory Notes.
THIRD: Payment of the obligations of Trustor secured
by this Deed of Trust, including, without limitation, interest at the Default
Rate defined in the Note, in any order that Beneficiary chooses.
FOURTH: The remainder, if any, to the person or
persons legally entitled thereto.
4.3 RECEIVER. In addition to all other remedies herein provided
for, Trustor agrees that upon the occurrence of an Event of Default hereunder,
Beneficiary shall, as a matter of right, be entitled to the appointment of a
receiver or receivers for all or any part of the Property, whether such
receivership be incident to a proposed sale of the Property or otherwise, and
without regard to the value of the Property or the solvency of Trustor or any
person or persons liable for the payment of the Indebtedness secured hereby,
and Trustor does hereby consent to the appointment of such receiver or
receivers, waives any and all notices of and defenses to such appointment and
agrees not to oppose any application therefor by Beneficiary, but nothing
herein is to be construed to deprive Beneficiary of any other right, remedy or
privilege it may now have under the law to have a receiver appointed; provided,
however, that the appointment of such receiver, trustee or other appointee by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Beneficiary to receive payment of the Rents and
Profits pursuant to other terms and provisions hereof. Any money advanced by
Beneficiary in connection with any such receivership shall be a demand
obligation owing by Trustor to Beneficiary, shall bear interest from the date
of making such advancement by Beneficiary until paid at the Default Rate
defined in the Promissory Notes, shall be a part of the Indebtedness secured
hereby and by every other instrument securing the Indebtedness. The receiver
or his agents shall be entitled to enter upon and take possession of any and
all of the Property to the same extent and in the same manner as Trustor might
lawfully do. The receiver, personally or through its agents or attorneys, may
exclude Trustor and its agents, servants and employees wholly from the Property
and may have, hold, use, operate, manage and control the same and each and
every part thereof, and in the name of Trustor or Trustor's agents, may
exercise all of their rights and powers and use all of the then existing
materials, current supplies, stores and assets and, at the expense of the
Property, maintain, restore, insure and keep insured the properties, equipment,
and apparatus provided or required for use in connection with the business or
businesses operated on the Property and may make all such reasonably necessary
and proper repairs, renewals and replacements and all such useful alterations,
additions, betterments and improvements as the receiver may deem judicious.
Such receivership shall, at the option of Beneficiary, continue until full
payment of all sums hereby secured or until title to the Property shall have
passed by foreclosure sale under this Deed of Trust.
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<PAGE> 19
4.4 OCCUPANCY AFTER FORECLOSURE. In the event there is a
foreclosure sale hereunder and at the time of such sale, Trustor or Trustor's
representatives, successors or assigns, or any other persons claiming any
interest in the Property by, through or under Trustor are occupying or using
the Property, or any part thereof, each and all shall, at the option of
Beneficiary or the purchaser at such sale, as the case may be, immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day-to-day, terminable at the will of either landlord or tenant,
at a reasonable rental per day based upon the value of the Property occupied,
or used, such rental to be due daily to purchaser. In the event the tenant
fails to surrender possession of the Property upon the termination of such
tenancy, the purchaser shall be entitled to institute and maintain an action
for unlawful detainer of the Property in the appropriate court of Imperial
County, State of California.
4.5 CUMULATIVE REMEDIES. All remedies contained in this Deed of
Trust are cumulative, and Beneficiary also has all other remedies provided at
law or in equity or in any other of the Loan Documents between Trustor and
Beneficiary. No act of Beneficiary shall be construed as an election to
proceed under any particular provision of this Deed of Trust to the exclusion
of any other provision of this Deed of Trust or as an election of remedies to
the exclusion of any other remedy that may then or thereafter be available to
Beneficiary. No delay or failure by Beneficiary to exercise any right or
remedy under this Deed of Trust shall be construed to be a waiver of that right
or remedy or of any default by Trustor. Beneficiary may exercise any one or
more of its right and remedies at its option without regard to the adequacy of
its security.
4.6 PAYMENT OF EXPENSES. Trustor shall pay all of Beneficiary's
and Trustee's reasonable expenses incurred in any efforts to enforce any terms
of this Deed of Trust, whether or not any lawsuit is filed, including, but not
limited to, attorneys' fees and disbursements, foreclosure costs and title
charges together with interest thereon at the Default Rate defined in the Note.
SWI California Leasehold Deed of Trust
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<PAGE> 20
ARTICLE 5
MISCELLANEOUS TERMS AND CONDITIONS
----------------------------------
5.1 TIME OF ESSENCE. Time is of the essence with respect to all
provisions of this Deed of Trust.
5.2 CERTAIN POWERS OF TRUSTEE. At any time or from time to time,
without liability therefor and without notice, upon written request of
Beneficiary and presentation of this Deed of Trust and the Promissory Notes,
and without affecting the personal liability of any person for payment of the
Indebtedness secured hereby or the effect of this Deed of Trust upon the
remainder of the Property, Trustee may (a) reconvey any part of the Property;
(b) consent in writing to the making of any subdivision map or plat thereof;
(c) join in granting any easement thereon; or (c) join in any extension
agreement or any agreement subordinating the lien hereof.
5.3 CERTAIN RIGHTS OF BENEFICIARY. Without affecting Trustor's
liability for the payment of any of the obligations secured by this Deed of
Trust, Beneficiary may from time to time and without notice to Trustor (a)
release any person liable for the payment of the Indebtedness secured hereby;
(b) extend or modify the terms of payment of said Indebtedness; or (c) accept
additional real or personal property of any kind as security or later,
substitute or release any property securing said Indebtedness.
5.4 ACCEPTANCE BY TRUSTEE. Trustee accepts this Trust when this
Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law. Trustee is not obligated to notify any party hereto of
pending sale under any other deed of trust or of any action or proceeding in
which Trustor, Beneficiary or Trustee shall be a party unless brought by
Trustee.
5.5 SUBSTITUTED TRUSTEE. Beneficiary may, from time to time, by
instrument in writing, substitute a successor or successors to any Trustee
named herein or acting hereunder, which instrument, executed and acknowledged
by Beneficiary and recorded in the office of the recorder of the county or
counties where the Land is situated, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall, without
conveyance from the Trustee predecessor, succeed to all its title, estate,
rights, powers and duties. Said instrument must contain the name and address
of the new Trustee.
5.6 NOTICES. All notices required or permitted to be given
pursuant to this Deed of Trust, the Promissory Notes, or under any of the other
Loan Documents (unless otherwise expressly provided therein) shall be in
writing, and shall be delivered either personally, by overnight delivery
service (such as Federal Express) or by U.S. certified mail, postage prepaid,
return-receipt requested and addressed to the parties at their respective
addresses shown in this Deed of Trust. The parties may change their addresses
for notice by giving notice of such change in accordance with this section.
Notices sent by overnight delivery service shall be deemed received on the
business day following the date of deposit with the delivery service. Mailed
notices shall be deemed received upon the earlier of the date of delivery shown
on the return receipt, or the second business day after the date of mailing.
5.7 SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and
conditions hereof shall be binding upon Trustor and the successors and assigns
of Trustor, including all successors in interest of Trustor in and to all or
any part of the Property, and shall inure to the benefit of Trustee and
Beneficiary and their respective successors and assigns and shall constitute
covenants running with the land. Provided, however, that nothing herein shall
be deemed to be a consent to any Transfer of the Property, or any part thereof,
by Trustor in violation of the provisions of SECTION 2.11 hereof. All
references in
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<PAGE> 21
this Deed of Trust to Trustor, Trustee or Beneficiary shall be deemed to
include all such parties' successors and assigns; and the term "Beneficiary" as
used herein shall also mean and refer to any lawful holder or owner, including
pledgees and participants, of any of the Indebtedness secured hereby. If
Trustor consists of more than one person or entity, each shall be jointly and
severally liable to perform the obligations of Trustor.
5.8 SEVERABILITY. A determination that any provision of this Deed
of Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this Deed of Trust to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
5.9 GENDER. Within this Deed of Trust, words of any gender shall
be held and construed to include any other gender, and words in the singular
shall be held and construed to include the plural, and vice versa unless the
context otherwise requires.
5.10 WAIVER. Beneficiary shall not be deemed to have waived any
provision of this Deed of Trust, or the Note secured hereby or of any of the
other Loan Documents unless such waiver is in writing and is signed by
Beneficiary. Without limiting the generality of the preceding sentence,
Beneficiary's acceptance of any payment with knowledge of a default by Trustor
shall not be deemed a waiver of such default. No waiver by Beneficiary of any
default on the part of Trustor or breach of any of the provisions of this Deed
of Trust shall be considered a waiver of any other or subsequent default or
breach, and no delay or omission in exercising or enforcing the rights and
powers herein granted shall be construed as a waiver of such rights and powers,
and every such right and power may be exercised from time to time.
5.11 SECTION HEADINGS. The headings of the sections and paragraphs
of this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
5.12 GOVERNING LAW. This Deed of Trust, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law,
except to the extent of procedural and substantive matters relating only to the
creation and perfection of liens and security interests in, and the enforcement
of rights and remedies against, the Mortgaged Property, which matters shall be
governed by the laws of the State of California.
5.13 COUNTING OF DAYS. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the State of Texas, the period shall be deemed to end
on the next succeeding business day.
5.14 RELATIONSHIP OF THE PARTIES. The relationship between Trustor
and Beneficiary is that of a borrower and a lender only; and neither of those
parties is, nor shall it hold itself out to be, the agent, employee, joint
venturer or partner of the other party.
5.15 ENTIRE AGREEMENT AND MODIFICATIONS. This Deed of Trust and
the other Loan Documents contain the entire agreements between the parties
relating to the subject matter hereof and thereof and all prior agreements
relative hereto and thereto which are not contained herein or therein are
terminated. This Deed of Trust and the other Loan Documents may not be
amended, revised, waived, discharged, released or terminated orally but only by
a written instrument or instruments executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is
SWI California Leasehold Deed of Trust
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<PAGE> 22
asserted. Any alleged amendment, revision, waiver, discharge, release or
termination which is not so documented shall not be effective as to any party.
5.16 REQUEST FOR NOTICE OF DEFAULT. In accordance with Section
2924b of the California Civil Code, request is hereby made by Trustor that a
copy of any Notice of Default and a copy of any Notice of Sale under this Deed
of Trust be mailed to Trustee at the following address 8572 Katy Freeway, Suite
101, Houston, Texas 77024.
5.17 RECONVEYANCE. Upon the payment in full of all sums secured by
this Deed of Trust, Beneficiary agrees to request Trustee to reconvey the
Mortgaged Property. Upon payment of Trustee's fees and all other sums owing to
it under this Deed of Trust, Trustee will reconvey the Mortgaged Property to
the person or persons legally entitled thereto. Such person or persons must
pay all costs and expenses in connection therewith. The recitals of any facts
in the reconveyance will be conclusive on all persons. The grantee in the
reconveyance may be described as "the person or persons legally entitled
thereto."
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first above written.
"TRUSTOR"
SOUTHWESTERN ICE, INC., a Texas corporation
By:
---------------------------------
James F. Stuart, Chief Executive Officer
STATE OF TEXAS )
)
COUNTY OF BEXAR )
On September ___, 1997, before me, _______________________________,
Notary Public, personally appeared James F. Stuart, Chief Executive Officer of
SOUTHWESTERN ICE, Inc., a Texas corporation, personally known to me/proved to
me on the basis of satisfactory evidence to be the person[s] whose name[s]
[is/are] subscribed to the within LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF RENTS AND FIXTURE FILING and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity, and that by
his/her/their signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------
NOTARY
[SEAL]
SWI CALIFORNIA LEASEHOLD DEED OF TRUST
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EXHIBIT "A"
-----------
All of Trustor's right, title, and interest in the real property
described below, arising out of:
Lease Agreement dated October 20, 1995, between One Governor Park Office
Building, LP and MCS, Ltd., said Lease Agreement having been assigned to
Trustor on July 3, 1997, covering property located at 8385 Miramar Road, San
Diego, San Diego County, California, recorded on September ___, 1997 in the
official records of San Diego County, California at instrument number
- -----------------..
SWI California Leasehold Deed of Trust
<PAGE> 1
EXHIBIT 10.29
This instrument prepared by The maximum principal indebtedness
LeeAnne M. Cox for Tennessee recording tax purposes
Burch, Porter & Johnson, PLLC is $_______________. See affidavit
50 North Front, Suite 800 attached.
Memphis, TN 38103
DEED OF TRUST,
SECURITY AGREEMENT, AND FIXTURE FILING
THIS DEED OF TRUST, SECURITY AGREEMENT, AND FIXTURE FILING (the "DEED
OF TRUST"), made and entered into as of the 15th day of September, 1997, by and
between SOUTHWESTERN ICE, INC., a Texas corporation, in favor of DAVID J.
HARRIS, JR., AND C. THOMAS CATES, both residents of Shelby County, Tennessee,
Trustees ("TRUSTEE"; said term collectively referring always to the named
Trustees and their respective successors in Trust), for the use and benefit of
Agent and all other Banks (as defined below) who are collectively referred to
as "BENEFICIARY", said term referring always to the lawful owner and holder of
the indebtedness secured hereby.
ARTICLE 1
1.01 CERTAIN DEFINITIONS. In addition to the other terms defined
herein, each of the following terms shall have the meaning assigned to it:
"AGENT" - The Frost National Bank, a national banking
association, in its capacity as agent for the Banks, and its successors and
assigns.
"BANKS" - Collectively, each of the financial institutions
listed on the signature pages to the Credit Agreement, together with each other
person or entity becoming a Bank pursuant thereto from time to time, and their
respective successors and assigns.
"BORROWER" - Packaged Ice, Inc., a Texas corporation.
"GRANTOR" - Southwestern Ice, Inc., a Texas corporation, and
its successors and assigns.
"CREDIT AGREEMENT" - that certain Credit Agreement dated as of
the date hereof, executed by and among Borrower, The Frost National Bank, as
Agent and as Bank, and the other Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
"PROMISSORY NOTES" - Each Revolving Credit Note (as such term
is defined in the Credit Agreement) executed by Borrower jointly and severally
payable to the order of any Bank, evidencing loans advanced to Borrower under
the Credit Agreement, in an aggregate principal face amount of $20,000,000,
bearing interest as therein provided, containing a provision for the payment of
a reasonable additional amount as attorneys' fees, and finally maturing on
April 15, 2003, together with any renewals, increases, extensions,
restatements, or modifications thereof.
SWI TENNESSEE DEED OF TRUST
<PAGE> 2
1.02 MORTGAGED PROPERTY. For and in consideration of the sum of
Ten and No/100 Dollars ($10.00), and other valuable considerations, the receipt
and sufficiency thereof are hereby acknowledged, and in order to secure the
indebtedness and other obligations of Borrower as hereinafter set forth,
Grantor does hereby grant, bargain, sell, convey, assign, transfer, pledge, and
set over unto Trustee, and the successors and assigns of Trustee, all of the
following described land and interests in land, estates, easements, rights,
improvements, personal property, fixtures, equipment, furniture, furnishings,
appliances and appurtenances, including replacements and additions thereto
(hereinafter referred to collectively as the "PREMISES"):
(a) That certain real property located in City of Memphis, Shelby County,
Tennessee, more particularly described in Exhibit A attached hereto
and by this reference made a part hereof (the "LAND");
(b) Any and all buildings, structures, and improvements of every nature
whatsoever now or hereafter situated on the Land, and all gas and
electric fixtures, radiators, heaters, engines and machinery, boilers,
ranges, elevators and motors, plumbing, heating, lighting,
ventilation, air conditioning, and sprinkling fixtures, carpeting and
other floor coverings, washers, dryers, water heaters, mirrors,
mantels, refrigerating plants, refrigerators, cooking apparatus and
appurtenances, window screens, awnings and storm sashes, communication
systems, dynamos, transformers, transmitters, satellite or microwave
dishes, which are or shall be attached to said buildings, structures,
land, or improvements, and all other furnishings, furniture, fixtures,
machinery, equipment, appliances, and personal property of every kind
and nature whatsoever now or hereafter owned by Grantor and located
in, on or about, or used or intended to be used with or in connection
with the use, operation or enjoyment of the Premises, including all
extensions, additions, improvements, betterments, renewals and
replacements, substitutions, or proceeds from a permitted sale of any
of the foregoing, and all building materials and supplies of every
kind now or hereafter placed or located on the Land (collectively the
"IMPROVEMENTS"), all of which are hereby declared and shall be deemed
to be fixtures and accessions to the Land and a part of the Premises
as between the parties hereto and all persons claiming by, through or
under them, and which shall be deemed to be a portion of the security
for the indebtedness herein described and to be secured by this Deed
of Trust;
(c) All easements, rights-of-way, strips, and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, minerals, flowers, shrubs, crops, trees,
timber and other emblements now or hereafter located on the Land or
under or above the same or any part or parcel thereof, and all
estates, rights, titles, interests, privileges, liberties, tenements,
hereditaments, and appurtenances, reversions, and remainders
whatsoever, in any way belonging, relating, or appertaining to the
Premises or any part thereof, or which hereafter shall in any way
belong, relate or be appurtenant thereto, whether now owned or
hereafter acquired by Borrower; and
(d) All rents, issues, profits, revenues, income, and other benefits
derived from the Premises from time to time (including, without
limitation, all payments under leases or tenancies, proceeds of
insurance, condemnation payments, tenant security deposits and escrow
funds), and all of the estate, right, title, interest, property,
possession, claim, and demand whatsoever at law, as well as in equity,
of Grantor of, in and to the same, reserving only the right to Grantor
to collect the same so long as Grantor is not in default hereunder.
SWI TENNESSEE DEED OF TRUST
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TO HAVE AND TO HOLD the Premises and all parts, rights, members, and
appurtenances thereof, to the use and benefit of Trustee and the successors,
successors-in-title and assigns of Trustee, forever; and Grantor covenants that
Grantor is lawfully seized and possessed of the Premises and has good right to
convey the same, that the Premises are unencumbered except for any and all
matters of record as of the date hereof.
1.03 SECURED INDEBTEDNESS. This Deed of Trust is made to secure
and enforce the payment and performance of the following promissory notes,
obligations, indebtedness and liabilities and all renewals, extensions,
supplements, increases, and modifications thereof in whole or in part from time
to time:
(a) The Promissory Notes and all other notes given in
substitution therefor or in modification, supplement, increase, renewal or
extension thereof, in whole or in part (such notes, as from time to time
renewed, extended, supplemented, increased, or modified and all other notes
given in substitution therefor, or in modification, renewal or extension
thereof, in whole or in part, referred to as the "NOTES"), and Agent and the
other Banks, or the subsequent holders at the time in question of the Notes or
any of the secured indebtedness, as hereinafter defined (being collectively
herein called "HOLDERS" and individually a "HOLDER");
(b) All indebtedness and other obligations owed by
Borrower (or Grantor) to any Holder now or hereafter incurred or arising
pursuant to or permitted by the provisions of the Notes, this Deed of Trust, or
any other document now or hereafter evidencing, governing, guaranteeing,
securing, or otherwise executed in connection with the loans evidenced by the
Notes, including, but not limited to any loan or credit agreement, tri-party
financing Agreement or other agreement between Borrower and Holders, or among
Borrower, Holders and any other party or parties, pertaining to the repayment
or use of the proceeds of the loan evidenced by the Notes (the Credit
Agreement, the Notes, this Deed of Trust, any other "Loan Papers" (as such term
is defined in the Credit Agreement), and such other documents, as they or any
of them may have been or may be from time to time renewed, extended,
supplemented, increased or modified, being herein sometimes collectively called
the "LOAN DOCUMENTS");
Should the above described indebtedness secured by this Deed of Trust
(hereinafter referred to collectively as the "SECURED INDEBTEDNESS") be paid
according to the tenor and effect thereof when the same shall become due and
payable, and should Grantor and Borrower perform all covenants herein contained
in a timely manner, then this Deed of Trust shall be canceled and released.
ARTICLE II
2.01. PAYMENT OF INDEBTEDNESS. Borrower shall pay the indebtedness
evidenced by the Promissory Notes according to the tenor thereof and the
remainder of the Secured Indebtedness promptly as the same shall become due.
Beneficiary has not consented and will not consent to the performance of any
work or the furnishing of any materials, which might be deemed to create a lien
or liens superior to the lien hereof, either under Tennessee Code Annotated
Section 66-11-108, as the same may be amended from time to time, or otherwise.
2.02 TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Premises or the ownership, use, occupancy or
enjoyment of any portion thereof, or any utility service thereto, as the same
become due and payable, including, but not limited to all ad valorem taxes
assessed against the Premises
SWI TENNESSEE DEED OF TRUST
3
<PAGE> 4
or any part thereof, except for any such taxes or charges being contested in
good faith and by proper proceedings for which adequate reserves in accordance
with generally accepted accounting principles have been taken, and shall
deliver promptly to Agent such evidence of the payment thereof as Agent may
reasonably require.
2.03 INSURANCE. Grantor shall obtain and maintain at Grantor's
sole expense:
(a) All risk insurance with respect to the Premises, all insurable
property of grantor therein, against loss or damage by fire,
lightning, windstorm, explosion, hail, tornado and such hazards as are
presently included in so-called "all-risk" coverage and against such
other insurable hazards as Agent may require, in an amount not less
than 100% of the full replacement cost, including the cost of debris
removal, without deduction for depreciation and sufficient to prevent
Grantor and Agent from becoming a coinsurer, such insurance to be in
Builder's Risk (non-reporting) form during and with respect to any
construction on the Premises;
(b) If and to the extent any portion of the Premises is in a special flood
hazard area, a flood insurance policy in an amount equal to the lesser
of the principal face amount of the Notes or the maximum amount
available;
(c) Commercial general public liability insurance, on an "occurrence"
basis, for the benefit of Grantor and Agent as named insureds;
(d) Statutory workers' compensation insurance with respect to any work on
or about the Premises; and
(e) Such other insurance on the Premises as may from time to time be
reasonably required by Agent (including, but not limited to business
interruption insurance, boiler and machinery insurance, earthquake
insurance, and war risk insurance) and against other insurable hazards
or casualty which at the time are commonly insured against in the case
of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and
improvements.
All insurance policies shall be issued and maintained by insurers, in amounts,
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Grantor with respect to the Premises, except for public
liability insurance, shall provide that each such policy shall be primary
without right of contribution from any other insurance that may be carried by
Grantor or Agent and that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured. If any insurer which has issued a policy of title,
hazard, liability or other insurance required pursuant to this Deed of Trust or
any other Loan Document becomes insolvent or the subject or any bankruptcy,
receivership or similar proceeding or if in the Agent's reasonable opinion the
financial responsibility of such insurer is or become inadequate, Grantor
shall, in each instance promptly upon the request of Agent and at Grantor's
expense, obtain and delivery to Agent a like policy (or, if and to the extent
permitted by Agent, a certificate of insurance) issued by another insurer,
which insurer and policy meet the requirements of this Deed of Trust or such
other Loan Document, as the case may be. Without limiting the discretion of
Agent with respect to required endorsements to insurance policies, all such
policies for loss of or damage to the Premises shall contain a standard Deed of
Trust clause (without contribution) naming Agent, as Agent for the Banks, as
Deed of Trusts with loss proceeds payable to Agent notwithstanding (i) any act,
SWI TENNESSEE DEED OF TRUST
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<PAGE> 5
failure to act or negligence of or violation of any warranty, declaration or
condition contained in any such policy by any named insured; (ii) the
occupation or use of the Premises for purposes more hazardous than permitted by
the terms of any such policy; (iii) any foreclosure or other action by Agent
under the Loan Documents; or (iv) any change in title to or in ownership of the
Premises or any portion thereof, such proceeds to be held for application as
provided in the Loan Documents. The originals of each initial insurance policy
(or to the extent permitted by Agent, a copy of the original policy and a
satisfactory certificate of insurance) shall be delivered to Agent at the time
of execution of this Deed of Trust, with premiums fully paid, and each renewal
or substitute policy (or certificate) shall be delivered to Agent, with
premiums fully paid, at least ten (10) days before the termination of the
policy it renews or replaces. Grantor shall pay all premiums on policies
required hereunder as they become due and payable and promptly deliver to Agent
evidence satisfactory to Agent of the timely payment thereof. If an loss
occurs at any time when Grantor has failed to perform Grantor's covenants and
agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Grantor, to the
same extent as if it had been made payable to Agent. Upon any foreclosure
hereof or transfer of title to the Premises in extinguishment of the whole or
any part of the secured indebtedness, all of grantor's right, title and
interest in and to the insurance policies referred to in this Section
(including unearned premiums) and all proceeds payable thereunder shall
thereupon vest in the purchaser at foreclosure or other such transferee, to the
extent permissible under such policies. Agent shall have the right (but not
the obligation) to make proof of loss for, settle and adjust any claim under,
and receive the proceeds of, all insurance for loss of or damage to the
Premises, and the expenses incurred by Agent in the adjustment and collection
of insurance proceeds shall be a part of the secured indebtedness and shall be
due and payable to Agent on demand. Agent shall not be, under any
circumstances, liable or responsible for the obtaining, maintaining or adequacy
of any insurance or for failure to collect or exercise diligence in the
collection of any of such proceeds or for failure to see to the proper
application of any amount paid over to grantor. Any such proceeds received by
Agent shall, after deduction therefrom of all reasonable expenses actually
incurred by Agent, including attorneys; fees, at Agent's option by (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration, either partly or entirely,
of the Premises so damaged, or (3) applied to the payment of the secured
indebtedness in such order and manner as Agent, in its sole discretion, may
elect, whether or not due. Grantor shall at all times comply with the
requirements of the insurance policies required hereunder and of the issuers of
such policies and of any board of fire underwriters or similar body as
applicable to or affecting the Premises.
2.04 RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence of an Event of Default and upon the written request of Agent, to
secure certain of Grantor's obligations in paragraphs (c) and (d) above, but
not in lieu of such obligations, Grantor will deposit with Agent a sum equal to
ad valorem taxes, assessments and charges (which charges for the purpose of
this paragraph shall include without limitation any recurring charge which
could result in a lien against the Premises) against the Premises for the
current year and the premiums for such policies of insurance for the current
year, all as estimated by Agent and prorated to the end of the calendar month
following the month during which Agent's request is made, and thereafter will
deposit with Agent, on each date when an installment of principal and/or
interest is due on the Notes, sufficient funds (as estimated from time to time
by Agent) to permit Agent to pay at least fifteen (15) days prior to the due
date thereof, the next maturing ad valorem taxes, assessments and charges and
premiums for such policies of insurance. Agent shall have the right to rely
upon tax information furnished by applicable taxing authorities in the payment
of such taxes or assessments and shall have no obligation to make any protest
of any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Agent for future use, applied to any secured
indebtedness or refunded to grantor, at Agent's option, and any deficiency in
such funds so deposited shall be made up by Grantor upon demand of Agent. All
such funds so deposited shall bear no
SWI TENNESSEE DEED OF TRUST
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interest, may be mingled with the general funds of Agent and shall be applied
by Agent toward the payment of such taxes, assessments, charges and premiums
when statements therefor are presented to Agent by Grantor (which statements
shall be presented by Grantor to Agent a reasonable time before the applicable
amount is due); provided, however, that, if a default shall have occurred
hereunder, such funds may at Agent's option be applied to the payment of the
secured indebtedness in the order determined by Agent in its sole discretion,
and Agent may (but shall have no obligation) at any time, in its discretion,
apply all or any part of such funds toward the payment of any such taxes,
assessments, charges or premiums which are past due, together with any
penalties or late charges with respect thereto. The conveyance or transfer of
Grantor's interest in the Premises for any reason (including without limitation
the foreclosure of a subordinate lien or security interest or a transfer by
operation of law) shall constitute an assignment or transfer of Grantor's
interest in and rights to such funds held by Agent under this paragraph but
subject to the rights of Agent hereunder.
2.05 CONDEMNATION. Grantor shall notify Agent immediately after
Grantor becomes aware of any threatened or pending proceeding for condemnation
affecting the Premises or arising out of damage to the Premises, and grantor
shall, at Grantor's expense, diligently prosecute any such proceedings. Agent
shall have the right (but not the obligation) to participate in any such
proceeding, and to be represented by counsel of its own choice. Agent shall be
entitled to receive all sums which may be awarded or become payable to grantor
of the condemnation of the Premises, or any part thereof, for public or
quasi-public use, or by virtue of private sale in lieu thereof, and any sums
which may be awarded or become payable to grantor for injury or damage to the
Deed of Trust Property, provided it is applied to the secured indebtedness.
Grantor shall, promptly upon request of Agent, execute such additional
assignments and other documents as may be necessary from time to time to permit
such participation and to enable Agent to collect and receipt for any such
sums. All such sums are hereby assigned to Agent, and shall, after deduction
therefrom of all reasonable expenses actually incurred by Agent, including
reasonable attorneys' fees, at Agent's option be (1) released to grantor, or
(2) applied (upon compliance with such terms and conditions as may be required
by Agent) to repair or restoration of the Premises so affected, or (3) applied
to the payment of the secured indebtedness in such order and manner as Agent,
in its sole discretion, may elect, whether or not due. Agent shall not be,
under any circumstances, liable or responsible for failure to collect or to
exercise diligence in the collection of any such sum or for failure to see to
the proper application of any amount paid over to grantor. Agent is hereby
authorized, in the name of grantor, to execute and deliver valid acquittances
for, and to appeal from, any such award, judgment or decree. All reasonable
costs and expenses (including but not limited to reasonable attorneys' fees)
incurred by Agent in connection with any condemnation shall be a demand
obligation owing by Grantor (which Grantor hereby promises to pay) to Agent
pursuant to this Deed of Trust.
2.06. CARE OF PREMISES.
(a) Grantor will keep any and all buildings, parking areas, roads,
walkways, recreational facilities, landscaping, and all other
improvements of any kind now or hereafter erected on the Land or any
part thereof in good condition and repair, will not commit or suffer
any waste and will not do or suffer to be done anything that would or
could increase the risk of fire or other hazard to the Premises or any
other part thereof or which would or could result in the cancellation
of any insurance policy carried with respect to the Premises.
(b) Grantor will not remove, demolish, or materially alter the structural
character of any Improvements located on the Land without the written
consent of Beneficiary.
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(c) If the Premises or any part thereof is damaged by fire or any other
cause, Grantor will give immediate written notice thereof to
Beneficiary.
(d) Beneficiary or its representative is hereby authorized to enter upon
and inspect the Premises at any time during normal business hours.
(e) Grantor will promptly comply with all present and future laws,
ordinances, rules, and regulations of any governmental authority
affecting the Premises or any part thereof.
(f) If all or any part of the Premises shall be damaged by fire or other
casualty, Grantor will promptly restore the Premises to the equivalent
of its original condition; and if a part of the Premises shall be
damaged through condemnation, Grantor will promptly restore, repair,
or alter the remaining portions of the Premises in a manner reasonably
satisfactory to Beneficiary. Notwithstanding the foregoing, Grantor
shall not be obligated so to restore unless in each instance,
Beneficiary agrees to make available to Grantor (pursuant to a
procedure satisfactory to Beneficiary) any net insurance or
condemnation proceeds actually received by Beneficiary hereunder in
connection with such casualty loss or condemnation, to the extent such
proceeds are required to defray the expense of such restoration;
provided, however, that the insufficiency of any such insurance or
condemnation proceeds to defray the entire expense of restoration
shall in no way relieve Grantor of its obligation to restore. In the
event all or any portion of the Premises shall be damaged or destroyed
by fire or other casualty or by condemnation, Grantor shall promptly
deposit with Beneficiary a sum equal to the amount by which the
estimated cost of the restoration of the Premises (as determined by
Beneficiary in its good faith judgment) exceeds the actual net
insurance or condemnation proceeds with respect to such damage or
destruction.
2.07. ASSIGNMENT OF LEASES. To secure the payment of the Secured
Indebtedness, Grantor hereby grants, transfers, and assigns to Beneficiary all
of the right, title, and interest of Grantor in and to any and all present and
future leases and licenses of the Premises (collectively the "LEASES"),
together with all renewals, modifications or extensions thereof; together with
all rents, income, and profits arising therefrom; together with all options or
other rights pertaining thereto; and together with all present or future
policies of lease insurance and guarantees, if any, of the obligations of the
lessee or licensee under any Lease.
2.08. SECURITY AGREEMENT. With respect to the apparatus, fittings,
fixtures, and articles of personal property referred to or described in this
Deed of Trust, or in any way connected with the use and enjoyment of the
Premises, this Deed of Trust is hereby made and declared to be a security
agreement encumbering each and every item of personal property included herein
as a part of the Premises, in compliance with the provisions of the Uniform
Commercial Code as enacted in the state of Tennessee, and Grantor hereby grants
to Beneficiary a security interest in said personal property (including any
fixtures that are personal property under applicable state law). A financing
statement or statements reciting this Deed of Trust to be a security agreement
affecting all of said personal property aforementioned shall be executed by
Grantor and Beneficiary and appropriately filed. The remedies for any
violation of the covenants, terms, and conditions of the security agreement
contained in this Deed of Trust, or otherwise in respect of an Event of Default
hereunder, shall be (i) as prescribed herein, or (ii) as prescribed by general
law, or (iii) as prescribed by the specific statutory consequences now or
hereafter enacted and specified in said Uniform Commercial Code, all at
Beneficiary's sole election. Grantor and Beneficiary agree that the filing of
such financing statement(s) in the records normally having to do with personal
property shall not in any way affect the agreement of Grantor and Beneficiary
that everything used in connection with the production of income from the
Premises or adapted for use therein or which
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is described or reflected in this Deed of Trust, is, and at all times and for
all purposes and in all proceedings, both legal or equitable, shall be,
regarded as part of the real estate conveyed hereby regardless of whether (a)
any such item is physically attached to the Improvements, (b) serial numbers
are used for the better identification of certain items capable of being thus
identified in an Exhibit to this Deed of Trust, or (c) any such item is
referred to or reflected in any such financing statement(s) so filed at any
time. Similarly, the mention in any such financing statement(s) of the rights
in and to (aa) the proceeds of any fire and/or hazard insurance policy, or (bb)
any award in eminent domain proceedings for a taking or for loss of value, or
(cc) Grantor's interest as lessor in any present or future lease or rights to
income growing out of the use and/or occupancy of the Premises, whether
pursuant to lease or otherwise, shall not in any way alter any of the rights of
Beneficiary as determined by this instrument or affect the priority of
Beneficiary's security interest granted hereby or by any other recorded
document, it being understood and agreed that such mention in such financing
statement(s) is solely for the protection of Beneficiary in the event any court
shall at any time hold, with respect to the foregoing items (aa), (bb), or
(cc), that notice of Beneficiary's priority of interest, to be effective
against a particular class of persons, must be filed in the Uniform Commercial
Code records.
2.09. EXPENSES. Grantor will pay or reimburse Beneficiary, upon
demand therefor, for all reasonable attorney's fees, costs and expenses
incurred by Trustee and/or Beneficiary in any suit, action, legal proceeding or
dispute of any kind in which Trustee and/or Beneficiary is made a party or
appears as party plaintiff or defendant, affecting the Secured Indebtedness,
this Deed of Trust or the interest created herein, or the Premises, including,
but not limited to, the exercise of the power of sale contained in this Deed of
Trust, any condemnation action involving the Premises or any action to protect
the security hereof, and any such amounts paid by Trustee and/or Beneficiary
shall be added to the Secured Indebtedness and shall be secured by this Deed of
Trust.
2.10. ESTOPPEL AFFIDAVITS. Grantor, upon ten (10) days' prior
written notice, shall furnish Beneficiary a written statement, duly
acknowledged, setting forth the unpaid principal of, and interest on, the
Secured Indebtedness, stating whether any off-sets or defenses exist against
the Secured Indebtedness, or any portion thereof, and, if such off-sets or
defenses exist, stating in detail the specific facts relating to each such
off-set or defense.
2.11. SUBROGATION. To the full extent of the Secured Indebtedness,
Beneficiary is hereby subrogated to the liens, claims, and demands, and to the
rights of the owners and holders of each and every lien, claim, demand, and
other encumbrance on the Premises which is paid or satisfied, in whole or in
part, out of the proceeds of the Secured Indebtedness, and the respective
liens, claims, demands, and other encumbrances shall be, and each of them is
hereby preserved and shall pass to and be held by Beneficiary as additional
collateral and further security for the Secured Indebtedness, to the same
extent they would have been preserved and would have been passed to and held by
Beneficiary had they been duly and legally assigned, transferred, set over, and
delivered unto Beneficiary by assignment, notwithstanding the fact that the
same may be satisfied and canceled of record.
2.12. LIMIT OF VALIDITY. If from any circumstances whatsoever,
fulfillment of any provision of this Deed of Trust or of the Promissory Notes,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction
be possible under this Deed of Trust or under the Promissory Notes that is in
excess of the current limit of such validity, but such obligation shall be
fulfilled to the limit of such validity. The
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provisions of this paragraph 1.13 shall control every other provision of this
Deed of Trust and of the Promissory Notes.
2.13. NO DEFAULT AFFIDAVITS. At Beneficiary's written request,
Grantor shall deliver to Beneficiary the affidavit of Borrower and/or Grantor
or a principal financial or accounting officer of Borrower and/or Grantor,
swearing that Borrower and/or Grantor knows of no Event of Default (as
hereinafter defined), nor of any default, which after notice or lapse of time
or both would constitute an Event of Default, which has occurred and is
continuing or, if any such default or Event of Default has occurred and is
continuing, specifying the nature and period of existence thereof and the
action Borrower and/or Grantor has taken or proposes to take with respect
thereto and, except as otherwise specified, stating that Grantor has fulfilled
all of Grantor's obligations under this Deed of Trust that are required to be
fulfilled on or prior to the date of such affidavit.
2.14. LEGAL ACTIONS. In the event that Trustee and/or Beneficiary
is made a party, either voluntarily or involuntarily, in any action or
proceeding affecting the Premises, the Promissory Notes, the Secured
Indebtedness, or the validity or priority of this Deed of Trust, Borrower
and/or Grantor shall immediately, upon demand, reimburse Trustee and/or
Beneficiary for all reasonable costs, expenses, and liabilities incurred by
Beneficiary by reason of any such action or proceeding, including reasonable
attorney's fees, and any such amounts paid by Trustee and/or Beneficiary shall
be added to the Secured Indebtedness and shall be secured by this Deed of
Trust.
2.15. USE AND MANAGEMENT OF PREMISES. Grantor shall at all times
operate the buildings and other improvements located upon the Premises as its
ice plant.
2.16. CONVEYANCE OF PREMISES. Grantor shall not by any instrument,
means or device whatsoever, convey, assign, sell, transfer, lease, mortgage or
encumber any or all of its interest in the Premises, whether legal or
equitable, present or future, vested or contingent, without the prior written
consent of Beneficiary or unless otherwise permitted under the Credit
Agreement. Beneficiary's consent to such a transfer, if given, shall not
release or alter in any manner the liability of Grantor or anyone who has
assumed or guaranteed the payment of the Secured Indebtedness or any portion
thereof. At the option of Beneficiary, the Secured Indebtedness shall be
immediately due and payable in the event that Grantor conveys all or any
portion of the Premises or any interest therein, or in the event that Grantor's
equitable title thereto or interest therein shall be assigned, transferred or
conveyed in any manner, or upon the transfer or conveyance of any interest in
Borrower, without obtaining Beneficiary's prior written consent thereto unless
permitted by the Credit Agreement and any waiver or consent for any prior
transfer shall not preclude Beneficiary from declaring the Secured Indebtedness
due and payable for any subsequent transfer.
2.17. ACQUISITION OF COLLATERAL. Grantor shall not acquire any
portion of the personal property covered by this Deed of Trust subject to any
security interest, conditional sales contract, title retention arrangement, or
other charge or lien taking precedence over the security title and lien of this
Deed of Trust unless the same is permitted under the Credit Agreement.
2.18. SALE BY FORECLOSURE OF PRIOR ENCUMBRANCES. In the event that
this Deed of Trust shall now or at any time after the date hereof be
subordinate to any other encumbrance on the Premises, Grantor hereby agrees
that the lien of this conveyance shall extend to the entire interest of Grantor
in the Premises conveyed hereby, and shall extend to the interest of Grantor in
the proceeds from any sale of said Premises, whether by foreclosure of any such
prior encumbrance or otherwise, to the extent any such proceeds exceed the
amount necessary to satisfy such prior encumbrance(s). Any trustee or other
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person conducting any such sale or foreclosure is hereby directed to pay such
excess proceeds to Beneficiary to the extent necessary to pay the Secured
Indebtedness in full, notwithstanding any provision to the contrary contained
in any prior encumbrance.
2.19. HAZARDOUS SUBSTANCES. For purposes of this Section 1.20,
"RELEVANT ENVIRONMENTAL LAWS" shall mean all Federal, state or local statutes,
regulations, rules, judicial determinations and decisions by any judicial,
legislative or executive body of any governmental or quasi-governmental entity,
whether in the past, the present or the future, that in any way relate to the
existence, removal of, or exposure to any hazardous substances at the Premises
or the effects on the environment of the Premises or of any activity now,
previously, or hereafter conducted on the Premises.
(a) To the best of Grantor's knowledge, there are presently no violations
of the Relevant Environmental Laws at the Premises and Grantor hereby
represents and agrees that the Premises and all operations thereon
comply and shall continue to comply strictly in all respects with the
Relevant Environmental Laws.
(b) Grantor is not aware of any claims or litigation related to, and has
not received any communication from any person concerning any
violation or alleged violation of, Relevant Environmental Laws at the
Premises which have not been rectified to the satisfaction of the
applicable regulatory authority. Grantor shall immediately notify
Beneficiary of any such claims and shall furnish Beneficiary a copy of
any such communication received after the date of this Deed of Trust.
(c) All permits required for the Premises pursuant to the Relevant
Environmental Laws have been obtained and are in full force and effect
and will remain so and any necessary permits will be obtained in the
future when required.
(d) In the event any expert or consultant retained by Beneficiary to audit
the Premises discovers a violation of Relevant Environmental Laws at
the Premises, Grantor shall expeditiously carry out all written
recommendations of said expert or consultant to remedy said violation.
If Grantor fails to do so, within a reasonable period of time to carry
out such recommendation, subject to applicable notice and cure
periods, Beneficiary may, but shall not be obligated to, exercise its
rights to do any one or more of the following: (i) elect that such
failure constitutes an Event of Default pursuant to this Deed of
Trust, or (ii) take any and all actions, at Grantor's expense, that
Beneficiary deems necessary or desirable to cure said failure of
compliance. No such action shall be a waiver of any right of
Beneficiary hereunder or otherwise available, including, without
limitation, the right to elect that such present or any future
violation shall constitute an Event of Default under this Deed of
Trust.
ARTICLE III
3.01. EVENTS OF DEFAULT. The terms "DEFAULT," "EVENT OF DEFAULT" or
"EVENTS OF DEFAULT," wherever used in this Deed of Trust, shall mean any one or
more of the following events:
(a) Failure by Borrower to pay as and when due and payable, subject to
applicable notice and cure period, any portion of the Secured
Indebtedness, as applicable; or
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(b) Failure by Grantor duly to observe or perform any other term,
covenant, condition, or agreement of this Deed of Trust, provided, any
such failure, other than failure to fully perform any provision of
Section 1.03 above, shall not be deemed an Event of Default hereunder
until the delivery of written notice thereof to Borrower and the
failure of Borrower to cure such default within thirty (30) days of
the date of such notice; or
(c) Failure by Borrower duly to observe or perform any respective term,
covenant, condition, or agreement in any of the Loan Documents or any
other instrument or agreement now or hereafter evidencing, securing,
or otherwise relating to the Promissory Notes, this Deed of Trust, or
the Secured Indebtedness, as applicable within the period for
performance and any grace period specified therein; or
(d) The occurrence of an event of default under any of the Loan Documents
or any other instrument or agreement now or hereafter evidencing,
securing or otherwise relating to the Promissory Notes or the Secured
Indebtedness subject to applicable notice and cure periods; or
(e) Any warranty of Grantor contained in this Deed of Trust, or in any
other instrument, document, transfer, conveyance, assignment or loan
agreement given by Borrower with respect to the Secured Indebtedness,
proving to be untrue or misleading in any material respect; or
(f) The Premises are subject to actual or threatened waste, or any
material part thereof is removed, demolished, or altered without the
prior written consent of Beneficiary; or
(g) Any claim of priority to this Deed of Trust, by title or lien, is
asserted in any legal or equitable proceeding; or
(h) The filing by Borrower or any endorser or guarantor of the Promissory
Notes of a voluntary petition in bankruptcy or Borrower's or any such
endorser's or guarantor's adjudication as a bankrupt or insolvent; or
the filing by Borrower or any endorser or guarantor of the Promissory
Notes of any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future
federal, state or other law or regulation relating to bankruptcy,
insolvency or other relief for debtors; or Borrower's or any such
endorser's or guarantor's seeking or consenting to or acquiescing in
the appointment of any trustee, receiver or liquidator of Borrower or
any such endorser or guarantor, or of all or any substantial part of
the Premises or of any or all of the rents, issues, profits, or
revenues thereof; or the making by Borrower or any such endorser or
guarantor of any general assignment for the benefit of creditors; or
the admission in writing by Borrower or any such endorser or guarantor
of its or their inability to pay its or their debts generally as they
become due; or the commission by Borrower or any such endorser or
guarantor of an act of bankruptcy; or
(i) The entry by a court of competent jurisdiction of an order, judgment
or decree approving a petition filed against Borrower or any endorser
or guarantor of the Promissory Notes seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future federal, state or other law
or regulation relating to bankruptcy, insolvency or other relief for
debtors or the appointment of any trustee, receiver or liquidator of
Borrower or any endorser or guarantor of the Promissory Notes, or of
all or any substantial part of the Premises or of any or all of the
rents, issues, profits or revenues thereof without the
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consent or acquiescence of Borrower or any endorser or guarantor of
the Promissory Notes, as the case may be; or
(j) Borrower is liquidated or dissolved or its charter expires or is
revoked or any guarantor of the Promissory Notes dies or seeks to
cancel or deny liability under the guaranty.
3.02. ACCELERATION OF MATURITY. If an Event of Default shall have
occurred and be continuing, then the entire Secured Indebtedness shall, at the
option of Beneficiary, immediately become due and payable without notice or
demand, time being of the essence of this Deed of Trust, and no omission on the
part of Beneficiary to exercise such option when entitled to do so shall be
construed as a waiver of such right.
3.03. RIGHT TO ENTER AND TAKE POSSESSION.
(a) If an Event of Default shall have occurred and be continuing, Grantor,
upon demand of Beneficiary, shall forthwith surrender to Beneficiary
the actual possession of the Premises and if, and to the extent
permitted by law, Beneficiary itself, or by such officers or agents as
it may appoint, may enter and take possession of all or any part of
the Premises without the appointment of a receiver or an application
therefor, and may exclude Grantor and its agents and employees wholly
therefrom, and have joint access with Grantor to the books, papers,
and accounts of Grantor;
(b) If Grantor shall for any reason fail to surrender or deliver the
Premises or any part thereof after such demand by Beneficiary,
Beneficiary may obtain a judgment or decree conferring upon
Beneficiary the right to immediate possession or requiring Grantor to
deliver immediate possession of the Premises to Beneficiary, and
Grantor hereby specifically consents to the entry of such judgment or
decree. Grantor will pay to Beneficiary, upon demand, all reasonable
expenses of obtaining such judgment or decree, including reasonable
compensation to Beneficiary, its attorneys and agents, and all such
expenses and compensation shall, until paid, become part of the
Secured Indebtedness and shall be secured by this Deed of Trust;
(c) Upon every such entering upon or taking of possession, Beneficiary may
hold, store, use, operate, manage, and control the Premises and
conduct the business thereof, all in a reasonable manner and, from
time to time (i) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments, and improvements
thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty, and other property; (ii) contract to keep the
Premises insured; (iii) manage and operate the Premises and exercise
all of the rights and powers of Grantor to the same extent as Grantor
could in its own name or otherwise act with respect to the same; and
(iv) enter into any and all agreements with respect to the exercise by
others of any of the powers herein granted to Beneficiary, all as
Beneficiary from time to time may determine to be in its best
interest. Beneficiary may collect and receive all the rents, issues,
profits, and revenues from the Premises, including those past due as
well as those accruing thereafter, and, after deducting (aa) all
reasonable expenses of taking, holding, managing, and operating the
Premises (including compensation for the services of all persons
employed for such purposes); (bb) the cost of all such maintenance,
repairs, renewals, replacements, additions, betterments, improvements,
purchases and acquisitions; (cc) the cost of such insurance; (dd) such
taxes, assessments, and other similar charges as Beneficiary may at
its option pay; (ee) other proper charges upon the Premises or any
part thereof; and (ff) the reasonable compensation, expenses, and
disbursements of the attorneys and agents of Beneficiary, Beneficiary
shall apply the
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remainder of the monies and proceeds so received by Beneficiary,
first, to the payment of accrued interest; second, to the payment of
other sums required to be paid hereunder; and third, to the payment of
overdue installments of principal. Anything in this paragraph 2.03 to
the contrary notwithstanding, Beneficiary shall not be obligated to
discharge or perform the duties of a landlord to any tenant or incur
any liability as a result of any exercise by Beneficiary of its rights
under this Deed of Trust, and Beneficiary shall be liable to account
only for the rents, incomes, issues and profits actually received by
Beneficiary;
(d) Whenever all such interest, deposits, and principal installments and
other sums due under any of the terms, covenants, conditions, and
agreements of this Deed of Trust shall have been paid and all Events
of Default shall have been cured, Beneficiary shall surrender
possession of the Premises to Grantor, its successors or assigns. The
same right of taking possession, however, shall exist if any
subsequent Event of Default shall occur and be continuing.
3.04. PERFORMANCE BY BENEFICIARY. If Borrower and/or Grantor shall
default in the payment, performance or observance of any term, covenant or
condition of this Deed of Trust, Beneficiary may, at its option, pay, perform
or observe the same, and all reasonable payments made or costs or expenses
incurred by Beneficiary in connection therewith, with interest thereon at the
Maximum Rate provided in the Promissory Notes, shall be secured hereby and
shall be, upon written demand, immediately repaid by Borrower and/or Grantor to
Beneficiary. Beneficiary shall be the sole judge of the necessity for any such
actions and of the amounts to be paid. Beneficiary is hereby empowered to
enter and to authorize others to enter upon the Premises or any part thereof
for the purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Grantor or any person in
possession holding under Grantor.
3.05. RECEIVER. If an Event of Default shall have occurred and be
continuing, Beneficiary, upon application to a court of competent jurisdiction,
shall be entitled as a matter of strict right, without notice and without
regard to the occupancy or value of any security for the Secured Indebtedness
or the solvency of any party bound for its payment, to the appointment of a
receiver to take possession of and to operate the Premises and to collect and
apply the rents, issues, profits, and revenues thereof. The receiver shall
have all of the rights and powers permitted under the laws of the state wherein
the Land is situated. Borrower and/or Grantor will pay unto Beneficiary upon
demand all reasonable expenses, including receiver's fees, attorneys' fees,
costs, and agents' compensation, incurred pursuant to the provisions of this
paragraph 2.05, and any such amounts paid by Borrower and/or Grantor shall be
added to the Secured Indebtedness and shall be secured by this Deed of Trust.
3.06. ENFORCEMENT.
(a) If any Event of Default shall have occurred and be continuing,
Trustee, or the agent or successor of Trustee, at the request of
Beneficiary shall sell the Premises or any part of the Premises at one
or more public sales before the door of the courthouse of the county
in which the Land or any part of the Land is situated, to the highest
bidder for cash (or credit upon the Secured Indebtedness if
Beneficiary is the successful bidder), and in bar of the right of
redemption (statutory or otherwise), the equity of redemption,
homestead, dower, elective or distributing share, any right of
appraisement or valuation, and all other rights and exemptions of
every kind, all of which are hereby expressly waived, in order to pay
the Secured Indebtedness and all expenses of sale and of all
proceedings in connection therewith, including reasonable attorneys'
fees, after advertising the time, place and terms of sale at least
three (3) different times in some newspaper of general circulation in
Memphis, Tennessee, the first of which publications shall be
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at least twenty (20) days previous to said sale. At any such public
sale, Beneficiary, may execute and deliver to the purchaser a
conveyance of the Premises or any part of the Premises in fee simple.
In the event of any sale under this Deed of Trust by virtue of the
exercise of the powers herein granted, or pursuant to any order in any
judicial proceedings or otherwise, the Premises may be sold as an
entirety or in separate parcels and in such manner or order as
Beneficiary in its sole discretion may elect, and if Beneficiary so
elects, Trustee or Beneficiary may sell the personal property covered
by this Deed of Trust at one or more separate sales in any manner
permitted by the Uniform Commercial Code as enacted in the state of
Tennessee and one or more exercises of the powers herein granted shall
not extinguish or exhaust such powers, until the entire Premises are
sold or the Secured Indebtedness is paid in full. If the Secured
Indebtedness is now or hereafter further secured by any chattel
mortgages, pledges, contracts of guaranty, assignments of lease or
other security instruments, Beneficiary at its option may exhaust the
remedies granted under any of said security instruments or this Deed
of Trust either concurrently or independently, and in such order as
Beneficiary may determine.
Said sale may be adjourned by the Trustee, or its agent or successors,
and reset at a later date without additional publication; provided
that an announcement to that effect be made at the scheduled place of
sale at the time and on the date the sale is originally set.
(b) If an Event of Default shall have occurred and be continuing,
Beneficiary may, in addition to and not in abrogation of the rights
covered under subparagraph (a) of this paragraph 2.06, either with or
without entry or taking possession as herein provided or otherwise,
proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (i) to enforce payment of the
Promissory Notes or the performance of any term, covenant, condition
or agreement of this Deed of Trust or any other right, and (ii) to
pursue any other remedy available to it, all as Beneficiary in its
sole discretion shall elect.
3.07. PURCHASE BY BENEFICIARY. Upon any foreclosure sale or sale of
all or any portion of the Premises under the power herein granted, Beneficiary
may bid for and purchase the Premises and shall be entitled to apply all or any
part of the Secured Indebtedness as a credit to the purchase price.
3.08. APPLICATION OF PROCEEDS OF SALE. In the event of a
foreclosure or other sale of all or any portion of the Premises, the proceeds
of said sale shall be applied, first, to the reasonable expenses of such sale
and of all proceedings in connection therewith, including reasonable fees of
the attorney and trustee (and attorney and trustee fees and expenses shall
become absolutely due and payable whenever foreclosure is commenced); then to
insurance premiums, liens, assessments, taxes and charges including utility
charges advanced by Beneficiary, and interest thereon; then to payment of the
Secured Indebtedness and accrued interest thereon, in such order of priority as
Beneficiary shall determine, in its sole discretion; and finally the remainder,
if any, shall be paid to Borrower, or to the person or entity lawfully entitled
thereto.
3.09. GRANTOR AS TENANT HOLDING OVER. In the event of any such
foreclosure sale or sale under the powers herein granted, Grantor (if Grantor
shall remain in possession) shall be deemed a tenant holding over and shall
forthwith deliver possession to the purchaser or purchasers at such sale or be
summarily dispossessed according to provisions of law applicable to tenants
holding over.
3.10. WAIVER OF APPRAISEMENT, VALUATION, ETC. Grantor agrees, to
the full extent permitted by law, that in case of a default on the part of
Grantor hereunder, neither Grantor nor anyone claiming through or under Grantor
will set up, claim or seek to take advantage of any appraisement, valuation,
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<PAGE> 15
stay, extension, homestead, exemption, or redemption laws now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Deed of Trust, or the absolute sale of the Premises, or the delivery of
possession thereof immediately after such sale to the purchaser at such sale,
and Grantor, for itself and all who may at any time claim through or under it,
hereby waives to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets subject to the security
interest of this Deed of Trust marshaled upon any foreclosure or sale under the
power herein granted.
3.11. LEASES. Beneficiary, at its option, is authorized to
foreclose this Deed of Trust subject to the rights of any tenants of the
Premises, and the failure to make any such tenants parties to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Grantor, a defense to any proceeding instituted by
Beneficiary to collect the sums secured hereby.
3.12. DISCONTINUANCE OF PROCEEDINGS. In case Beneficiary shall
have proceeded to enforce any right, power or remedy under this Deed of Trust
by foreclosure, entry, or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to Beneficiary, then in every such case, Grantor, Trustee, and
Beneficiary shall be restored to their former positions and rights hereunder,
and all rights, powers and remedies of Beneficiary shall continue as if no such
proceeding had occurred.
3.13. REMEDIES CUMULATIVE. No right, power, or remedy conferred
upon or reserved to Beneficiary by this Deed of Trust is intended to be
exclusive of any other right, power, or remedy, but each and every such right,
power, and remedy shall be cumulative and concurrent and shall be in addition
to any other right, power, and remedy given hereunder or now or hereafter
existing at law, in equity, or by statute.
3.14. WAIVER.
(a) No delay or omission by Beneficiary or by any holder of the Promissory
Notes to exercise any right, power or remedy accruing upon any default
shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such default, or acquiescence therein,
and every right, power, and remedy given by this Deed of Trust to
Beneficiary may be exercised from time to time and as often as may be
deemed expedient by Beneficiary. No consent or waiver expressed or
implied by Beneficiary to or of any breach or default by Grantor in
the performance of the obligations of Grantor hereunder shall be
deemed or construed to be a consent or waiver to or of any other
breach or default in the performance of the same or any other
obligations of Borrower and/or Grantor hereunder. Failure on the part
of Beneficiary to complain of any act or failure to act or failure to
declare an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Beneficiary of its rights
hereunder or impair any rights, powers, or remedies of Beneficiary
hereunder.
(b) No acts or omission by Trustee or Beneficiary shall release,
discharge, modify, change, or otherwise affect the original liability
under the Promissory Notes or this Deed of Trust or any other
obligation of Borrower and/or Grantor or any subsequent purchaser of
the Premises or any part thereof, or any maker, cosigner, endorser,
surety, or guarantor, nor preclude Trustee and/or Beneficiary from
exercising any right, power or privilege herein granted or intended to
be granted in the event of any default then existing or of any
subsequent default, nor alter the lien of this Deed of Trust, except
as expressly provided in an instrument or instruments executed by
Beneficiary. Without limiting the generality of the foregoing,
Beneficiary may (i) grant forbearance or an extension of time for the
payment of all or any portion of the Secured
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Indebtedness; (ii) take other or additional security for the payment
of any of the Secured Indebtedness; (iii) waive or fail to exercise
any right granted herein or in the Promissory Notes; (iv) release any
part of the Premises from the security interest or lien of this Deed
of Trust or otherwise change any of the terms, covenants, conditions
or agreements of the Promissory Notes or this Deed of Trust; (v)
consent to the filing of any map, plat, or replat affecting the
Premises; (vi) consent to the granting of any easement or other right
affecting the Premises; (vii) make or consent to any agreement
subordinating the security title or lien hereof, or (viii) take or
omit to take any action whatsoever with respect to the Promissory
Notes, this Deed of Trust, the Premises, or any document or instrument
now or hereafter evidencing, securing or in any way related to the
Secured Indebtedness, all without releasing, discharging, modifying,
changing, or affecting any such liability, or precluding Beneficiary
from exercising any such right, power or privilege or affecting the
lien of this Deed of Trust. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Premises,
Beneficiary, without notice, is hereby authorized and empowered to
deal with any such vendee or transferee with reference to the Premises
or the Secured Indebtedness, or with reference to any of the terms,
covenants, conditions, or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without
in any way releasing or discharging any liabilities, obligations or
undertakings.
3.15. SUITS TO PROTECT THE PREMISES. Beneficiary shall have power
to institute and maintain such suits and proceedings as it may deem expedient
(a) to prevent any impairment of the Premises by any acts which may be unlawful
or constitute a default under this Deed of Trust; (b) to preserve or protect
its interest in the Premises and in the rents, issues, profits and revenues
arising therefrom; and (c) to restrain the enforcement of or compliance with
any legislation or other governmental enactment, rule, or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interest of Beneficiary.
3.16. PROOFS OF CLAIM. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition,
or other proceedings affecting Grantor, its creditors or its property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or advisable in order
to have the claims of Beneficiary allowed in such proceedings for the entire
amount due and payable by Grantor under this Deed of Trust at the date of the
institution of such proceedings and for any additional amount which may become
due and payable by Borrower hereunder after such date.
SWI TENNESSEE DEED OF TRUST
16
<PAGE> 17
ARTICLE IV
4.01. SUCCESSORS AND ASSIGNS; SUCCESSOR TRUSTEE. This Deed of
Trust shall inure to the benefit of and be binding upon Borrower, Trustee, and
Beneficiary and their respective heirs, executors, legal representatives,
successors, successors-in-title, and assigns. Whenever a reference is made in
this Deed of Trust to "Grantor," "Borrower," "Trustee," or "Beneficiary," such
reference shall be deemed to include a reference to the heirs, executors, legal
representatives, successors, successors-in-title, and assigns of Grantor,
Borrower, Trustee, or Beneficiary, as the case may be. In the event of the
death, absence, inability or refusal to act of Trustee, or for any other
reason, Beneficiary at any time and from time to time shall have the right to
name and appoint, by instrument in writing recorded in the appropriate records
in the office(s) in which this Deed of Trust is recorded, a successor to
execute this trust, who shall be vested with all of the right, title, estate,
powers, privileges and duties of the above-named Trustee without the necessity
of any conveyance from the above named Trustee or any successor.
4.02. TERMINOLOGY. All personal pronouns used in this Deed of
Trust, whether used in the masculine, feminine, or neuter gender, shall include
all other genders; the singular shall include the plural, and vice versa.
Titles and Articles are for convenience only and neither limit nor amplify the
provisions of this Deed of Trust, and all references herein to Articles,
paragraphs, or subparagraphs shall refer to the corresponding Articles,
paragraphs, or subparagraphs of this Deed of Trust unless specific reference is
made to Articles, paragraphs, or subparagraphs of another document or
instrument.
4.03. SEVERABILITY. If any provisions of this Deed of Trust or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Deed of Trust and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
4.04. APPLICABLE LAW. This Deed of Trust, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law,
except to the extent of procedural and substantive maters relating only to the
creation and perfection of liens and security interests in, and the enforcement
of rights and remedies against, the Premises, which matters shall be governed
by the laws of the state of Tennessee.
4.05. NOTICES. Any and all notices, elections, or demands permitted
or required to be made under this Deed of Trust shall be in writing, signed by
the party giving such notice, election or demand, and shall be delivered
personally, or sent by registered or certified mail, to the other party at the
address set forth below, or at such other address as may hereafter be supplied
in writing. The date of personal delivery or the date of mailing, as the case
may be, shall be the date of such notice, election, or demand. For the
purposes of this Deed of Trust:
The address of Grantor is: 8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
SWI TENNESSEE DEED OF TRUST
17
<PAGE> 18
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent, Suite 1500
San Antonio, Texas 78205
Attention: Alan Schoenbaum
The address of Agent is: P.O. Box 1600
San Antonio, Texas 78296-1400
Attention: Richard D. Young
4.06. GREATER ESTATE. In the event that Grantor is the owner of a
leasehold estate or any other estate less than a fee simple with respect to any
portion of the Premises and, prior to the satisfaction of the Secured
Indebtedness and the cancellation of this Deed of Trust of record, Grantor
obtains a greater estate or interest in such portion of the Premises, then,
such greater estate or interest shall automatically and without further action
of any kind on the part of Grantor be and become subject to the lien of this
Deed of Trust.
4.07. REPLACEMENT OF PROMISSORY NOTES. Upon receipt of evidence
reasonably satisfactory to Borrower of the loss, theft, destruction, or
mutilation of the Promissory Notes, and in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory to
Borrower or, in the case of any such mutilation, upon surrender and
cancellation of the Promissory Notes, Borrower at Beneficiary's expense will
execute and deliver, in lieu thereof, a replacement note, identical in form and
substance to the Promissory Notes and dated as of the date of the Promissory
Notes, and upon such execution and delivery all references in this Deed of
Trust to the Promissory Notes shall be deemed to refer to such replacement
note.
4.08. ASSIGNMENT. This Deed of Trust is assignable by Beneficiary
and any assignment hereof by Beneficiary shall operate to vest in the assignee
all rights and powers herein conferred upon and granted to Beneficiary.
4.09. TIME OF THE ESSENCE. Time is of the essence with respect to
each and every covenant, agreement, and obligation of Borrower under this Deed
of Trust, the Promissory Notes and any and all other instruments now or
hereafter evidencing, securing or otherwise relating to the Secured
Indebtedness.
4.10. EXTENSIONS, ETC. Borrower and Beneficiary may agree to extend
the time for payment of all or any part of the Secured Indebtedness, or reduce,
rearrange, or otherwise modify the terms of payment thereof, or accept a
renewal note or promissory note therefor, all without notice to or the consent
of any junior lienholder or any other person having an interest in the Premises
subordinate to the lien of this Deed of Trust, and without the consent of
Grantor if Grantor has then parted with title to the Premises. No such
extension, reduction, modification or renewal shall affect the priority of this
Deed of Trust or impair the security hereof in any manner whatsoever, or
release, discharge or otherwise affect in any manner the personal liability of
Borrower to Beneficiary or the liability of any other person now or hereafter
liable for payment of the Secured Indebtedness or any part thereof.
SWI TENNESSEE DEED OF TRUST
18
<PAGE> 19
4.11. INDEMNITY.
(a) Borrower agrees to indemnify Beneficiary from and against any and all
claims, losses and liabilities growing out of or resulting from this
Deed of Trust (including, without limitation, enforcement of this Deed
of Trust), except claims, losses or liabilities resulting from the
Beneficiary's gross negligence or willful misconduct.
(b) Upon demand, Borrower will pay to the Beneficiary the amount of any
and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the
Beneficiary may incur in connection with the failure by the Borrower
to perform or observe any of the provisions hereof.
4.12. BUSINESS DAYS. If any payment date under the Secured
Indebtedness falls on a day that is not a business day of Beneficiary, or if
the last day of any notice period falls on such a day, the payment shall be due
and the notice period shall end on the next preceding business day of
Beneficiary.
4.13. FINANCING STATEMENT AND FIXTURE FILING. This Deed of Trust
shall constitute a security agreement with respect to (and the Grantor hereby
grants the Beneficiary a security interest in) all personal property and
fixtures included in the Premises as more specifically described in paragraphs
(a), (b), and (c) of the granting clause hereof. The Grantor will, from time
to time, at the request of the Beneficiary, execute any and all financing
statements covering such personal property and fixtures (in a form satisfactory
to the Beneficiary) which the Beneficiary may reasonably consider necessary or
appropriate to perfect its security interest. From the date of its recording,
this Deed of Trust shall be effective as a financing statement filed as a
fixture filing with respect to all goods constituting part of the Premises (as
more particularly described in (b) of the granting clause of this Deed of
Trust) which are or are to become fixtures related to the real estate described
herein. For this purpose, the following information is set forth:
(a) Name and Address of Borrower: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
(b) Name and Address of Secured Party: The Frost National Bank, as Agent
P.O. Box 1600
San Antonio, Texas 78296-1400
Attention: Richard D. Young
(c) This document covers goods which are or are to become fixtures.
(d) The name of the record owner of the land is Southwestern Ice, Inc.
SWI TENNESSEE DEED OF TRUST
19
<PAGE> 20
IN WITNESS WHEREOF, Grantor has executed this Deed of Trust, or has
caused this Deed of Trust to be executed, as of the day and year first above
written.
SOUTHWESTERN ICE, INC., a Texas corporation
By:
--------------------------------------
James F. Stuart, Chief Executive Officer
STATE OF TEXAS )
)
COUNTY OF BEXAR )
Before me, a Notary Public of the state and county aforesaid,
personally appeared James F. Stuart, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged himself to be Chief Executive Officer of SOUTHWESTERN ICE, INC.,
the within named bargainor, a corporation, and that he/she as such Chief
Executive Officer, executed the foregoing instrument for the purpose therein
contained, by signing the name of the corporation by himself/herself as Chief
Executive Officer.
WITNESS MY HAND AND SEAL, at office in San Antonio, Texas, this _____
day of September, 1997.
--------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
SWI Tennessee Deed of Trust
20
<PAGE> 21
EXHIBIT A
Legal Description
SWI TENNESSEE DEED OF TRUST
21
<PAGE> 1
EXHIBIT 10.30
When Recorded, Return To:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296
Attention: Loan No. _________________
Loan Documentation Department, RB-2
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT,
SECURITY AGREEMENT AND FINANCING STATEMENT
THE STATE OF TEXAS (
(
COUNTY OF REFUGIO (
THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING
STATEMENT (this "MORTGAGE") dated as of September 15, 1997, is executed and
delivered by Grantor for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by Grantor.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
Section 1.1. CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition
to the other terms defined herein, each of the following terms shall have the
meaning assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWER": Packaged Ice, Inc., a Texas corporation.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrower, The Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
"GRANTOR": Mission Party Ice, Inc., a Texas corporation, and its
successors and assigns.
"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrower, and payable to the order
of any Bank, evidencing loans advanced to Borrower under the Credit Agreement,
in an aggregate principal face amount of $20,000,000, bearing interest as
therein provided, containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and finally maturing on April 15, 2003,
together with any renewals, increases, extensions, restatements, or
modifications thereof.
MPI TEXAS DEED OF TRUST
<PAGE> 2
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
Section 1.2. MORTGAGED PROPERTY. Grantor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: (a) the
real estate (herein called the "LAND") described in EXHIBIT A which is attached
hereto and incorporated herein by reference, and (i) all improvements now or
hereafter situated or to be situated on the Land (herein together called the
"IMPROVEMENTS"); and (ii) all right, title and interest of Grantor in and to
(1) all streets, roads, alleys, easements, rights-of-way, licenses, rights of
ingress and egress, vehicle parking rights and public places, existing or
proposed, abutting, adjacent, used in connection with or pertaining, to the
Land or the Improvements; (2) any strips or gores between the Land and abutting
or adjacent properties; and (3) all water and water rights, timber, crops and
mineral interests on or pertaining to the Land or the Improvements (the Land,
Improvements and other rights, titles and interests referred to in this clause
(a) being herein sometimes collectively called the "PREMISES"); (b) all
fixtures, equipment, systems, machinery, furniture, furnishings, appliances,
inventory, goods, building and construction materials, supplies, and articles
of personal property, of every kind and character, now owned or hereafter
acquired by Grantor, which are now or hereafter attached to or situated in, on
or about the Land or the Improvements, or used in or necessary to the complete
and proper planning, development, use, occupancy or operation thereof, or
acquired (whether delivered to the Land or stored elsewhere) for use or
installation in or on the Land or the Improvements, and all renewals and
replacements of, substitutions for and additions to the foregoing (the
properties referred to in this clause (b) being herein sometimes collectively
called the "ACCESSORIES," all of which are hereby declared to be permanent
accessions to the Land); (c) all (i) plans and specifications for the
Improvements; (ii) Grantor's rights, but not liability for any breach by
Grantor, under all commitments (including any commitment for financing to pay
any of the secured indebtedness, as defined below), insurance policies and
other contracts and general intangibles (including, but not limited to
trademarks, trade names and symbols) related to the Premises or the Accessories
or the operation thereof; (iii) deposits (including, but not limited to
Grantor's rights in tenants' security deposits, deposits with respect to
utility services to the Premises, and any deposits or reserves hereunder or
under any other Loan Document for taxes, insurance or otherwise), money,
accounts, instruments, documents, notes and chattel paper arising from or by
virtue of any transactions related to the Premises or the Accessories (without
derogation of ARTICLE 3 hereof); (iv) permits, licenses, franchises,
certificates, development rights, commitments and rights for utilities, and
other rights and privileges obtained in connection with the Premises or the
Accessories; (v) leases, rents, royalties, bonuses, issues, profits, revenues
and other benefits of the Premises and the Accessories (without derogation of
ARTICLE 3 hereof); (vi) oil, gas and other hydrocarbons and other minerals
produced from or allocated to the Land and all products processed or obtained
therefrom, and the proceeds thereof; and (vii) engineering, accounting, title,
legal, and other technical or business data concerning the Mortgaged Property
which are in the possession of Grantor or in which Grantor can otherwise grant
a security interest; and (d) all (i) proceeds of or arising from the
properties, rights, titles and interests referred to above in this SECTION 1.2,
including, but not limited to proceeds of any sale, lease or other disposition
thereof, proceeds of each policy of insurance relating thereto (including
premium refunds), proceeds of the taking thereof or of any rights appurtenant
thereto, including change of grade of streets, curb cuts or other rights of
access, by eminent domain or transfer in lieu thereof for public or
quasi-public use under any law, and proceeds arising out of any damage thereto;
and (ii) other interests of every kind and character which Grantor now has or
hereafter acquires in, to or for the benefit of the properties, rights, titles
and interests referred to above in this SECTION 1.2 and all property used or
useful in connection therewith, including, but not limited to rights of ingress
and egress and remainders, reversions and reversionary rights or interests; and
if the estate of Grantor in any of the property referred to above in this
SECTION 1.2 is a leasehold estate, this conveyance shall include, and the lien
and security interest created hereby shall encumber and extend to, all other or
additional
2 MPI TEXAS DEED OF TRUST
<PAGE> 3
title, estates, interests or rights which are now owned or may hereafter be
acquired by Grantor in or to the property demised under the lease creating the
leasehold estate; TO HAVE AND TO HOLD the foregoing rights, interests and
properties, and all rights, estates, powers and privileges appurtenant thereto
(herein collectively called the "MORTGAGED PROPERTY"), unto Trustee, and to his
successors or substitutes in this trust, and to his or their successors and
assigns, in trust, however, upon the terms, provisions and conditions herein
set forth.
Section 1.3. SECURITY INTEREST. Grantor hereby grants to Agent, as
agent for the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business and
Commerce Code, or under the Uniform Commercial Code in force in any other state
to the extent the same is applicable law.
Section 1.4. NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage
is made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities and all renewals,
extensions, supplements, increases, and modifications thereof in whole or in
part from time to time:
(i) the Promissory Notes and all other notes given in substitution
therefor or in modification, supplement, increase, renewal or extension
thereof, in whole or in part (such notes, as from time to time renewed,
extended, supplemented, increased, or modified and all other notes given in
substitution therefor, or in modification, renewal or extension thereof, in
whole or in part, being hereinafter collectively called the "NOTES," and
individually a "NOTE," and Agent and the other Banks, or the subsequent holders
at the time in question of the Notes or any of the secured indebtedness, as
hereinafter defined, being collectively herein called "HOLDERS" and
individually a "HOLDER"); (ii) all indebtedness and other obligations owed by
the Borrower to any Holder now or hereafter incurred or arising pursuant to or
permitted by the provisions of the Notes, this Mortgage, or any other document
now or hereafter evidencing, governing, guaranteeing, securing, or otherwise
executed in connection with the loans evidenced by the Notes, including, but
not limited to any loan or credit agreement, tri-party financing agreement or
other agreement between the Borrower and Holders, or among the Borrower,
Holders and any other party or parties, pertaining to the repayment or use of
the proceeds of the loan evidenced by the Notes (the Credit Agreement, the
Notes, this Mortgage, any other "LOAN PAPERS" (as such term is defined in the
Credit Agreement), and such other documents, as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS");
(iii) all other loans and future advances made by any Holder to the Borrower
and all other debts, obligations and liabilities of Grantor of every kind and
character now or hereafter existing in favor of any Holder, and arising under
the Credit Agreement, any of the Notes, or any of the other Loan Documents, and
whether direct or indirect, primary or secondary, joint or several, fixed or
contingent, secured or unsecured, and whether originally payable to such Holder
or to a third party and subsequently acquired by such Holder, it being
contemplated that Grantor may hereafter become indebted to one or more Holders
for such other debts, obligations and liabilities arising under the Credit
Agreement, any of the Notes, or any of the other Loan Documents; provided,
however, and notwithstanding the foregoing provisions of this clause (iii),
this Mortgage shall not secure any such other loan, advance, debt, obligation
or liability with respect to which any such Holder is by applicable law
prohibited from obtaining a lien on real estate nor shall this clause (iii)
operate or be effective to constitute or require any assumption or payment by
any person, in any way, of any debt of any other person to the extent that the
same would violate or exceed the limit provided in any applicable usury or
other law.
The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY."
3 MPI TEXAS DEED OF TRUST
<PAGE> 4
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Grantor represents, warrants, and covenants as follows:
(a) PAYMENT AND PERFORMANCE. Grantor will, and will cause the
Borrower to, make due and punctual payment of the secured indebtedness.
Grantor will, and will cause the Borrower to, timely and properly perform and
comply with all of the covenants, agreements, and conditions imposed upon them
by this Mortgage and the other Loan Documents and will not permit a default to
occur hereunder or thereunder which shall remain uncured. Time shall be of the
essence in this Mortgage.
(b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has in Grantor's
own right, and Grantor covenants to maintain, lawful, good and indefeasible
title to the Mortgaged Property, free and clear of all liens, charges, claims,
security interests, and encumbrances except for (i) any and all matters of
record as of the date hereof and disclosed to Agent only to the extent the same
are valid and subsisting and affect the Mortgaged Property, (ii) the liens and
security interests evidenced by this Mortgage, (iii) statutory liens for ad
valorem taxes and standby fees on the Mortgaged Property which are not yet
delinquent, and (iv) other liens and security interests (if any) in favor of
any Bank (the matters described in the foregoing clauses (i), (ii), (iii) and
(iv) being herein called the "PERMITTED ENCUMBRANCES"). Grantor, and Grantor's
successors and assigns, will warrant and forever defend title to the Mortgaged
Property, subject as aforesaid to Trustee and his successors or substitutes and
assigns, against the claims and demands of all persons claiming or to claim the
same or any part thereof. Grantor will punctually pay, perform, observe and
keep all covenants, obligations and conditions in or pursuant to any Permitted
Encumbrance and will not modify or permit modification of any Permitted
Encumbrance without the prior written consent of Agent. Inclusion of any
matter as a Permitted Encumbrance does not constitute approval or waiver by
Agent of any existing or future violation or other breach thereof by Grantor,
by the Mortgaged Property or otherwise. No part of the Mortgaged Property
constitutes all or any part of the homestead of Grantor. If any right or
interest of Agent or any Bank in the Mortgaged Property or any part thereof
shall be endangered or questioned or shall be attacked directly or indirectly,
Trustee and Agent, or either of them (whether or not named as parties to legal
proceedings with respect thereto), are hereby authorized and empowered to take
such reasonable steps as in their discretion may be proper for the defense of
any such legal proceedings or the protection of such right or interest of Agent
or any Bank, including, but not limited to the employment of independent
counsel, the prosecution or defense of litigation, and the compromise or
discharge of adverse claims. All reasonable expenditures so made of every kind
and character shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent or Trustee (as the case may be), and
the party (Agent or Trustee, as the case may be) making such expenditures shall
be subrogated to all rights of the person receiving such payment.
(c) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Mortgaged Property or the ownership, use,
occupancy or enjoyment of any portion thereof, or any utility service thereto,
as the same become due and payable, including, but not limited to all ad
valorem taxes assessed against the Mortgaged Property or any part thereof,
except for any such taxes or charges being contested in good faith and by
proper proceedings for which adequate reserves in accordance with generally
accepted accounting principles have been taken, and shall deliver promptly to
Agent such evidence of the payment thereof as Agent may reasonably require.
4 MPI TEXAS DEED OF TRUST
<PAGE> 5
(d) INSURANCE. Grantor shall obtain and maintain at Grantor's
sole expense: (1) all-risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning, windstorm, explosion,
hail, tornado and such hazards as are presently included in so-called
"all-risk" coverage and against such other insurable hazards as Agent may
require, in an amount not less than 100% of the full replacement cost,
including the cost of debris removal, without deduction for depreciation and
sufficient to prevent Grantor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (2) if and to the extent any portion of
the Premises is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Grantor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Premises; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts,
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Grantor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Grantor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan Document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Grantor shall, in each instance promptly upon the request of Agent and at
Grantor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss of or damage to the Mortgaged Property shall contain a
standard mortgage clause (without contribution) naming Agent, as agent for the
Banks, as mortgagee with loss proceeds payable to Agent notwithstanding (i) any
act, failure to act or negligence of or violation of any warranty, declaration
or condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Grantor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to Agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Grantor has failed to perform Grantor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Grantor, to the
same extent as if it had been made payable to Agent. Upon any foreclosure
hereof or transfer of title to the Mortgaged Property in extinguishment of the
whole or any part of the secured indebtedness, all of Grantor's right, title
and interest
5 MPI TEXAS DEED OF TRUST
<PAGE> 6
in and to the insurance policies referred to in this Section (including
unearned premiums) and all proceeds payable thereunder shall thereupon vest in
the purchaser at foreclosure or other such transferee, to the extent
permissible under such policies. Agent shall have the right (but not the
obligation) to make proof of loss for, settle and adjust any claim under, and
receive the proceeds of, all insurance for loss of or damage to the Mortgaged
Property, and the expenses incurred by Agent in the adjustment and collection
of insurance proceeds shall be a part of the secured indebtedness and shall be
due and payable to Agent on demand. Agent shall not be, under any
circumstances, liable or responsible for the obtaining, maintaining or adequacy
of any insurance or for failure to collect or exercise diligence in the
collection of any of such proceeds or for failure to see to the proper
application of any amount paid over to Grantor. Any such proceeds received by
Agent shall, after deduction therefrom of all reasonable expenses actually
incurred by Agent, including attorneys' fees, at Agent's option be (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration, either partly or entirely,
of the Mortgaged Property so damaged, or (3) applied to the payment of the
secured indebtedness in such order and manner as Agent, in its sole discretion,
may elect, whether or not due. Grantor shall at all times comply with the
requirements of the insurance policies required hereunder and of the issuers of
such policies and of any board of fire underwriters or similar body as
applicable to or affecting the Mortgaged Property.
(e) RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence of a default and upon the written request of Agent, to secure
certain of Grantor's obligations in paragraphs (c) and (d) above, but not in
lieu of such obligations, Grantor will deposit with Agent a sum equal to ad
valorem taxes, assessments and charges (which charges for the purpose of this
paragraph shall include without limitation any recurring charge which could
result in a lien against the Mortgaged Property) against the Mortgaged Property
for the current year and the premiums for such policies of insurance for the
current year, all as estimated by Agent and prorated to the end of the calendar
month following the month during which Agent's request is made, and thereafter
will deposit with Agent, on each date when an installment of principal and/or
interest is due on the Notes, sufficient funds (as estimated from time to time
by Agent) to permit Agent to pay at least fifteen (15) days prior to the due
date thereof, the next maturing ad valorem taxes, assessments and charges and
premiums for such policies of insurance. Agent shall have the right to rely
upon tax information furnished by applicable taxing authorities in the payment
of such taxes or assessments and shall have no obligation to make any protest
of any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Agent for future use, applied to any secured
indebtedness or refunded to Grantor, at Agent's option, and any deficiency in
such funds so deposited shall be made up by Grantor upon demand of Agent. All
such funds so deposited shall bear no interest, may be mingled with the general
funds of Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Grantor (which statements shall be presented by Grantor to Agent a
reasonable time before the applicable amount is due); provided, however, that,
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Grantor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Grantor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
(f) CONDEMNATION. Grantor shall notify Agent immediately after
Grantor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Grantor shall, at Grantor's expense, diligently prosecute any
such
6 MPI TEXAS DEED OF TRUST
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proceedings. Agent shall have the right (but not the obligation) to participate
in any such proceeding, and to be represented by counsel of its own choice.
Agent shall be entitled to receive all sums which may be awarded or become
payable to Grantor for the condemnation of the Mortgaged Property, or any part
thereof, for public or quasi-public use, or by virtue of private sale in lieu
thereof, and any sums which may be awarded or become payable to Grantor for
injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Grantor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option be (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any such sum
or for failure to see to the proper application of any amount paid over to
Grantor. Agent is hereby authorized, in the name of Grantor, to execute and
deliver valid acquittances for, and to appeal from, any such award, judgment or
decree. All reasonable costs and expenses (including but not limited to
reasonable attorneys' fees) incurred by Agent in connection with any
condemnation shall be a demand obligation owing by Grantor (which Grantor
hereby promises to pay) to Agent pursuant to this Mortgage.
(g) COMPLIANCE WITH LEGAL REQUIREMENTS. The Mortgaged Property
and the use, operation and maintenance thereof and all activities thereon do
and shall at all times comply with all applicable Legal Requirements (defined
below). The Mortgaged Property is not, and shall not be, dependent on any
other property or premises or any interest therein other than the Mortgaged
Property to fulfill any requirement of any Legal Requirement. Grantor shall
not, by act or omission, permit any building or other improvement not subject
to the lien of this Mortgage to rely on the Mortgaged Property or any interest
therein to fulfill any requirement of any Legal Requirement. No part of the
Mortgaged Property constitutes a non-conforming use under any zoning law or
similar law or ordinance applicable thereto. Grantor has obtained and shall
preserve in force all requisite zoning, utility, building, health and operating
permits from the governmental authorities having jurisdiction over the
Mortgaged Property. If Grantor receives a written notice or claim from any
authority having jurisdiction over the Mortgaged Property that the Mortgaged
Property, or any use, activity, operation or maintenance thereof or thereon, is
not in compliance with any Legal Requirement, Grantor will promptly furnish a
copy of such notice or claim to Agent. Grantor has received no notice and has
no knowledge of any such noncompliance. As used in this Mortgage: (i) the term
"LEGAL REQUIREMENT" means any applicable law (defined below), agreement,
covenant, restriction, easement or condition, as any of the same now exists or
may be changed or amended or come into effect in the future; and (ii) the term
"LAW" means any applicable federal, state or local law, statute, ordinance,
code, rule, regulation, license, permit, authorization, decision, order,
injunction or decree, domestic or foreign.
(h) MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the
Mortgaged Property in good first class order, repair, operating condition and
appearance, reasonable wear and tear excepted, causing all reasonably necessary
repairs, renewals, replacements, additions and improvements to be promptly
made, and will not allow any of the Mortgaged Property to be wasted or to
deteriorate. Notwithstanding the foregoing, Grantor will not, without the
prior written consent of Agent, (i) remove from the Mortgaged Property any
fixtures or personal property covered by this Mortgage except as permitted by
the Credit Agreement or as such as is replaced by Grantor by an article of
equal suitability and value, owned by Grantor, free and clear of any lien or
security interest (except that created by this Mortgage), or (ii) make any
structural alteration to the Mortgaged Property or any other alteration thereto
which materially impairs the value thereof. If any act or
7 MPI TEXAS DEED OF TRUST
<PAGE> 8
occurrence of any kind or nature (including any condemnation or any casualty
for which insurance was not obtained or obtainable) shall result in material
damage to or loss or destruction of the Mortgaged Property, Grantor shall give
prompt notice thereof to Agent and Grantor shall promptly, at Grantor's sole
cost and expense and regardless of whether insurance or condemnation proceeds
(if any) shall be available or sufficient for the purpose, commence and
continue diligently to completion to restore, repair, replace and rebuild the
Mortgaged Property as nearly as possible to its value, condition and character
immediately prior to the damage, loss or destruction.
(i) NO OTHER LIENS. Grantor will not, without the prior written
consent of Agent, create, place or permit to be created or placed, or through
any act or failure to act, acquiesce in the placing of, or allow to remain, any
deed of trust, mortgage, voluntary or involuntary lien, whether statutory,
constitutional or contractual, security interest, encumbrance or charge, or
conditional sale or other title retention document, against or covering the
Mortgaged Property, or any part thereof, other than the Permitted Encumbrances,
regardless of whether the same are expressly or otherwise subordinate to the
lien or security interest created in this Mortgage, and should any of the
foregoing become attached hereafter in any manner to any part of the Mortgaged
Property without the prior written consent of Agent, Grantor will cause the
same to be promptly discharged and released. Grantor will own all parts of the
Mortgaged Property and will not acquire any fixtures, equipment or other
property forming a part of the Mortgaged Property pursuant to a lease, license,
security agreement or similar agreement, whereby any party has or may obtain
the right to repossess or remove same, without the prior written consent of
Agent. If Agent consents to the voluntary grant by Grantor of any lien,
security interest, or other encumbrance (hereinafter called "SUBORDINATE
MORTGAGE") covering any of the Mortgaged Property or if the foregoing
prohibition is determined by a court of competent jurisdiction to be
unenforceable as to a Subordinate Mortgage, any such Subordinate Mortgage shall
contain express covenants to the effect that: (1) the Subordinate Mortgage is
unconditionally subordinate to this Mortgage and all Leases (hereinafter
defined); (2) if any action (whether judicial or pursuant to a power of sale)
shall be instituted to foreclose or otherwise enforce the Subordinate Mortgage,
no tenant of any of the Leases shall be named as a party defendant, and no
action shall be taken that would terminate any occupancy or tenancy without the
prior written consent of Agent; (3) Rents (hereinafter defined), if collected
by or for the holder of the Subordinate Mortgage, shall be applied first to the
payment of the secured indebtedness then due and expenses incurred in the
ownership, operation and maintenance of the Mortgaged Property in such order as
Agent may determine, prior to being applied to any indebtedness secured by the
Subordinate Mortgage; (4) written notice of default under the Subordinate
Mortgage and written notice of the commencement of any action (whether judicial
or pursuant to a power of sale) to foreclose or otherwise enforce the
Subordinate Mortgage or to seek the appointment of a receiver for all or any
part of the Mortgaged Property shall be given to Agent with or immediately
after the occurrence of any such default or commencement; and (5) neither the
holder of the Subordinate Mortgage, nor any purchaser at foreclosure
thereunder, nor anyone claiming, by, through or under any of them shall succeed
to any of Grantor's rights hereunder without the prior written consent of
Agent.
(j) OPERATION OF MORTGAGED PROPERTY. Grantor will operate the
Mortgaged Property in a good and workmanlike manner and in accordance with all
Legal Requirements and will pay all fees or charges of any kind in connection
therewith. Grantor will keep the Mortgaged Property occupied so as not to
impair the insurance carried thereon. Grantor will not use or occupy or
conduct any activity on or allow the use or occupancy of or the conduct of any
activity on, the Mortgaged Property in any manner which violates any Legal
Requirement or which constitutes a public or private nuisance or which makes
void, voidable or cancelable, or increases the premium of, any insurance then
in force with respect thereto. Grantor will not initiate or permit any zoning
reclassification of the Mortgaged Property or seek any variance under existing
zoning ordinances applicable to the Mortgaged Property or use or permit the use
of the Mortgaged Property
8 MPI TEXAS DEED OF TRUST
<PAGE> 9
in such a manner which would result in such use becoming a non-conforming use
under applicable zoning ordinances or other Legal Requirement. Grantor will
not impose any easement, restrictive covenant or encumbrance upon the Mortgaged
Property, execute or file any subdivision plat or condominium declaration
affecting the Mortgaged Property or consent to the annexation of the Mortgaged
Property to any municipality, without the prior written consent of Agent.
Grantor will not do or suffer to be done any act whereby the value of any part
of the Mortgaged Property may be materially lessened. Grantor will preserve,
protect, renew, extend and retain all material rights and privileges granted
for or applicable to the Mortgaged Property. Without the prior written consent
of Agent, there shall be no drilling or exploration for or extraction, removal
or production of any mineral, hydrocarbon, gas, natural element, compound or
substance (including sand and gravel) from the surface or subsurface of the
Land regardless of the depth thereof or the method of mining or extraction
thereof. Grantor will cause all debts and liabilities of any character
(including without limitation all debts and liabilities for labor, material and
equipment and all debts and charges for utilities servicing the Mortgaged
Property) incurred in the construction, maintenance, operation and development
of the Mortgaged Property to be promptly paid, unless the same are diligently
contested in good faith.
(k) SUITS AND CLAIMS; LOAN DOCUMENTS. Except as disclosed to
Agent in writing, there is no suit, action, claim, investigation, inquiry,
proceeding or demand pending (or, to Grantor's knowledge, threatened) which
affects the Mortgaged Property (including, without limitation, any which
challenges or otherwise pertains to Grantor's title to the Mortgaged Property)
or the validity, enforceability or priority of any of the Loan Documents. The
Loan Documents constitute legal, valid and binding obligations of Grantor (and
of each guarantor, if any) enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Debtor Relief Laws (hereinafter
defined) and except as the availability of certain remedies may be limited by
general principles of equity. Grantor is not a "foreign person" within the
meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and
7701 (i.e. Grantor is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined therein
and in any regulations promulgated thereunder). The loan evidenced by the
Notes is solely for business purposes, and is not for personal, family,
household or agricultural purposes.
(l) FURTHER ASSURANCES. Grantor will, promptly on the reasonable
request of Agent, (i) correct any defect, error or omission which may be
discovered in the contents, execution or acknowledgment of this Mortgage or any
other Loan Document; (ii) execute, acknowledge, deliver, procure and record
and/or file such further documents (including, without limitation, further
deeds of trust, security agreements, financing, statements, continuation
statements, and assignments of rents or leases) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
this Mortgage and the other Loan Documents, to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby (including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Mortgaged
Property) or as deemed advisable by any Holder to protect the lien or the
security interest hereunder against the rights or interests of third persons;
and (iii) provide such certificates, documents, reports, information,
affidavits and other instruments and do such further acts as may be necessary,
desirable or proper in the reasonable determination of Agent or any other
Holder to enable Agent or such other Holder to comply with the requirements or
requests of any agency having jurisdiction over Agent or such other Holder or
any examiners of such agencies with respect to the indebtedness secured hereby,
Grantor or the Mortgaged Property. Grantor shall pay all reasonable costs
connected with any of the foregoing, which shall be a demand obligation owing
by Grantor (which Grantor hereby promises to pay) to Agent or such other Holder
pursuant to this Mortgage.
(m) FEES AND EXPENSES. Without limitation of any other provision
of this Mortgage or of any other Loan Document and to the extent not prohibited
by applicable law, Grantor will pay, and will reimburse
9 MPI TEXAS DEED OF TRUST
<PAGE> 10
to Agent and each other Holder and/or Trustee on demand to the extent paid by
Agent or such other Holder and/or Trustee, provided such amounts are
reasonable: (i) all appraisal fees, filing and recording fees, taxes, abstract
fees, title search or examination fees, uniform commercial code search fees,
escrow fees, reasonable attorneys' fees, environmental inspection fees, and all
other out-of-pocket costs and expenses of every character incurred by Grantor,
Agent or any other Holder and/or Trustee in connection with the preparation of
the Loan Documents, the evaluation, closing and funding of the loan evidenced
by the Loan Documents, and any and all amendments and supplements to this
Mortgage, the Notes or any other Loan Documents or any approval, consent,
waiver, release or other matter requested or required hereunder or thereunder,
or otherwise attributable or chargeable to Grantor as owner of the Mortgaged
Property; and (ii) all reasonable costs and expenses, including, reasonable
attorneys' fees and expenses, incurred or expended in connection with the
exercise of any right or remedy, or the enforcement of any obligation of
Grantor, hereunder or under any other Loan Document.
(n) INDEMNIFICATION.
(i) Grantor will indemnify and hold harmless Agent, each
other Holder and Trustee from and against, and reimburse them on demand for,
any and all Indemnified Matters (defined below). For purposes of this
paragraph (n), the terms "Agent," "Holder" and "Trustee" shall include the
directors, officers, partners, employees and agents of Agent, each Holder and
Trustee, respectively, and any persons owned or controlled by, owning or
controlling, or under common control or affiliated with Agent, each Holder or
Trustee, respectively. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PERSON. However, such indemnities shall not apply to a particular
indemnified person to the extent that the subject of the indemnification is
caused by or arises out of the gross negligence or willful misconduct of that
indemnified person. Any amount to be paid under this paragraph (n) by Grantor
to Agent, any other Holder and/or Trustee shall be a demand obligation owing by
Grantor (which Grantor hereby promises to pay) to Agent, such other Holder
and/or Trustee pursuant to this Mortgage. Nothing in this paragraph, elsewhere
in this Mortgage or in any other Loan Document shall limit or impair any rights
or remedies of Agent, any other Holder and/or Trustee (including without
limitation any rights of contribution or indemnification) against Grantor or
any other person under any other provision of this Mortgage, any other Loan
Document, any other agreement or any applicable Legal Requirement.
(ii) As used herein, the term "INDEMNIFIED MATTERS" means
any and all claims, demands, liabilities (including strict liability), losses,
damages (including consequential damages), causes of action, judgments,
penalties, costs and expenses (including without limitation, reasonable fees
and expenses of attorneys and other professional consultants and experts, and
of the investigation and defense of any claim, whether or not such claim is
ultimately defeated, and the settlement of any claim or judgment including all
value paid or given in settlement) of every kind, known or unknown, foreseeable
or unforeseeable, which may be imposed upon, asserted against or incurred or
paid by Agent, any other Holder and/or Trustee at any time and from time to
time, whenever imposed, asserted or incurred, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Mortgaged Property or with this
Mortgage or any other Loan Document, including, but not limited to any bodily
injury or death or property damage occurring in or upon or in the vicinity of
the Mortgaged Property through any cause whatsoever at any time on or before
the Release Date (defined below), any act performed or omitted to be performed
hereunder or under any other Loan Document, any breach by Grantor of any
representation, warranty, covenant, agreement or condition contained in this
Mortgage or in any other Loan Document, any default as defined herein, and any
claim under or with respect to any Lease or any
10 MPI TEXAS DEED OF TRUST
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Environmental Matters. As used herein, the term "ENVIRONMENTAL MATTER" means:
(a) the presence of any Hazardous Substance on, in, under, above or about the
Mortgaged Property, or the migration or release or threatened migration or
release of any Hazardous Substance on, to, from or through the Mortgaged
Property, on or at any time before the Release Date; or (b) any act, omission,
event or circumstance existing or occurring in connection with the handling,
treatment, containment, removal, storage, decontamination, clean-up, transport
or disposal of any Hazardous Substance which is at any time on or before the
Release Date present on, in, under, above or about the Mortgaged Property; or
(c) any violation on or before the Release Date, of any Environmental
Requirement in effect on or before the Release Date, regardless of whether any
act, omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission,
event or circumstance; or (d) any Environmental Claim, or the filing or
imposition of any environmental lien against the Mortgaged Property, because
of, resulting from, in connection with, or arising out of any of the matters
referred to in clauses (a) through (c) preceding; and regardless of whether any
of the matters referred to in the foregoing clauses (a) through (d) was caused
by Grantor or Grantor's tenant or any subtenant, or a prior owner of the
Mortgaged Property or its tenant or any subtenant, or any third party. The
term "RELEASE DATE" as used herein means the earlier of the following two
dates: (i) the date on which the indebtedness and obligations secured hereby
have been paid and performed in full and this Mortgage has been released, or
(ii) the date on which the lien of this Mortgage is fully and finally
foreclosed or a conveyance by deed in lieu of such foreclosure is fully and
finally effective, and possession of the Mortgaged Property has been given to
the purchaser or grantee free of occupancy and claims to occupancy by Grantor
and Grantor's heirs, devisees, representatives, successors and assigns;
provided, that if such payment, performance, release, foreclosure or conveyance
is challenged, in bankruptcy proceedings or otherwise, the Release Date shall
be deemed not to have occurred until such challenge is rejected, dismissed or
withdrawn with prejudice. The indemnities in this paragraph (n) shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of this Mortgage but will survive the Release Date, foreclosure of
this Mortgage or conveyance in lieu of foreclosure, the repayment of the
secured indebtedness, the discharge and release of this Mortgage and the other
Loan Documents, any bankruptcy or other debtor relief proceeding, and any other
event whatsoever.
(o) TAXES ON NOTES OR MORTGAGE. Grantor will promptly pay all
income, franchise and other taxes owing by Grantor and any stamp taxes or other
taxes (unless such payment by Grantor is prohibited by law) which may be
required to be paid with respect to the Notes, this Mortgage or any other
instrument evidencing or securing any of the secured indebtedness. In the
event of the enactment after this date of any law of any governmental entity
applicable to Agent any other Holder, the Notes, the Mortgaged Property, this
Mortgage or any other Loan Document deducting from the value of property for
the purpose of taxation any lien or security interest thereon, or imposing upon
Agent or any other Holder the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Grantor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or
mortgages or security agreements or the interest of the mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to affect this Mortgage or the indebtedness secured hereby or
Agent or any other Holder, then, and in any such event, Grantor, upon demand by
Agent or any such other Holder, shall pay such taxes, assessments, charges or
liens, or reimburse Agent or such other Holder therefor to the extent permitted
by law.
(p) STATEMENT CONCERNING NOTES OR MORTGAGE. Grantor shall at any
time and from time to time furnish within seven (7) days of a written request
by Agent a written statement in such form as may be required by Agent stating
that: (i) the Notes, this
11 MPI TEXAS DEED OF TRUST
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Mortgage and the other Loan Documents are valid and binding obligations of
Grantor, enforceable against Grantor in accordance with their terms; (ii) the
unpaid principal balance of the Notes; (iii) the date to which interest on the
Notes are paid; (iv) the Notes, this Mortgage and the other Loan Documents have
not been released, subordinated or modified; and (v) there are no offsets or
defenses against the enforcement of the Notes, this Mortgage or any other Loan
Document. If any of the foregoing statements are untrue, Grantor shall,
alternatively, specify the reasons therefor.
(q) ANNUAL APPRAISAL. Agent may at its option obtain at Grantor's
reasonable expense, once in each year (or as otherwise requested by Agent but
in any event no more than once each year) an appraisal of the Mortgaged
Property or any part thereof prepared in accordance with written instructions
from Agent by a third-party appraiser engaged directly by Agent. Each such
appraiser and appraisal shall be reasonably satisfactory to Agent. The costs
of each such appraisal shall be a part of the secured indebtedness and shall be
payable by Grantor to Agent on demand (which obligation Grantor hereby promises
to pay).
Section 2.2. PERFORMANCE BY AGENT ON GRANTOR'S BEHALF. Grantor
agrees that, if Grantor fails to perform any act or to take any action which
under any Loan Document Grantor is required to perform or take, or to pay any
money which under any Loan Document Grantor is required to pay, and whether or
not the failure then constitutes a default hereunder or thereunder, and whether
or not there has occurred any default or defaults hereunder or the secured
indebtedness has been accelerated, Agent, in Grantor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act
or take such action or pay such money, and any reasonable expenses so incurred
by Agent and any money so paid by Agent shall be a demand obligation owing by
Grantor to Agent (which obligation Grantor hereby promises to pay), shall be a
part of the indebtedness secured hereby, and Agent, upon making such payment,
shall be subrogated to all of the rights of the person, entity or body politic
receiving such payment. Agent and its designees shall have the right to enter
upon the Mortgaged Property at any reasonable time for any such purposes. No
such payment or performance by Agent shall waive or cure any default or waive
any right, remedy or recourse of Agent. Any such payment may be made by Agent
in reliance on any statement, invoice or claim without inquiry into the
validity or accuracy thereof. Each amount due and owing by Grantor to Agent
pursuant to this Mortgage shall bear interest, from the date such amount
becomes due until paid, at the rate per annum provided in the Notes for
interest on past due principal owed on the Notes but never in excess of the
maximum non-usurious amount permitted by applicable law, which interest shall
be payable to Agent on demand; and all such amounts, together with such
interest thereon, shall automatically and without notice be a part of the
indebtedness secured hereby. The amount and nature of any expense by Agent
hereunder and the time when paid shall be fully established by the certificate
of Agent or any of Agent's officers or agents.
Section 2.3. ABSENCE OF OBLIGATIONS OF AGENT WITH RESPECT TO
MORTGAGED PROPERTY. Notwithstanding anything in this Mortgage to the contrary,
including, without limitation, the definition of "Mortgaged Property" and/or
the provisions of ARTICLE 3 hereof, (i) to the extent permitted by applicable
law, the Mortgaged Property is composed of Grantor's rights, title and
interests therein but not Grantor's obligations, duties or liabilities
pertaining thereto, (ii) neither Agent nor any other Holder assumes or shall
have any obligations, duties or liabilities in connection with any portion of
the items described in the definition of "Mortgaged Property" herein, prior to
obtaining title to such Mortgaged Property, whether by foreclosure sale, the
granting of a deed in lieu of foreclosure or otherwise, and (iii) Agent, and
each other Holder may, at any time prior to acquisition of title to any portion
of the Mortgaged Property as above described, advise any party in writing as to
the extent of such Holder's interest therein and/or expressly disaffirm in
writing any rights, interests, obligations, duties and/or liabilities with
respect to such Mortgaged Property or matters related thereto. Without
limiting the generality of the foregoing, it is understood and agreed that
Agent and each other Holder shall have no obligations, duties or liabilities
prior to acquisition of title to any portion of the Mortgaged Property, as
lessee under any lease or purchaser or seller under any contract or option
unless Agent and each other Holder elects otherwise by written notification.
12 MPI TEXAS DEED OF TRUST
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ARTICLE 3
COLLATERAL ASSIGNMENT OF RENTS AND LEASES
Section 3.1. ASSIGNMENT. As additional security for the
indebtedness secured hereby, Grantor hereby assigns to Agent, as agent for the
Banks, all Rents (hereinafter defined) and all of Grantor's rights in and under
all Leases (hereinafter defined). Upon the occurrence of a default hereunder,
Agent shall have the right, power and privilege (but shall be under no duty) to
demand possession of the Rents, which demand shall to the fullest extent
permitted by applicable law be sufficient action by Agent to entitle Agent to
immediate and direct payment of the Rents (including delivery to Agent of Rents
collected for the period in which the demand occurs and for any subsequent
period), for application as provided in this Mortgage, all without the
necessity of any further action by Agent, including, without limitation, any
action to obtain possession of the Land, Improvements or any other portion of
the Mortgaged Property. Grantor hereby authorizes and directs the tenants
under the Leases to pay Rents to Agent upon written demand by Agent, without
further consent of Grantor, without any obligation to determine whether a
default has in fact occurred and regardless of whether Agent has taken
possession of any portion of the Mortgaged Property, and the tenants may rely
upon any written statement delivered by Agent to the tenants. Any such payment
to Agent shall constitute payment to Grantor under the Leases, and Grantor
hereby appoints Agent as Grantor's lawful attorney-in-fact for giving, and
Agent is hereby empowered to give, acquittances to any tenants for such
payments to Agent after a default. The assignment contained in this Section
shall become null and void upon the release of this Mortgage. As used herein:
(i) "Lease" means each existing or future lease, sublease (to the extent of
Grantor's rights thereunder) or other agreement under the terms of which any
person has or acquires any right to occupy or use the Mortgaged Property, or
any part thereof, or interest therein, and each existing or future guaranty of
payment or performance thereunder, and all extensions, renewals, modifications
and replacements of each such lease, sublease, agreement or guaranty; and (ii)
"Rents" means all of the rents, revenue, income, profits and proceeds derived
and to be derived from the Mortgaged Property or arising from the use or
enjoyment of any portion thereof or from any Lease, including, but not limited
to liquidated damages following default under any such Lease, all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property, all of
Grantor's rights to recover monetary amounts from any tenant in bankruptcy
including, without limitation, rights of recovery for use and occupancy and
damage claims arising out of Lease defaults, including rejections, under any
applicable Debtor Relief Law (as hereinafter defined), together with any sums
of money that may now or at any time hereafter be or become due and payable to
Grantor by virtue of any and all royalties, overriding royalties, bonuses,
delay rentals and any other amount of any kind or character arising under any
and all present and all future oil, gas, mineral and mining leases covering the
Mortgaged Property or any part thereof, and all proceeds and other amounts paid
or owing to Grantor under or pursuant to any and all contracts and bonds
relating to the construction or renovation of the Mortgaged Property.
Section 3.2. COVENANTS, REPRESENTATIONS AND WARRANTIES CONCERNING
LEASES AND RENTS. Grantor covenants, represents and warrants to each Holder
that: (i) Grantor has good title to, and is the owner of the entire landlord's
interest in, the Leases and Rents hereby assigned and authority to assign them;
(ii) all Leases are valid and enforceable, and in full force and effect, and
are unmodified except as stated therein; (iii) unless otherwise stated in a
Permitted Encumbrance, no Rents or Leases have been or will be assigned,
mortgaged, pledged or otherwise encumbered and no other person has or will
acquire any right, title or interest in such Rents or Leases; (iv) no Rents
have been waived, released, discounted, set off or compromised; (v) except as
stated in the Leases, Grantor has not received any funds or deposits from any
13 MPI TEXAS DEED OF TRUST
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tenant for which credit has not already been made on account of accrued Rents;
(vi) Grantor shall perform all of its obligations under the Leases and enforce
the tenants' obligations under the leases to the extent enforcement is prudent
under the circumstances; (vii) Grantor will not without the prior written
consent of Agent, enter into any Lease after the date hereof, or waive,
release, discount, set off, compromise, reduce or defer any Rent, receive or
collect Rents more than one (1) month in advance, grant any rent-free period to
any tenant, reduce any Lease term or waive, release or otherwise modify any
other material obligation under any Lease, renew or extend any Lease except in
accordance with a right of the tenant thereto in such Lease, approve or consent
to an assignment of a Lease or a subletting of any part of the premises covered
by a Lease, or settle or compromise any claim against a tenant under a Lease in
bankruptcy or otherwise; provided, however, Agent will not unreasonably
withhold or delay its consent to any of the foregoing actions; (viii) Grantor
will not, except in good faith where the tenant is in material default
thereunder, terminate or consent to the cancellation or surrender of any Lease
having an unexpired term of one year or more unless promptly after the
cancellation or surrender a new Lease of such premises is made with a new
tenant having a credit standing, in Agent's judgment, at least equivalent to
that of the tenant whose Lease was canceled, on substantially the same terms as
the terminated or canceled Lease; (ix) Grantor will not execute any Lease
except in accordance with the Loan Documents and for actual occupancy by the
tenant thereunder; (x) Grantor shall give prompt notice to Agent, as soon as
Grantor first obtains notice, of any claim, or the commencement of any action,
by any tenant or subtenant under or with respect to a Lease regarding any
claimed damage, default, diminution of or offset against Rent, cancellation of
the Lease, or constructive eviction, excluding, however, notices of default
under residential Leases, and Grantor shall defend, at Grantor's reasonable
expense, any proceeding pertaining to any Lease, including, if Agent so
requests, any such proceeding, to which Agent is a party; (xi) Grantor shall as
requested by Agent (but in any event no more than once per calendar quarter),
within ten (10) days of each written request, deliver to Agent a complete rent
roll of the Mortgaged Property in such detail as Agent may require, and
financial statements of the tenants, subtenants and guarantors under the Leases
to the extent available to Grantor, and deliver to such of the tenants and
others obligated under the Leases specified by Agent written notice of the
assignment in SECTION 3.1 hereof in form and content satisfactory to Agent;
(xii) promptly upon written request by Agent, Grantor shall deliver to Agent
copies of all Leases and copies of all records relating thereto; (xiii) there
shall be no merger of the leasehold estates, created by the Leases, with the
fee estate of the Land without the prior written consent of Agent; and (xiv)
Agent may at any time and from time to time by specific written instrument
intended for the purpose, unilaterally subordinate the lien of this Mortgage to
any Lease, without joinder or consent of, or notice to, Grantor, any tenant or
any other person, and notice is hereby given to each tenant under a Lease of
such right to subordinate. No such subordination shall constitute a
subordination to any lien or other encumbrance, whenever arising, or improve
the right of any junior lienholder; and nothing herein shall be construed as
subordinating this Mortgage to any Lease.
Section 3.3. NO LIABILITY OF AGENT. Agent's acceptance of this
assignment shall not be deemed to constitute Agent as a "mortgagee in
possession," nor obligate Agent to appear in or defend any proceeding relating
to any Lease or to the Mortgaged Property, or to take any action hereunder,
expend any money, incur any expenses, or perform any obligation or liability
under any Lease, or assume any obligation for any deposit delivered to Grantor
by any tenant and not as such delivered to and accepted by Agent. Agent shall
not be liable for any injury or damage to person or property in or about the
Mortgaged Property unless due to Agent's gross negligence or willful
misconduct, or for Agent's failure to collect or to exercise diligence in
collecting, Rents, but shall be accountable only for Rents that it shall
actually receive. Neither the assignment of Leases and Rents nor enforcement
of Agent's rights regarding Leases and Rents (including collection of Rents)
nor possession of the Mortgaged Property by Agent nor Agent's consent to or
approval of any Lease (nor all of the same), shall render Agent liable on any
obligation under or with respect to any Lease or constitute affirmation of, or
any subordination to, any Lease, occupancy, use or option. If Agent seeks or
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obtains any judicial relief regarding Rents or Leases, the same shall in no way
prevent the concurrent or subsequent employment of any other appropriate rights
or remedies nor shall same constitute an election of judicial relief for any
foreclosure or any other purpose. Neither Agent has nor assumes any
obligations as lessor or landlord with respect to any Lease. The rights of
Agent under this ARTICLE 3 shall be cumulative of all other rights of Agent
under the Loan Documents or otherwise.
ARTICLE 4
DEFAULT
Section 4.1. EVENTS OF DEFAULT. The occurrence of any one of the
following shall be a default under this Mortgage ("DEFAULT"):
(a) DEFAULT UNDER CREDIT AGREEMENT. An Event of Default under the
Credit Agreement occurs and is continuing, subject to applicable notice and
cure periods.
(b) TRANSFER OF THE MORTGAGED PROPERTY. Any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Mortgaged Property or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, except: (i) sales or transfers of
items of the Accessories which have become obsolete or worn beyond practical
use and which have been replaced by adequate substitutes, owned by Grantor,
having a value equal to or greater than the replaced items when new; (ii) the
grant, in the ordinary course of business, of a leasehold interest in a part of
the Improvements to a tenant for occupancy, not containing a right or option to
purchase and not in contravention of any provision of this Mortgage or of any
other Loan Document, and (iii) such sales, leases, conveyances, assignments,
pledges, encumbrances or transfers permitted under the Credit Agreement.
Agent, on behalf of and upon the direction of Required Banks (as defined in the
Credit Agreement) may, in its sole discretion, waive a default under this
paragraph, but it shall have no obligation to do so, and any waiver may be
conditioned upon such one or more of the following, (if any) which Agent may
require: the grantee's integrity, reputation, character, creditworthiness and
management ability being satisfactory to Agent in its sole judgment and grantee
executing, prior to such sale or transfer, a written assumption agreement
containing such terms as Agent may require, a principal paydown on the Notes,
an increase in the rate of interest payable under the Notes, a transfer fee, a
modification of the term of the Notes, and any other modification of the Loan
Documents which Agent may require.
(c) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge,
encumbrance, assignment or transfer, voluntarily or involuntarily, whether by
operation of law or otherwise, of any interest in Grantor (if Grantor is not a
natural person but is a corporation, partnership, trust or other legal entity),
without the prior written consent of Agent (including, without limitation, if
Grantor is a partnership or joint venture, the withdrawal from or admission
into it of any general partner or joint venturer), which consent shall not be
unreasonably withheld, except: (i) sales, pledges, encumbrances, assignments or
transfers permitted under the Credit Agreement, and (ii) sales or transfers of
stock in Grantor if Grantor is a corporation or sales or transfers of limited
partnership interests in Grantor if Grantor is a limited partnership provided
that such sales or transfers, together with any prior sales or transfers of
interests in Grantor, do not result in more than 49% of the total beneficial
interests in Grantor having been sold or transferred since the date of this
Mortgage.
(d) GRANT OF EASEMENT, ETC. Without the prior written consent of
Agent, which consent shall not be unreasonably withheld, Grantor grants any
easement or dedication, files any plat, condominium
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declaration, or restriction, or otherwise encumbers the Mortgaged Property, or
seeks or permits any zoning reclassification or variance, unless such action is
expressly permitted by the Loan Documents or does not affect the Mortgaged
Property.
(e) ABANDONMENT. The owner of the Mortgaged Property abandons any
of the Mortgaged Property for a period in excess of thirty (30) consecutive
days.
(f) DEFAULT UNDER OTHER LIEN. A default or event of default
occurs under any lien, security interest or assignment covering the Mortgaged
Property or any part thereof (whether or not Agent has consented, and without
hereby implying Agent's consent, to any such lien, security interest or
assignment not created hereunder) and such default is not cured within any
applicable grace period provided by such document, or the holder of any such
lien, security interest or assignment declares a default or institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
(g) INTENTIONALLY DELETED.
(h) INTENTIONALLY DELETED.
(i) LIQUIDATION, ETC. The liquidation, termination, dissolution,
merger, consolidation or failure to maintain good standing in the State of
Texas (or in the case of an individual, the death or legal incapacity) of the
owner of the Mortgaged Property or any person obligated to pay any part of the
secured indebtedness.
(j) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any
reason without Agent's specific written consent cease to be in full force and
effect, or shall be declared null and void or unenforceable in whole or in
part, or the validity or enforceability thereof, in whole or in part, shall be
challenged or denied by any party thereto other than Agent; or the liens,
mortgages or security interests of Agent or any other Holder in any of the
Mortgaged Property become unenforceable in whole or in part, or cease to be of
the priority herein required, or the validity or enforceability thereof, in
whole or in part, shall be challenged or denied by Grantor or any person
obligated to pay any part of the secured indebtedness.
Section 4.2. NOTICE AND CURE. If any provision of this Mortgage or
any other Loan Document provides for Holder to give to Grantor any notice
regarding a default or incipient default, then if Agent shall fail to give such
notice to Grantor as provided, the sole and exclusive remedy of Grantor for
such failure shall be to seek appropriate equitable relief to enforce the
agreement to give such notice and to have any acceleration of the maturity of
the Notes and the secured indebtedness postponed or revoked and foreclosure
proceedings in connection therewith delayed or terminated pending or upon the
curing of such default in the manner and during the period of time permitted by
such agreement, if any, and Grantor shall have no right to damages or any other
type of relief not herein specifically set out against Agent or any other
Holder, all of which damages or other relief are hereby waived by Grantor.
Nothing herein or in any other Loan Document shall operate or be construed to
add on or make cumulative any cure or grace periods specified in any of the
Loan Documents.
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ARTICLE 5
REMEDIES
Section 5.1. CERTAIN REMEDIES. If a default shall occur, Agent, upon
the direction of Required Banks (as defined in the Credit Agreement), may (but
shall have no obligation to) exercise any one or more of the following
remedies, without notice (unless notice is required by applicable statute or
the terms hereof or any of the Loan Documents):
(a) ACCELERATION. Agent may at any time and from time to time
declare any or all of the secured indebtedness immediately due and payable and
such secured indebtedness shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest, notice of acceleration
or of intention to accelerate or any other notice or declaration of any kind,
all of which are hereby expressly waived by Grantor, except as provided above.
(b) ENFORCEMENT OF ASSIGNMENT OF RENTS. Prior or subsequent to
taking possession of any portion of the Mortgaged Property or taking any action
with respect to such possession, Agent may: (1) collect and/or sue for the
Rents in Agent's own name, give receipts and releases therefor, and after
deducting all reasonable expenses of collection, including attorneys' fees and
expenses, apply the net proceeds thereof to the secured indebtedness in such
manner and order as Agent may elect and/or to the operation and management of
the Mortgaged Property, including the payment of management, brokerage and
attorney's fees and expenses; and (2) require Grantor to transfer all security
deposits and records thereof to Agent together with original counterparts of
the Leases.
(c) FORECLOSURE. Upon the occurrence of a default, Trustee, or
his successor or substitute, is authorized and empowered and it shall be his
special duty at the request of Agent to sell the Mortgaged Property or any part
thereof situated in the State of Texas, at the courthouse of any county
(whether or not the counties in which the Mortgaged Property is located are
contiguous, if the Mortgaged Property is located in more than one county) in
the State of Texas in which any part of the Mortgaged Property is situated, at
public vendue to the highest bidder for cash between the hours of ten o'clock
a.m. and four o'clock p.m. on the first Tuesday in any month or at such other
place, time and date as provided by the statutes of the State of Texas then in
force governing sales of real estate under powers of sale conferred by deed of
trust, after having given notice of such sale in accordance with such statutes.
Any sale made by Trustee hereunder may be as an entirety or in such parcels as
Agent may request. To the extent permitted by applicable law, any sale may be
adjourned by announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive sale
or sales under such power until the whole of the Mortgaged Property shall be
sold; and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby
and the expense of executing this trust as provided herein, this Mortgage and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property but Agent shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Mortgaged
Property. Trustee may, after any request or direction by Agent, sell not only
the real property but also the Collateral and other interests which are a part
of the Mortgaged Property, or any part thereof, as a unit and as a part of a
single sale, or may sell any part of the Mortgaged Property separately from the
remainder of the Mortgaged Property. It shall not be necessary for Trustee to
have taken possession of any part of the Mortgaged Property or to have present
or to exhibit at any sale any of the Collateral. After each sale, Trustee
shall make to the purchaser or purchasers at such sale good and sufficient
conveyances in the name of Grantor, conveying the property so sold to the
purchaser or purchasers with general warranty of title by Grantor, subject to
the Permitted Encumbrances (and to such leases and other matters, if any, as
Trustee may elect upon request of Agent), and shall receive the proceeds of
said sale or
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sales and apply the same as herein provided. Payment of the purchase price to
the Trustee shall satisfy the obligation of purchaser at such sale therefor,
and such purchaser shall not be responsible for the application thereof. The
power of sale granted herein shall not be exhausted by any sale held hereunder
by Trustee or his substitute or successor, and such power of sale may be
exercised from time to time and as many times as Agent may deem necessary until
all of the Mortgaged Property has been duly sold and all secured indebtedness
has been fully paid. In the event any sale hereunder is not completed or is
defective in the opinion of Agent, such sale shall not exhaust the power of
sale hereunder and Agent shall have the right to cause a subsequent sale or
sales to be made hereunder. Any and all statements of fact or other recitals
made in any deed or deeds or other conveyances given by Trustee or any
successor or substitute appointed hereunder as to nonpayment of the secured
indebtedness or as to the occurrence of any default, or as to Agent having
declared all of said indebtedness to be due and payable, or as to the request
to sell, or as to notice of time, place and terms of sale and the properties to
be sold having been duly given, or as to the refusal, failure or inability to
act of Trustee or any substitute or successor trustee, or as to the appointment
of any substitute or successor trustee, or as to any other act or thing having
been duly done by Agent or by such Trustee, substitute or successor, shall be
taken as prima facie evidence of the truth of the facts so stated and recited.
The Trustee or his successor or substitute may appoint or delegate any one or
more persons as agent to perform any act or acts necessary or incident to any
sale held by Trustee, including the posting of notices and the conduct of sale,
but in the name and on behalf of Trustee, his successor or substitute. If
Trustee or his successor or substitute shall have given notice of sale
hereunder, any successor or substitute Trustee thereafter appointed may
complete the sale and the conveyance of the property pursuant thereto as if
such notice had been given by the successor or substitute Trustee conducting
the sale.
(d) UNIFORM COMMERCIAL CODE. Without limitation of Agent's rights
of enforcement with respect to the Collateral or any part thereof in accordance
with the procedures for foreclosure of real estate, Agent may exercise its
rights of enforcement with respect to the Collateral or any part thereof under
the Texas Business and Commerce Code as amended (or under the Uniform
Commercial Code in force in any other state to the extent the same is
applicable law) and in conjunction with, in addition to or in substitution for
those rights and remedies: (1) Agent may enter upon Grantor's premises to take
possession of, assemble and collect the Collateral or, to the extent and for
those items of the Collateral permitted under applicable law, to render it
unusable; (2) Agent may require Grantor to assemble the Collateral and make it
available at a place Agent designates which is mutually convenient to allow
Agent to take possession or dispose of the Collateral; (3) written notice
mailed to Grantor as provided herein at least ten (10) days prior to the date
of public sale of the Collateral or prior to the date after which private sale
of the Collateral will be made shall constitute reasonable notice; (4) any sale
made pursuant to the provisions of this paragraph shall be deemed to have been
a public sale conducted in a commercially reasonable manner if held
contemporaneously with and upon the same notice as required for the sale of the
Mortgaged Property under power of sale as provided in paragraph (c) above in
this SECTION 5.1; (5) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the Collateral
and the other Mortgaged Property may, at the option of Agent, be sold as a
whole; (6) it shall not be necessary that Agent take possession of the
Collateral or any part thereof prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale; (7)
with respect to application of proceeds of disposition of the Collateral under
SECTION 5.3 hereof, the costs and expenses incident to disposition shall
include the reasonable expenses of retaking, holding, preparing for sale or
lease, selling, leasing, and the like and the reasonable attorneys' fees and
legal expenses incurred by Agent and each other Holder; (8) any and all
statements of fact or other recitals made in any bill of sale or assignment or
other instrument evidencing any foreclosure sale hereunder as to nonpayment of
the secured indebtedness or as to the occurrence of any default, or as to Agent
having declared all of such indebtedness to be due and payable, or as to notice
of time, place and terms of sale and of the properties to be
18 MPI TEXAS DEED OF TRUST
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sold having been duly given, or as to any other act or thing having been duly
done by Agent, shall be taken as prima facie evidence of the truth of the facts
so stated and recited; and (9) Agent may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Agent, including the sending of notices and the conduct of the sale,
but in the name and on behalf of Agent.
(e) LAWSUITS. Agent may proceed by a suit or suits in equity or
at law, whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction.
(f) ENTRY ON MORTGAGED PROPERTY. Agent is authorized, prior or
subsequent to the institution of any foreclosure proceedings, to the fullest
extent permitted by applicable law, to enter upon the Mortgaged Property, or
any part thereof, and to take possession of the Mortgaged Property and all
books and records relating thereto, and to exercise without interference from
Grantor any and all rights which Grantor has with respect to the management,
possession, operation, protection or preservation of the Mortgaged Property.
Agent shall not be deemed to have taken possession of the Mortgaged Property or
any part thereof except upon the exercise of its right to do so, and then only
to the extent evidenced by its demand and overt act specifically for such
purpose. All reasonable costs, expenses and liabilities of every character
incurred by Agent in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property shall constitute a demand obligation of
Grantor (which obligation Grantor hereby promises to pay) to Agent pursuant to
this Mortgage. If necessary to obtain the possession provided for above, Agent
may invoke any and all legal remedies to dispossess Grantor. In connection
with any action taken by Agent pursuant to this Section, Agent shall not be
liable for any loss sustained by Grantor resulting from any failure to let the
Mortgaged Property, or any part thereof, or from any act or omission of Agent
in managing the Mortgaged Property unless such loss is caused by the willful
misconduct and bad faith of Agent, nor shall Agent be obligated to perform or
discharge any obligation, duty or liability of Grantor arising under any lease
or other agreement relating to the Mortgaged Property or arising under any
Permitted Encumbrance or otherwise arising. Grantor hereby assents to,
ratifies and confirms any and all actions of Agent with respect to the
Mortgaged Property taken under this Section.
(g) RECEIVER. Agent shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Mortgaged
Property, whether such receivership be incident to a proposed sale (or sales)
of such property or otherwise, and without regard to the value of the Mortgaged
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Grantor does hereby irrevocably consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, agrees not to oppose any application therefor by Agent, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Agent to application of Rents as provided in this Mortgage.
Nothing herein is to be construed to deprive Agent of any other right, remedy
or privilege it may have under the law to have a receiver appointed. Any
reasonable amount of money advanced by Agent in connection with any such
receivership shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent pursuant to this Mortgage.
(h) TERMINATION OF COMMITMENT TO LEND. Agent and each other
Holder may terminate any commitment or obligation to lend or disburse funds
under any Loan Document.
(i) OTHER RIGHTS AND REMEDIES. Agent may exercise any and all
other rights and remedies which Agent may have under the Loan Documents, or at
law or in equity or otherwise.
19 MPI TEXAS DEED OF TRUST
<PAGE> 20
Section 5.2. EFFECTIVE AS MORTGAGE. This instrument shall be
effective as a mortgage as well as a deed of trust and upon the occurrence of a
default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by applicable law, and any foreclosure suit may be brought by Trustee
or by Agent; and to the extent, if any, required to cause this instrument to be
so effective as a mortgage as well as a deed of trust, Grantor hereby mortgages
the Mortgaged Property to Agent, as agent for itself and the other Banks. In
the event a foreclosure hereunder shall be commenced by Trustee, or his
substitute or successor, Agent may at any time before the sale of the Mortgaged
Property direct Trustee to abandon the sale, and may then institute suit for
the collection of the Notes and/or any other secured indebtedness, and for the
foreclosure of this Mortgage. It is agreed that if Agent should institute a
suit for the collection of the Notes or any other secured indebtedness and for
the foreclosure of this Mortgage, Agent may at any time before the entry of a
final judgment in said suit dismiss the same, and require Trustee, his
substitute or successor to sell the Mortgaged Property in accordance with the
provisions of this Mortgage.
Section 5.3. PROCEEDS OF FORECLOSURE. The proceeds of any sale held
by Trustee or Agent or any receiver or public officer in foreclosure of the
liens and security interests evidenced hereby shall be applied: FIRST, to the
payment of all necessary costs and expenses incident to such foreclosure sale,
including but not limited to all reasonable attorneys' fees and legal expenses,
all court costs and charges of every character, and to the payment of the other
secured indebtedness, pro rata, including specifically without limitation the
principal, accrued interest and attorneys' fees due and unpaid on the Notes and
the amounts due and unpaid and owed to Agent and each other Holder under this
Mortgage, the order and manner of application to the items in this clause to be
in Agent's sole discretion; and SECOND, the remainder, if any there shall be,
shall be paid to Grantor, or to Grantor's heirs, devisees, representatives,
successors or assigns, or such other persons (including the holder or
beneficiary of any inferior lien) as may be entitled thereto by law; provided,
however, that if Agent is uncertain which person or persons are so entitled,
Agent may interplead such remainder in any court of competent jurisdiction and
the amount of any reasonable attorneys' fees, court costs and expenses incurred
in such action shall be a part of the secured indebtedness and shall be
reimbursable (without limitation) from such remainder.
Section 5.4. AGENT AS PURCHASER. Agent shall have the right to
become the purchaser as agent for, and for the benefit of the Banks, at any
sale held by Trustee or substitute or successor or by any receiver or public
officer or at any public sale, and Agent shall have the right to credit upon
the amount of Agent's successful bid, to the extent necessary to satisfy such
bid, all or any part of the secured indebtedness in such manner and order as
Agent may elect.
Section 5.5. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence
of a default, Agent shall have the right to proceed with foreclosure judicial
or non-judicial) of the liens and security interests hereunder without
declaring the entire secured indebtedness due, and in such event any such
foreclosure sale may be made subject to the unmatured part of the secured
indebtedness; and any such sale shall not in any manner affect the unmatured
part of the secured indebtedness, but as to such unmatured part this Mortgage
shall remain in full force and effect just as though no sale had been made.
The proceeds of such sale shall be applied as provided in SECTION 5.3 hereof
except that the amount paid under clause FIRST thereof shall be only the
matured portion of the secured indebtedness and any proceeds of such sale in
excess of those provided for in clause FIRST (modified as provided above) shall
be applied to the prepayment (without penalty) of any other secured
indebtedness in such manner and order and to such extent as Agent deems
advisable, and the remainder, if any, shall be applied as provided in clause
second of SECTION 5.3 hereof. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the secured
indebtedness.
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Section 5.6. REMEDIES CUMULATIVE. All rights and remedies
provided for herein and in any other Loan Document are cumulative of each other
and of any and all other rights and remedies existing at law or in equity, and
Trustee and Agent shall, in addition to the rights and remedies provided herein
or in any other Loan Document, be entitled to avail themselves of all such
other rights and remedies as may now or hereafter exist at law or in equity for
the collection of the secured indebtedness and the enforcement of the covenants
herein and the foreclosure of the liens and security interests evidenced
hereby, and the resort to any right or remedy provided for hereunder or under
any such other Loan Document or provided for by law or in equity shall not
prevent the concurrent or subsequent employment of any other appropriate right
or rights or remedy or remedies.
Section 5.7. AGENT'S DISCRETION AS TO SECURITY. Agent may resort
to any security given by this Mortgage or to any other security now existing,
or hereafter given to secure the payment of the secured indebtedness, in whole
or in part, and in such portions and in such order as may seem best to Agent in
its sole and uncontrolled discretion, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 5.8. GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full
extent Grantor may do so, Grantor agrees that Grantor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension
or redemption, and Grantor, for Grantor, Grantor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by
applicable law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of
assets of Grantor, including the Mortgaged Property, or to a sale in inverse
order of alienation in the event of foreclosure of the liens and/or security
interests hereby created. Grantor shall not have or assert any right under any
statute or rule of law pertaining to the marshaling of assets, sale in inverse
order of alienation, the exemption of homestead, the administration of estates
of decedents, or other matters whatever to defeat, reduce or affect the right
of Agent under the terms of this Mortgage to a sale of the Mortgaged Property
for the collection of the secured indebtedness without any prior or different
resort for collection, or the right of Agent under the terms of this Mortgage
to the payment of the secured indebtedness out of the proceeds of sale of the
Mortgaged Property in preference to every other claimant whatever. Grantor
waives any right or remedy which Grantor may have or be able to assert pursuant
to Chapter 34 of the Texas Business and Commerce Code, or any other provision
of Texas law, pertaining to the rights and remedies of sureties. If any law
referred to in this Section and now in force, of which Grantor or Grantor's
heirs, devisees, representatives, successors or assigns or any other persons
claiming any interest in the Mortgaged Property might take advantage despite
this Section, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to preclude the application of this Section.
Section 5.9. DELIVERY OF POSSESSION AFTER FORECLOSURE. In the
event there is a foreclosure sale hereunder and at the time of such sale,
Grantor or Grantor's heirs, devisees, representatives, successors or assigns
are occupying or using the Mortgaged Property, or any part thereof, each and
all shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
property occupied, such rental to be due daily to the purchaser; and to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as tenants at will. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall
21 MPI TEXAS DEED OF TRUST
<PAGE> 22
be entitled to institute and maintain a summary action for possession of the
property (such as an action for forcible detainer) in any court having
jurisdiction.
ARTICLE 6
MISCELLANEOUS
Section 6.1. SCOPE OF MORTGAGE. This Mortgage is a deed of trust
and mortgage of both real and personal property, a security agreement, a
financing statement and a collateral assignment, and also covers proceeds and
fixtures.
Section 6.2. EFFECTIVE AS A FINANCING STATEMENT. This Mortgage
shall be effective as a financing statement filed as a fixture filing with
respect to all fixtures included within the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property (including said fixtures) is situated. This Mortgage
shall also be effective as a financing statement covering minerals or the like
(including oil and gas) and accounts subject to Subsection (e) of Section 9.103
of the Texas Business and Commerce Code, as amended, and similar provisions (if
any) of the Uniform Commercial Code as enacted in any other state where the
Mortgaged Property is situated which will be financed at the wellhead or
minehead of the wells or mines located on the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property is situated. This Mortgage shall also be effective as a
financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of
Grantor is the address of Grantor set forth at the end of this Mortgage and the
address of Agent from which information concerning the security interests
hereunder may be obtained is the address of Agent set forth at the end of this
Mortgage. A carbon photographic or other reproduction of this Mortgage or of
any financing statement relating to this Mortgage shall be sufficient as a
financing statement for any of the purposes referred to in this Section.
Section 6.3. NOTICE TO ACCOUNT DEBTORS. In addition to the rights
granted elsewhere in this Mortgage, Agent may at any time notify the account
debtors or obligors of any accounts, chattel paper, negotiable instruments or
other evidences of indebtedness included in the Collateral to pay Agent
directly.
Section 6.4. WAIVER BY AGENT. Agent, at the direction of Required
Banks (as defined in the Credit Agreement), may at any time and from time to
time by a specific writing intended for the purpose: (a) waive compliance by
Grantor with any covenant herein made by Grantor to the extent and in the
manner specified in such writing; (b) consent to Grantor's doing any act which
hereunder Grantor is prohibited from doing, or to Grantor's failing to do any
act which hereunder Grantor is required to do, to the extent and in the manner
specified in such writing; (c) release any part of the Mortgaged Property or
any interest therein from the lien and security interest of this Mortgage,
without the joinder of Trustee; or (d) release any party liable, either
directly or indirectly, for the secured indebtedness or for any covenant herein
or in any other Loan Document, without impairing or releasing the liability of
any other party. No such act shall in any way affect the rights or powers of
Agent or Trustee hereunder except to the extent specifically agreed to by Agent
in such writing.
Section 6.5. NO IMPAIRMENT OF SECURITY. The lien, security
interest and other security rights of Agent and each other Holder hereunder or
under any other Loan Document shall not be impaired by any indulgence,
moratorium or release granted by Agent including, but not limited to, any
renewal, extension or modification which Holders may grant with respect to any
secured indebtedness, or any surrender,
22 MPI TEXAS DEED OF TRUST
<PAGE> 23
compromise, release, renewal, extension, exchange or substitution which Agent
may grant in respect of the Mortgaged Property, or any part thereof or any
interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any secured indebtedness. The taking of additional
security by Agent or any other Holder shall not release or impair the lien,
security interest or other security rights of Agent and each other Holder
hereunder or affect the liability of Grantor or of any endorser, guarantor or
surety, or improve the right of any junior lienholder in the Mortgaged Property
(without implying hereby Agent's consent to any junior lien).
Section 6.6. ACTS NOT CONSTITUTING WAIVER BY AGENT. Agent, on
behalf of Required Banks (as defined in the Credit Agreement), may waive any
default without waiving any other prior or subsequent default. Agent may
remedy any default without waiving the default remedied. Neither failure by
Agent to exercise, nor delay by Agent in exercising, nor discontinuance of the
exercise of any right, power or remedy (including but not limited to the right
to accelerate the maturity of the secured indebtedness or any part thereof)
upon or after any default shall be construed as a waiver of such default or as
a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Agent of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
then such waiver or consent shall be effective only in the specific instance,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Grantor in any case shall of itself entitle Grantor to any
other or further notice or demand in similar or other circumstances.
Remittances in payment of any part of the secured indebtedness other than in
the required amount in immediately available U.S. funds shall not, regardless
of any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Agent in immediately available U.S. funds and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting
bank or banks. Acceptance by Agent of any payment in an amount less than the
amount then due on any secured indebtedness shall be deemed an acceptance on
account only and shall not in any way excuse the existence of a default
hereunder.
Section 6.7. GRANTOR'S SUCCESSORS. If the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, Agent may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Mortgage and to the indebtedness
secured hereby in the same manner as with Grantor, without in any way vitiating
or discharging Grantor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Mortgaged Property, no forbearance on the part of Agent, and no extension
of the time for the payment of the indebtedness secured hereby given by Agent,
upon direction of Banks, shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Grantor hereunder for the payment
of the indebtedness or performance of the obligations secured hereby or the
liability of any other person hereunder for the payment of the indebtedness
secured hereby. Grantor agrees that it shall be bound by any modification of
this Mortgage or any of the other Loan Documents made by Agent and any
subsequent owner of the Mortgaged Property, with or without notice to such
Grantor, and no such modifications shall impair the obligations of such Grantor
under this Mortgage or any other Loan Document. Nothing in this Section or
elsewhere in this Mortgage shall be construed to imply Agent's consent to any
transfer of the Mortgaged Property.
Section 6.8. PLACE OF PAYMENT; FORUM. All secured indebtedness
which may be owing hereunder at any time by Grantor shall be payable at the
place designated in the Notes or the other Loan
23 MPI TEXAS DEED OF TRUST
<PAGE> 24
Documents (or if no such designation is made, at the address of Agent indicated
at the end of this Mortgage). Grantor hereby irrevocably submits generally and
unconditionally for itself and in respect of its property to the non-exclusive
jurisdiction of any Texas state court, or any United States federal court,
sitting in the county in which the secured indebtedness is payable, and to the
non-exclusive jurisdiction of any state or United States federal court sitting
in the state in which any of the Mortgaged Property is located, over any suit,
action or proceeding arising out of or relating to this Mortgage or the secured
indebtedness. Grantor hereby agrees and consents that, in addition to any
methods of service of process provided for under applicable law, all service of
process in any such suit, action or proceeding in any Texas state court, or any
United States federal court, sitting in the county in which the secured
indebtedness is payable may be made by certified or registered mail, return
receipt requested, directed to Grantor at its address stated in this Mortgage,
or at a subsequent address of Grantor of which Agent received actual notice
from Grantor in accordance with this Mortgage, and service so made shall be
complete five (5) days after the same shall have been so mailed.
Section 6.9. SUBROGATION TO EXISTING LIENS; VENDOR'S LIEN. To the
extent that proceeds of the Notes are used to pay indebtedness secured by any
outstanding, lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Holders at Grantor's
request, and Holders shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, however remote, irrespective of
whether said liens, security interests, charges or encumbrances are released,
and all of the same are recorded as valid and subsisting and are renewed and
continued and merged herein to secure the secured indebtedness, but the terms
and provisions of this Mortgage shall govern and control the manner and terms
of enforcement of the liens, security interests, charges and encumbrances to
which Holders are subrogated hereunder. It is expressly understood that in
consideration of the payment of such indebtedness by Holders, Grantor hereby
waives and releases all demands and causes of action for offsets and payments
in connection with the said indebtedness. If all or any portion of the
proceeds of the loan evidenced by the Notes or of any other secured
indebtedness has been advanced for the purpose of paying the purchase price for
all or a part of the Mortgaged Property, no vendor's lien is waived; and Agent
and each other Holder shall have, and is hereby granted, a vendor's lien on the
Mortgaged Property as cumulative additional security for the secured
indebtedness. Agent may foreclose under this Mortgage or under the vendor's
lien without waiving the other or may foreclose under both.
Section 6.10. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If
any part of the secured indebtedness cannot be lawfully secured by this
Mortgage or if any part of the Mortgaged Property cannot be lawfully subject to
the lien and security interest hereof to the full extent of such indebtedness,
then an payments made shall be applied on said indebtedness first in discharge
of that portion thereof which is not secured by this Mortgage.
Section 6.11. COMPLIANCE WITH USURY LAWS. It is the intent of
Grantor, Agent and each other Holder and all other parties to the Loan
Documents to conform to and contract in strict compliance with applicable usury
law from time to time in effect. All agreements between each Holder and
Grantor (or any other party liable with respect to any indebtedness under the
Loan Documents) are hereby limited by the provisions of this Section which
shall override and control all such agreements, whether now existing or
hereafter arising. In no way, nor in any event or contingency (including but
not limited to prepayment, default, demand for payment, or acceleration of the
maturity of any obligation), shall the interest taken, reserved, contracted
for, charged, chargeable, or received under this Mortgage, the Notes or any
other Loan Document or otherwise, exceed the maximum non-usurious amount
permitted by applicable law (the "MAXIMUM AMOUNT"). If, from any possible
construction of any document, interest would otherwise be
24 MPI TEXAS DEED OF TRUST
<PAGE> 25
payable in excess of the Maximum Amount, any such construction shall be subject
to the provisions of this Section and such document shall ipso facto be
automatically reformed and the interest payable shall be automatically reduced
to the Maximum Amount, without the necessity of execution of any amendment or
new document. If any Holder shall ever receive anything of value which is
characterized as interest under applicable law and which would apart from this
provision be in excess of the Maximum Amount, an amount equal to the amount
which would have been excessive interest shall, without penalty, be applied to
the reduction of the principal amount owing on the secured indebtedness in the
inverse order of its maturity and not to the payment of interest, or refunded
to Grantor or the other payor thereof if and to the extent such amount which
would have been excessive exceeds such unpaid principal. The right to
accelerate maturity of the Notes or any other secured indebtedness does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and Holders do not intend to charge or receive
any unearned interest in the event of acceleration. All interest paid or
agreed to be paid to each Holder shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full stated
term (including any renewal or extension) of such indebtedness so that the
amount of interest on account of such indebtedness does not exceed the Maximum
Amount. As used in this Section, the term "APPLICABLE LAW" shall mean the laws
of the State of Texas or the federal laws of the United States applicable to
this transaction, whichever laws allow the greater interest, as such laws now
exist or may be changed or amended or come into effect in the future.
Section 6.12. SUBSTITUTE TRUSTEE. The Trustee may resign by an
instrument in writing addressed to Agent, or Trustee may be removed at any time
with or without cause by an instrument in writing executed by Agent. In case
of the death, resignation, removal, or disqualification of Trustee, or if for
any reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without
other formality than appointment and designation in writing, executed by Agent
and the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the indebtedness secured
hereby has been paid in full, or until the Mortgaged Property is fully and
finally sold hereunder. If Agent is a corporation or association and such
appointment is executed on its behalf by officers of such corporation or
association, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation or
association. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he or she shall thereupon succeed to,
and shall hold, possess and execute, all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All references herein to
"Trustee" shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time
acting hereunder.
Section 6.13. NO LIABILITY OF TRUSTEE. The Trustee shall not be
liable for any error of judgment or act done by Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever
(including Trustee's negligence), except for Trustee's gross negligence or
willful misconduct. The Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine. All moneys received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated in any manner from any other moneys (except to the
extent required by law), and Trustee shall be under no liability for interest
on any moneys received by him hereunder. Grantor hereby ratifies and confirms
any and all acts which the herein named Trustee or his successor or successors,
substitute or substitutes, in this trust, shall do lawfully by virtue hereof.
Grantor will
25 MPI TEXAS DEED OF TRUST
<PAGE> 26
reimburse Trustee for, and save him harmless against, any and all liability not
due to gross negligence or willful misconduct and expenses which may be
incurred by him in the performance of his duties. The foregoing indemnity
shall not terminate upon discharge of the secured indebtedness or foreclosure,
or release or other termination, of this Mortgage.
Section 6.14. RELEASE OF MORTGAGE. If all of the secured
indebtedness be paid as the same becomes due and payable and all of the
covenants, warranties, undertakings and agreements made in this Mortgage are
kept and performed, and all obligations, if any, of Agent and each other Holder
for further advances have been terminated, then, and in that event only, all
rights under this Mortgage shall terminate (except to the extent expressly
provided herein with respect to indemnifications, representations and
warranties and other rights which are to continue following the release hereof)
and the Mortgaged Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, and such liens and
security interests shall be released by Agent in due form at Grantor's cost.
Without limitation, all provisions herein for indemnity of Agent and each other
Holder or Trustee shall survive discharge of the secured indebtedness and any
foreclosure, release or termination of this Mortgage.
Section 6.15. NOTICES. All notices, requests, consents, demands
and other communications required or which any party desires to give hereunder
or under any other Loan Document shall be in writing and, unless otherwise
specifically provided in such other Loan Document, shall be deemed sufficiently
given or furnished if delivered by personal delivery, by courier, or by
registered or certified United States mail, postage prepaid, addressed to the
party to whom directed at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party
whose address is to be changed) or by telegram, telex, or facsimile. Any such
notice or communication shall be deemed to have been given either at the time
of personal delivery or, in the case of courier or mail, as of the date of
first attempted delivery at the address and in the manner provided herein, or,
in the case of telegram, telex or facsimile, upon receipt; provided that,
service of a notice required by Texas Property Code Section 51.002, as amended,
shall be considered complete when the requirements of that statute are met.
Notwithstanding the forgoing, no notice of change of address shall be effective
except upon receipt. This Section shall not be construed in any way to affect
or impair any waiver of notice or demand provided in any Loan Document or to
require giving of notice or demand to or upon any person in any situation or
for any reason.
Section 6.16. INVALIDITY OF CERTAIN PROVISIONS. A determination
that any provision of this Mortgage is unenforceable or invalid shall not
affect the enforceability or validity of any other provision and the
determination that the application of any provision of this Mortgage to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other persons
or circumstances.
Section 6.17. GENDER; TITLES; CONSTRUCTION. Within this Mortgage,
words of any gender shall be held and construed to include any other gender,
and words in the singular number shall be held and construed to include the
plural, unless the context otherwise requires. Titles appearing at the
beginning of any subdivisions hereof are for convenience only, do not
constitute any part of such subdivisions, and shall be disregarded in
construing the language contained in such subdivisions. The use of the words
"herein," "hereof," "hereunder" and other similar compounds of the word "here"
shall refer to this entire Mortgage and not to any particular Article, Section,
paragraph or provision. The term "person" and words importing persons as used
in this Mortgage shall include firms, associations, partnerships (including
limited partnerships), joint ventures, trusts, corporations and other legal
entities, including public or governmental bodies, agencies or
instrumentalities, as well as natural persons.
26 MPI TEXAS DEED OF TRUST
<PAGE> 27
Section 6.18. REPORTING COMPLIANCE. Grantor agrees to comply with
any and all reporting requirements applicable to the transaction evidenced by
the Notes and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including but not limited to The International Investment Survey Act
of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of
1984 and further agrees upon written request of Agent to furnish Agent with
evidence of such compliance.
Section 6.19. REGARDING AGENT. Except where otherwise expressly
provided herein, (a) in any instance hereunder where the approval, consent or
the exercise of judgment of Agent is required or requested, no approval or
consent of Agent shall be deemed to have been given except by a specific
writing intended for the purpose and executed by an authorized representative
of Agent, and (b) any payments made to Agent hereunder in respect of the
Mortgaged Property shall be made to Agent for the ratable benefit of all of the
Banks based upon the outstanding principal amount of the secured indebtedness
(except for reimbursements of Agent for sums expended by it hereunder, which
sums shall be retained by Agent for its own account).
Section 6.20. GRANTOR. Unless the context clearly indicates
otherwise, as used in this Mortgage, "GRANTOR" means the grantors named in
SECTION 1.1 hereof or any of them. The obligations of Grantor hereunder shall
be joint and several. If any Grantor, or any signatory who signs on behalf of
any Grantor, is a corporation, partnership or other legal entity, Grantor and
any such signatory, and the person or persons signing for it, represent and
warrant to Agent that this instrument is executed, acknowledged and delivered
by Grantor's duly authorized representatives. If Grantor is an individual, no
power of attorney granted by Grantor herein shall terminate on Grantor's
disability.
Section 6.21. EXECUTION; RECORDING. This Mortgage has been
executed in several counterparts, all of which are identical, and all of which
counterparts together shall constitute one and the same instrument. The date
or dates reflected in the acknowledgments hereto indicate the date or dates of
actual execution of this Mortgage, but such execution is as of the date shown
on the first page hereof, and for purposes of identification and reference the
date of this Mortgage shall be deemed to be the date reflected on the first
page hereof. Grantor will cause this Mortgage and all amendments and
supplements thereto and substitutions therefor and all financing statements and
continuation statements relating thereto to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Trustee or Agent shall reasonably
request and will pay all such recording, filing, re-recording and re-filing
taxes, fees and other charges.
Section 6.22. SUCCESSORS AND ASSIGNS. The terms, provisions,
covenants and conditions hereof shall be binding upon Grantor, and the heirs,
devisees, representatives, successors and assigns of Grantor, and shall inure
to the benefit of Trustee, Agent and each other Holder and shall constitute
covenants running with the Land. All references in this Mortgage to Grantor
shall be deemed to include all such heirs, devisees, representatives,
successors and assigns of Grantor.
Section 6.23. MODIFICATION OR TERMINATION. The Loan Documents may
only be modified or terminated by a written instrument or instruments intended
for that purpose and executed by the party against which enforcement of the
modification or termination is asserted. Any alleged modification or
termination which is not so documented shall not be effective as to any party.
Section 6.24. NO PARTNERSHIP, ETC. The relationship between
Holders and Grantor is solely that of lenders and borrower. Neither Agent nor
any other Holder has any fiduciary or other special relationship with Grantor.
Nothing contained in the Loan Documents is intended to create any partnership,
joint venture,
27 MPI TEXAS DEED OF TRUST
<PAGE> 28
association or special relationship between Grantor and any Holder or in any
way make Agent or any other Holder a co- principal with Grantor with reference
to the Mortgaged Property. All agreed contractual duties between or among
Agent, each other Holder, Grantor and Trustee are set forth herein and in the
other Loan Documents and any additional implied covenants or duties are hereby
disclaimed. Any inferences to the contrary of any of the foregoing are hereby
expressly negated.
Section 6.25. APPLICABLE LAW. This Mortgage, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law.
Section 6.26. ENTIRE AGREEMENT. The Loan Documents constitute the
entire understanding and agreement between Grantor, Agent and each other Holder
with respect to the transactions arising in connection with the indebtedness
secured hereby and supersede all prior written or oral understandings and
agreements between Grantor, Agent and each other Holder with respect to the
matters addressed in the Loan Documents. Grantor hereby acknowledges that,
except as incorporated in writing in the Loan Documents, there are not, and
were not, and no persons are or were authorized by Agent or any other Holder to
make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Loan
Documents. To the extent any of the provisions contained herein conflict with
the terms set forth in the Credit Agreement, the provisions of the Credit
Agreement shall control.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this instrument is executed by Grantor as to the
date first written on page 1 hereof.
The address and federal tax identification number of Grantor are:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Federal Tax No.: 76-0533333
GRANTOR:
MISSION PARTY ICE, INC., a Texas corporation
By:
------------------------------------------
James F. Stuart, Chief Executive Officer
28 MPI TEXAS DEED OF TRUST
<PAGE> 29
The address of Agent is
The Frost National Bank, as Agent
P.O. Box 1600
San Antonio, Texas 78296
Attention: Richard D. Young, Senior Vice President
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on ____________, 1997, by
JAMES F. STUART, Chief Executive Officer of MISSION PARTY ICE, INC., a Texas
corporation, on behalf of such corporation.
--------------------------------
Notary Public, State of Texas
29 MPI TEXAS DEED OF TRUST
<PAGE> 30
EXHIBIT A
TO
DEED OF TRUST
PROPERTY
Grantor's fee simple interest in the following properties located in Refugio
County, Texas:
[TO BE ATTACHED]
MPI TEXAS DEED OF TRUST
<PAGE> 1
EXHIBIT 10.31
When Recorded, Return To:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296
Attention: Loan No. _________________
Loan Documentation Department, RB-2
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT,
SECURITY AGREEMENT AND FINANCING STATEMENT
THE STATE OF TEXAS (
(
COUNTIES OF CAMERON (
AND HIDALGO
THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING
STATEMENT (this "MORTGAGE") dated as of September 15, 1997, is executed and
delivered by Grantor for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by Grantor.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
Section 1.1. CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition
to the other terms defined herein, each of the following terms shall have the
meaning assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWER": Packaged Ice, Inc., a Texas corporation.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrower, The Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
"GRANTOR": Southwestern Ice, Inc., a Texas corporation, and its
successors and assigns.
"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrower, and payable to the order
of any Bank, evidencing loans advanced to Borrower under the Credit Agreement,
in an aggregate principal face amount of $20,000,000, bearing interest as
therein provided, containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and
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finally maturing on April 15, 2003, together with any renewals, increases,
extensions, restatements, or modifications thereof.
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
Section 1.2. MORTGAGED PROPERTY. Grantor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: (a) the
real estate (herein called the "LAND") described in EXHIBIT A which is attached
hereto and incorporated herein by reference, and (i) all improvements now or
hereafter situated or to be situated on the Land (herein together called the
"IMPROVEMENTS"); and (ii) all right, title and interest of Grantor in and to
(1) all streets, roads, alleys, easements, rights-of-way, licenses, rights of
ingress and egress, vehicle parking rights and public places, existing or
proposed, abutting, adjacent, used in connection with or pertaining, to the
Land or the Improvements; (2) any strips or gores between the Land and abutting
or adjacent properties; and (3) all water and water rights, timber, crops and
mineral interests on or pertaining to the Land or the Improvements (the Land,
Improvements and other rights, titles and interests referred to in this clause
(a) being herein sometimes collectively called the "PREMISES"); (b) all
fixtures, equipment, systems, machinery, furniture, furnishings, appliances,
inventory, goods, building and construction materials, supplies, and articles
of personal property, of every kind and character, now owned or hereafter
acquired by Grantor, which are now or hereafter attached to or situated in, on
or about the Land or the Improvements, or used in or necessary to the complete
and proper planning, development, use, occupancy or operation thereof, or
acquired (whether delivered to the Land or stored elsewhere) for use or
installation in or on the Land or the Improvements, and all renewals and
replacements of, substitutions for and additions to the foregoing (the
properties referred to in this clause (b) being herein sometimes collectively
called the "ACCESSORIES," all of which are hereby declared to be permanent
accessions to the Land); (c) all (i) plans and specifications for the
Improvements; (ii) Grantor's rights, but not liability for any breach by
Grantor, under all commitments (including any commitment for financing to pay
any of the secured indebtedness, as defined below), insurance policies and
other contracts and general intangibles (including, but not limited to
trademarks, trade names and symbols) related to the Premises or the Accessories
or the operation thereof; (iii) deposits (including, but not limited to
Grantor's rights in tenants' security deposits, deposits with respect to
utility services to the Premises, and any deposits or reserves hereunder or
under any other Loan Document for taxes, insurance or otherwise), money,
accounts, instruments, documents, notes and chattel paper arising from or by
virtue of any transactions related to the Premises or the Accessories (without
derogation of ARTICLE 3 hereof); (iv) permits, licenses, franchises,
certificates, development rights, commitments and rights for utilities, and
other rights and privileges obtained in connection with the Premises or the
Accessories; (v) leases, rents, royalties, bonuses, issues, profits, revenues
and other benefits of the Premises and the Accessories (without derogation of
ARTICLE 3 hereof); (vi) oil, gas and other hydrocarbons and other minerals
produced from or allocated to the Land and all products processed or obtained
therefrom, and the proceeds thereof; and (vii) engineering, accounting, title,
legal, and other technical or business data concerning the Mortgaged Property
which are in the possession of Grantor or in which Grantor can otherwise grant
a security interest; and (d) all (i) proceeds of or arising from the
properties, rights, titles and interests referred to above in this SECTION 1.2,
including, but not limited to proceeds of any sale, lease or other disposition
thereof, proceeds of each policy of insurance relating thereto (including
premium refunds), proceeds of the taking thereof or of any rights appurtenant
thereto, including change of grade of streets, curb cuts or other rights of
access, by eminent domain or transfer in lieu thereof for public or
quasi-public use under any law, and proceeds arising out of any damage thereto;
and (ii) other interests of every kind and character which Grantor now has or
hereafter acquires in, to or for the benefit of the properties, rights, titles
and interests referred to above in this SECTION 1.2 and all property used or
useful in connection therewith, including, but not limited to rights of ingress
and egress and remainders, reversions and reversionary rights or interests; and
if the estate of
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Grantor in any of the property referred to above in this SECTION 1.2 is a
leasehold estate, this conveyance shall include, and the lien and security
interest created hereby shall encumber and extend to, all other or additional
title, estates, interests or rights which are now owned or may hereafter be
acquired by Grantor in or to the property demised under the lease creating the
leasehold estate; TO HAVE AND TO HOLD the foregoing rights, interests and
properties, and all rights, estates, powers and privileges appurtenant thereto
(herein collectively called the "MORTGAGED PROPERTY"), unto Trustee, and to his
successors or substitutes in this trust, and to his or their successors and
assigns, in trust, however, upon the terms, provisions and conditions herein
set forth.
Section 1.3. SECURITY INTEREST. Grantor hereby grants to Agent, as
agent for the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business and
Commerce Code, or under the Uniform Commercial Code in force in any other state
to the extent the same is applicable law.
Section 1.4. NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage
is made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities and all renewals,
extensions, supplements, increases, and modifications thereof in whole or in
part from time to time:
(i) the Promissory Notes and all other notes given in substitution
therefor or in modification, supplement, increase, renewal or extension
thereof, in whole or in part (such notes, as from time to time renewed,
extended, supplemented, increased, or modified and all other notes given in
substitution therefor, or in modification, renewal or extension thereof, in
whole or in part, being hereinafter collectively called the "NOTES," and
individually a "NOTE," and Agent and the other Banks, or the subsequent holders
at the time in question of the Notes or any of the secured indebtedness, as
hereinafter defined, being collectively herein called "HOLDERS" and
individually a "HOLDER"); (ii) all indebtedness and other obligations owed by
the Borrower to any Holder now or hereafter incurred or arising pursuant to or
permitted by the provisions of the Notes, this Mortgage, or any other document
now or hereafter evidencing, governing, guaranteeing, securing, or otherwise
executed in connection with the loans evidenced by the Notes, including, but
not limited to any loan or credit agreement, tri-party financing agreement or
other agreement between the Borrower and Holders, or among the Borrower,
Holders and any other party or parties, pertaining to the repayment or use of
the proceeds of the loan evidenced by the Notes (the Credit Agreement, the
Notes, this Mortgage, any other "LOAN PAPERS" (as such term is defined in the
Credit Agreement), and such other documents, as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS");
(iii) all other loans and future advances made by any Holder to the Borrower
and all other debts, obligations and liabilities of Grantor of every kind and
character now or hereafter existing in favor of any Holder, and arising under
the Credit Agreement, any of the Notes, or any of the other Loan Documents, and
whether direct or indirect, primary or secondary, joint or several, fixed or
contingent, secured or unsecured, and whether originally payable to such Holder
or to a third party and subsequently acquired by such Holder, it being
contemplated that Grantor may hereafter become indebted to one or more Holders
for such other debts, obligations and liabilities arising under the Credit
Agreement, any of the Notes, or any of the other Loan Documents; provided,
however, and notwithstanding the foregoing provisions of this clause (iii),
this Mortgage shall not secure any such other loan, advance, debt, obligation
or liability with respect to which any such Holder is by applicable law
prohibited from obtaining a lien on real estate nor shall this clause (iii)
operate or be effective to constitute or require any assumption or payment by
any person, in any way, of any debt of any other person to the extent that the
same would violate or exceed the limit provided in any applicable usury or
other law.
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The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY."
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Grantor represents, warrants, and covenants as follows:
(a) PAYMENT AND PERFORMANCE. Grantor will, and will cause the
Borrower to, make due and punctual payment of the secured indebtedness.
Grantor will, and will cause the Borrower to, timely and properly perform and
comply with all of the covenants, agreements, and conditions imposed upon them
by this Mortgage and the other Loan Documents and will not permit a default to
occur hereunder or thereunder which shall remain uncured. Time shall be of the
essence in this Mortgage.
(b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has in Grantor's
own right, and Grantor covenants to maintain, lawful, good and indefeasible
title to the Mortgaged Property, free and clear of all liens, charges, claims,
security interests, and encumbrances except for (i) any and all matters of
record as of the date hereof and disclosed to Agent only to the extent the same
are valid and subsisting and affect the Mortgaged Property, (ii) the liens and
security interests evidenced by this Mortgage, (iii) statutory liens for ad
valorem taxes and standby fees on the Mortgaged Property which are not yet
delinquent, and (iv) other liens and security interests (if any) in favor of
any Bank (the matters described in the foregoing clauses (i), (ii), (iii) and
(iv) being herein called the "PERMITTED ENCUMBRANCES"). Grantor, and Grantor's
successors and assigns, will warrant and forever defend title to the Mortgaged
Property, subject as aforesaid to Trustee and his successors or substitutes and
assigns, against the claims and demands of all persons claiming or to claim the
same or any part thereof. Grantor will punctually pay, perform, observe and
keep all covenants, obligations and conditions in or pursuant to any Permitted
Encumbrance and will not modify or permit modification of any Permitted
Encumbrance without the prior written consent of Agent. Inclusion of any
matter as a Permitted Encumbrance does not constitute approval or waiver by
Agent of any existing or future violation or other breach thereof by Grantor,
by the Mortgaged Property or otherwise. No part of the Mortgaged Property
constitutes all or any part of the homestead of Grantor. If any right or
interest of Agent or any Bank in the Mortgaged Property or any part thereof
shall be endangered or questioned or shall be attacked directly or indirectly,
Trustee and Agent, or either of them (whether or not named as parties to legal
proceedings with respect thereto), are hereby authorized and empowered to take
such reasonable steps as in their discretion may be proper for the defense of
any such legal proceedings or the protection of such right or interest of Agent
or any Bank, including, but not limited to the employment of independent
counsel, the prosecution or defense of litigation, and the compromise or
discharge of adverse claims. All reasonable expenditures so made of every kind
and character shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent or Trustee (as the case may be), and
the party (Agent or Trustee, as the case may be) making such expenditures shall
be subrogated to all rights of the person receiving such payment.
(c) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Mortgaged Property or the ownership, use,
occupancy or enjoyment of any portion thereof, or any utility service thereto,
as the same become due and payable, including, but not limited to all ad
valorem taxes assessed against the Mortgaged Property or any part thereof,
except for any such taxes or charges being contested in good faith and by
proper proceedings for which adequate reserves in accordance with generally
accepted accounting principles have
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been taken, and shall deliver promptly to Agent such evidence of the payment
thereof as Agent may reasonably require.
(d) INSURANCE. Grantor shall obtain and maintain at Grantor's
sole expense: (1) all-risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning, windstorm, explosion,
hail, tornado and such hazards as are presently included in so-called
"all-risk" coverage and against such other insurable hazards as Agent may
require, in an amount not less than 100% of the full replacement cost,
including the cost of debris removal, without deduction for depreciation and
sufficient to prevent Grantor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (2) if and to the extent any portion of
the Premises is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Grantor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Premises; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts,
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Grantor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Grantor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan Document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Grantor shall, in each instance promptly upon the request of Agent and at
Grantor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss of or damage to the Mortgaged Property shall contain a
standard mortgage clause (without contribution) naming Agent, as agent for the
Banks, as mortgagee with loss proceeds payable to Agent notwithstanding (i) any
act, failure to act or negligence of or violation of any warranty, declaration
or condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Grantor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to Agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Grantor has failed to perform Grantor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Grantor, to the
same extent as if it
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had been made payable to Agent. Upon any foreclosure hereof or transfer of
title to the Mortgaged Property in extinguishment of the whole or any part of
the secured indebtedness, all of Grantor's right, title and interest in and to
the insurance policies referred to in this Section (including unearned
premiums) and all proceeds payable thereunder shall thereupon vest in the
purchaser at foreclosure or other such transferee, to the extent permissible
under such policies. Agent shall have the right (but not the obligation) to
make proof of loss for, settle and adjust any claim under, and receive the
proceeds of, all insurance for loss of or damage to the Mortgaged Property, and
the expenses incurred by Agent in the adjustment and collection of insurance
proceeds shall be a part of the secured indebtedness and shall be due and
payable to Agent on demand. Agent shall not be, under any circumstances,
liable or responsible for the obtaining, maintaining or adequacy of any
insurance or for failure to collect or exercise diligence in the collection of
any of such proceeds or for failure to see to the proper application of any
amount paid over to Grantor. Any such proceeds received by Agent shall, after
deduction therefrom of all reasonable expenses actually incurred by Agent,
including attorneys' fees, at Agent's option be (1) released to Grantor, or (2)
applied (upon compliance with such terms and conditions as may be required by
Agent) to repair or restoration, either partly or entirely, of the Mortgaged
Property so damaged, or (3) applied to the payment of the secured indebtedness
in such order and manner as Agent, in its sole discretion, may elect, whether
or not due. Grantor shall at all times comply with the requirements of the
insurance policies required hereunder and of the issuers of such policies and
of any board of fire underwriters or similar body as applicable to or affecting
the Mortgaged Property.
(e) RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence of a default and upon the written request of Agent, to secure
certain of Grantor's obligations in paragraphs (c) and (d) above, but not in
lieu of such obligations, Grantor will deposit with Agent a sum equal to ad
valorem taxes, assessments and charges (which charges for the purpose of this
paragraph shall include without limitation any recurring charge which could
result in a lien against the Mortgaged Property) against the Mortgaged Property
for the current year and the premiums for such policies of insurance for the
current year, all as estimated by Agent and prorated to the end of the calendar
month following the month during which Agent's request is made, and thereafter
will deposit with Agent, on each date when an installment of principal and/or
interest is due on the Notes, sufficient funds (as estimated from time to time
by Agent) to permit Agent to pay at least fifteen (15) days prior to the due
date thereof, the next maturing ad valorem taxes, assessments and charges and
premiums for such policies of insurance. Agent shall have the right to rely
upon tax information furnished by applicable taxing authorities in the payment
of such taxes or assessments and shall have no obligation to make any protest
of any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Agent for future use, applied to any secured
indebtedness or refunded to Grantor, at Agent's option, and any deficiency in
such funds so deposited shall be made up by Grantor upon demand of Agent. All
such funds so deposited shall bear no interest, may be mingled with the general
funds of Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Grantor (which statements shall be presented by Grantor to Agent a
reasonable time before the applicable amount is due); provided, however, that,
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Grantor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Grantor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
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(f) CONDEMNATION. Grantor shall notify Agent immediately after
Grantor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Grantor shall, at Grantor's expense, diligently prosecute any
such proceedings. Agent shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its own
choice. Agent shall be entitled to receive all sums which may be awarded or
become payable to Grantor for the condemnation of the Mortgaged Property, or
any part thereof, for public or quasi-public use, or by virtue of private sale
in lieu thereof, and any sums which may be awarded or become payable to Grantor
for injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Grantor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option be (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any such sum
or for failure to see to the proper application of any amount paid over to
Grantor. Agent is hereby authorized, in the name of Grantor, to execute and
deliver valid acquittances for, and to appeal from, any such award, judgment or
decree. All reasonable costs and expenses (including but not limited to
reasonable attorneys' fees) incurred by Agent in connection with any
condemnation shall be a demand obligation owing by Grantor (which Grantor
hereby promises to pay) to Agent pursuant to this Mortgage.
(g) COMPLIANCE WITH LEGAL REQUIREMENTS. The Mortgaged Property
and the use, operation and maintenance thereof and all activities thereon do
and shall at all times comply with all applicable Legal Requirements (defined
below). The Mortgaged Property is not, and shall not be, dependent on any
other property or premises or any interest therein other than the Mortgaged
Property to fulfill any requirement of any Legal Requirement. Grantor shall
not, by act or omission, permit any building or other improvement not subject
to the lien of this Mortgage to rely on the Mortgaged Property or any interest
therein to fulfill any requirement of any Legal Requirement. No part of the
Mortgaged Property constitutes a non-conforming use under any zoning law or
similar law or ordinance applicable thereto. Grantor has obtained and shall
preserve in force all requisite zoning, utility, building, health and operating
permits from the governmental authorities having jurisdiction over the
Mortgaged Property. If Grantor receives a written notice or claim from any
authority having jurisdiction over the Mortgaged Property that the Mortgaged
Property, or any use, activity, operation or maintenance thereof or thereon, is
not in compliance with any Legal Requirement, Grantor will promptly furnish a
copy of such notice or claim to Agent. Grantor has received no notice and has
no knowledge of any such noncompliance. As used in this Mortgage: (i) the term
"LEGAL REQUIREMENT" means any applicable law (defined below), agreement,
covenant, restriction, easement or condition, as any of the same now exists or
may be changed or amended or come into effect in the future; and (ii) the term
"LAW" means any applicable federal, state or local law, statute, ordinance,
code, rule, regulation, license, permit, authorization, decision, order,
injunction or decree, domestic or foreign.
(h) MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the
Mortgaged Property in good first class order, repair, operating condition and
appearance, reasonable wear and tear excepted, causing all reasonably necessary
repairs, renewals, replacements, additions and improvements to be promptly
made, and will not allow any of the Mortgaged Property to be wasted or to
deteriorate. Notwithstanding the foregoing, Grantor will not, without the
prior written consent of Agent, (i) remove from the Mortgaged Property any
fixtures or personal property covered by this Mortgage except as permitted by
the Credit Agreement or as
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such as is replaced by Grantor by an article of equal suitability and value,
owned by Grantor, free and clear of any lien or security interest (except that
created by this Mortgage), or (ii) make any structural alteration to the
Mortgaged Property or any other alteration thereto which materially impairs the
value thereof. If any act or occurrence of any kind or nature (including any
condemnation or any casualty for which insurance was not obtained or
obtainable) shall result in material damage to or loss or destruction of the
Mortgaged Property, Grantor shall give prompt notice thereof to Agent and
Grantor shall promptly, at Grantor's sole cost and expense and regardless of
whether insurance or condemnation proceeds (if any) shall be available or
sufficient for the purpose, commence and continue diligently to completion to
restore, repair, replace and rebuild the Mortgaged Property as nearly as
possible to its value, condition and character immediately prior to the damage,
loss or destruction.
(i) NO OTHER LIENS. Grantor will not, without the prior written
consent of Agent, create, place or permit to be created or placed, or through
any act or failure to act, acquiesce in the placing of, or allow to remain, any
deed of trust, mortgage, voluntary or involuntary lien, whether statutory,
constitutional or contractual, security interest, encumbrance or charge, or
conditional sale or other title retention document, against or covering the
Mortgaged Property, or any part thereof, other than the Permitted Encumbrances,
regardless of whether the same are expressly or otherwise subordinate to the
lien or security interest created in this Mortgage, and should any of the
foregoing become attached hereafter in any manner to any part of the Mortgaged
Property without the prior written consent of Agent, Grantor will cause the
same to be promptly discharged and released. Grantor will own all parts of the
Mortgaged Property and will not acquire any fixtures, equipment or other
property forming a part of the Mortgaged Property pursuant to a lease, license,
security agreement or similar agreement, whereby any party has or may obtain
the right to repossess or remove same, without the prior written consent of
Agent. If Agent consents to the voluntary grant by Grantor of any lien,
security interest, or other encumbrance (hereinafter called "SUBORDINATE
MORTGAGE") covering any of the Mortgaged Property or if the foregoing
prohibition is determined by a court of competent jurisdiction to be
unenforceable as to a Subordinate Mortgage, any such Subordinate Mortgage shall
contain express covenants to the effect that: (1) the Subordinate Mortgage is
unconditionally subordinate to this Mortgage and all Leases (hereinafter
defined); (2) if any action (whether judicial or pursuant to a power of sale)
shall be instituted to foreclose or otherwise enforce the Subordinate Mortgage,
no tenant of any of the Leases shall be named as a party defendant, and no
action shall be taken that would terminate any occupancy or tenancy without the
prior written consent of Agent; (3) Rents (hereinafter defined), if collected
by or for the holder of the Subordinate Mortgage, shall be applied first to the
payment of the secured indebtedness then due and expenses incurred in the
ownership, operation and maintenance of the Mortgaged Property in such order as
Agent may determine, prior to being applied to any indebtedness secured by the
Subordinate Mortgage; (4) written notice of default under the Subordinate
Mortgage and written notice of the commencement of any action (whether judicial
or pursuant to a power of sale) to foreclose or otherwise enforce the
Subordinate Mortgage or to seek the appointment of a receiver for all or any
part of the Mortgaged Property shall be given to Agent with or immediately
after the occurrence of any such default or commencement; and (5) neither the
holder of the Subordinate Mortgage, nor any purchaser at foreclosure
thereunder, nor anyone claiming, by, through or under any of them shall succeed
to any of Grantor's rights hereunder without the prior written consent of
Agent.
(j) OPERATION OF MORTGAGED PROPERTY. Grantor will operate the
Mortgaged Property in a good and workmanlike manner and in accordance with all
Legal Requirements and will pay all fees or charges of any kind in connection
therewith. Grantor will keep the Mortgaged Property occupied so as not to
impair the insurance carried thereon. Grantor will not use or occupy or
conduct any activity on or allow the use or occupancy of or the conduct of any
activity on, the Mortgaged Property in any manner which violates any Legal
Requirement or which constitutes a public or private nuisance or which makes
void, voidable or
8 SWI TEXAS DEED OF TRUST
<PAGE> 9
cancelable, or increases the premium of, any insurance then in force with
respect thereto. Grantor will not initiate or permit any zoning
reclassification of the Mortgaged Property or seek any variance under existing
zoning ordinances applicable to the Mortgaged Property or use or permit the use
of the Mortgaged Property in such a manner which would result in such use
becoming a non-conforming use under applicable zoning ordinances or other Legal
Requirement. Grantor will not impose any easement, restrictive covenant or
encumbrance upon the Mortgaged Property, execute or file any subdivision plat
or condominium declaration affecting the Mortgaged Property or consent to the
annexation of the Mortgaged Property to any municipality, without the prior
written consent of Agent. Grantor will not do or suffer to be done any act
whereby the value of any part of the Mortgaged Property may be materially
lessened. Grantor will preserve, protect, renew, extend and retain all
material rights and privileges granted for or applicable to the Mortgaged
Property. Without the prior written consent of Agent, there shall be no
drilling or exploration for or extraction, removal or production of any
mineral, hydrocarbon, gas, natural element, compound or substance (including
sand and gravel) from the surface or subsurface of the Land regardless of the
depth thereof or the method of mining or extraction thereof. Grantor will
cause all debts and liabilities of any character (including without limitation
all debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Mortgaged Property) incurred in the
construction, maintenance, operation and development of the Mortgaged Property
to be promptly paid, unless the same are diligently contested in good faith.
(k) SUITS AND CLAIMS; LOAN DOCUMENTS. Except as disclosed to
Agent in writing, there is no suit, action, claim, investigation, inquiry,
proceeding or demand pending (or, to Grantor's knowledge, threatened) which
affects the Mortgaged Property (including, without limitation, any which
challenges or otherwise pertains to Grantor's title to the Mortgaged Property)
or the validity, enforceability or priority of any of the Loan Documents. The
Loan Documents constitute legal, valid and binding obligations of Grantor (and
of each guarantor, if any) enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Debtor Relief Laws (hereinafter
defined) and except as the availability of certain remedies may be limited by
general principles of equity. Grantor is not a "foreign person" within the
meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and
7701 (i.e. Grantor is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined therein
and in any regulations promulgated thereunder). The loan evidenced by the
Notes is solely for business purposes, and is not for personal, family,
household or agricultural purposes.
(l) FURTHER ASSURANCES. Grantor will, promptly on the reasonable
request of Agent, (i) correct any defect, error or omission which may be
discovered in the contents, execution or acknowledgment of this Mortgage or any
other Loan Document; (ii) execute, acknowledge, deliver, procure and record
and/or file such further documents (including, without limitation, further
deeds of trust, security agreements, financing, statements, continuation
statements, and assignments of rents or leases) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
this Mortgage and the other Loan Documents, to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby (including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Mortgaged
Property) or as deemed advisable by any Holder to protect the lien or the
security interest hereunder against the rights or interests of third persons;
and (iii) provide such certificates, documents, reports, information,
affidavits and other instruments and do such further acts as may be necessary,
desirable or proper in the reasonable determination of Agent or any other
Holder to enable Agent or such other Holder to comply with the requirements or
requests of any agency having jurisdiction over Agent or such other Holder or
any examiners of such agencies with respect to the indebtedness secured hereby,
Grantor or the Mortgaged Property. Grantor shall pay all reasonable costs
connected with any of the foregoing, which shall be a demand obligation owing
by Grantor (which Grantor hereby promises to pay) to Agent or such other Holder
pursuant to this Mortgage.
9 SWI TEXAS DEED OF TRUST
<PAGE> 10
(m) FEES AND EXPENSES. Without limitation of any other provision
of this Mortgage or of any other Loan Document and to the extent not prohibited
by applicable law, Grantor will pay, and will reimburse to Agent and each other
Holder and/or Trustee on demand to the extent paid by Agent or such other
Holder and/or Trustee, provided such amounts are reasonable: (i) all appraisal
fees, filing and recording fees, taxes, abstract fees, title search or
examination fees, uniform commercial code search fees, escrow fees, reasonable
attorneys' fees, environmental inspection fees, and all other out-of-pocket
costs and expenses of every character incurred by Grantor, Agent or any other
Holder and/or Trustee in connection with the preparation of the Loan Documents,
the evaluation, closing and funding of the loan evidenced by the Loan
Documents, and any and all amendments and supplements to this Mortgage, the
Notes or any other Loan Documents or any approval, consent, waiver, release or
other matter requested or required hereunder or thereunder, or otherwise
attributable or chargeable to Grantor as owner of the Mortgaged Property; and
(ii) all reasonable costs and expenses, including, reasonable attorneys' fees
and expenses, incurred or expended in connection with the exercise of any right
or remedy, or the enforcement of any obligation of Grantor, hereunder or under
any other Loan Document.
(n) INDEMNIFICATION.
(i) Grantor will indemnify and hold harmless Agent, each
other Holder and Trustee from and against, and reimburse them on demand for,
any and all Indemnified Matters (defined below). For purposes of this
paragraph (n), the terms "Agent," "Holder" and "Trustee" shall include the
directors, officers, partners, employees and agents of Agent, each Holder and
Trustee, respectively, and any persons owned or controlled by, owning or
controlling, or under common control or affiliated with Agent, each Holder or
Trustee, respectively. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PERSON. However, such indemnities shall not apply to a particular
indemnified person to the extent that the subject of the indemnification is
caused by or arises out of the gross negligence or willful misconduct of that
indemnified person. Any amount to be paid under this paragraph (n) by Grantor
to Agent, any other Holder and/or Trustee shall be a demand obligation owing by
Grantor (which Grantor hereby promises to pay) to Agent, such other Holder
and/or Trustee pursuant to this Mortgage. Nothing in this paragraph, elsewhere
in this Mortgage or in any other Loan Document shall limit or impair any rights
or remedies of Agent, any other Holder and/or Trustee (including without
limitation any rights of contribution or indemnification) against Grantor or
any other person under any other provision of this Mortgage, any other Loan
Document, any other agreement or any applicable Legal Requirement.
(ii) As used herein, the term "INDEMNIFIED MATTERS" means
any and all claims, demands, liabilities (including strict liability), losses,
damages (including consequential damages), causes of action, judgments,
penalties, costs and expenses (including without limitation, reasonable fees
and expenses of attorneys and other professional consultants and experts, and
of the investigation and defense of any claim, whether or not such claim is
ultimately defeated, and the settlement of any claim or judgment including all
value paid or given in settlement) of every kind, known or unknown, foreseeable
or unforeseeable, which may be imposed upon, asserted against or incurred or
paid by Agent, any other Holder and/or Trustee at any time and from time to
time, whenever imposed, asserted or incurred, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Mortgaged Property or with this
Mortgage or any other Loan Document, including, but not limited to any bodily
injury or death or property damage occurring in or upon or in the vicinity of
the Mortgaged Property through any cause whatsoever at any time on or before
the Release Date (defined below), any act performed
10 SWI TEXAS DEED OF TRUST
<PAGE> 11
or omitted to be performed hereunder or under any other Loan Document, any
breach by Grantor of any representation, warranty, covenant, agreement or
condition contained in this Mortgage or in any other Loan Document, any default
as defined herein, and any claim under or with respect to any Lease or any
Environmental Matters. As used herein, the term "ENVIRONMENTAL MATTER" means:
(a) the presence of any Hazardous Substance on, in, under, above or about the
Mortgaged Property, or the migration or release or threatened migration or
release of any Hazardous Substance on, to, from or through the Mortgaged
Property, on or at any time before the Release Date; or (b) any act, omission,
event or circumstance existing or occurring in connection with the handling,
treatment, containment, removal, storage, decontamination, clean-up, transport
or disposal of any Hazardous Substance which is at any time on or before the
Release Date present on, in, under, above or about the Mortgaged Property; or
(c) any violation on or before the Release Date, of any Environmental
Requirement in effect on or before the Release Date, regardless of whether any
act, omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission,
event or circumstance; or (d) any Environmental Claim, or the filing or
imposition of any environmental lien against the Mortgaged Property, because
of, resulting from, in connection with, or arising out of any of the matters
referred to in clauses (a) through (c) preceding; and regardless of whether any
of the matters referred to in the foregoing clauses (a) through (d) was caused
by Grantor or Grantor's tenant or any subtenant, or a prior owner of the
Mortgaged Property or its tenant or any subtenant, or any third party. The
term "RELEASE DATE" as used herein means the earlier of the following two
dates: (i) the date on which the indebtedness and obligations secured hereby
have been paid and performed in full and this Mortgage has been released, or
(ii) the date on which the lien of this Mortgage is fully and finally
foreclosed or a conveyance by deed in lieu of such foreclosure is fully and
finally effective, and possession of the Mortgaged Property has been given to
the purchaser or grantee free of occupancy and claims to occupancy by Grantor
and Grantor's heirs, devisees, representatives, successors and assigns;
provided, that if such payment, performance, release, foreclosure or conveyance
is challenged, in bankruptcy proceedings or otherwise, the Release Date shall
be deemed not to have occurred until such challenge is rejected, dismissed or
withdrawn with prejudice. The indemnities in this paragraph (n) shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of this Mortgage but will survive the Release Date, foreclosure of
this Mortgage or conveyance in lieu of foreclosure, the repayment of the
secured indebtedness, the discharge and release of this Mortgage and the other
Loan Documents, any bankruptcy or other debtor relief proceeding, and any other
event whatsoever.
(o) TAXES ON NOTES OR MORTGAGE. Grantor will promptly pay all
income, franchise and other taxes owing by Grantor and any stamp taxes or other
taxes (unless such payment by Grantor is prohibited by law) which may be
required to be paid with respect to the Notes, this Mortgage or any other
instrument evidencing or securing any of the secured indebtedness. In the
event of the enactment after this date of any law of any governmental entity
applicable to Agent any other Holder, the Notes, the Mortgaged Property, this
Mortgage or any other Loan Document deducting from the value of property for
the purpose of taxation any lien or security interest thereon, or imposing upon
Agent or any other Holder the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Grantor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or
mortgages or security agreements or the interest of the mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to affect this Mortgage or the indebtedness secured hereby or
Agent or any other Holder, then, and in any such event, Grantor, upon demand by
Agent or any such other Holder, shall pay such taxes, assessments, charges or
liens, or reimburse Agent or such other Holder therefor to the extent permitted
by law.
(p) STATEMENT CONCERNING NOTES OR MORTGAGE. Grantor shall at any
time and from time to time furnish within seven (7) days of a written request
by Agent a written statement in such form as may be
11 SWI TEXAS DEED OF TRUST
<PAGE> 12
required by Agent stating that: (i) the Notes, this Mortgage and the other
Loan Documents are valid and binding obligations of Grantor, enforceable
against Grantor in accordance with their terms; (ii) the unpaid principal
balance of the Notes; (iii) the date to which interest on the Notes are paid;
(iv) the Notes, this Mortgage and the other Loan Documents have not been
released, subordinated or modified; and (v) there are no offsets or defenses
against the enforcement of the Notes, this Mortgage or any other Loan Document.
If any of the foregoing statements are untrue, Grantor shall, alternatively,
specify the reasons therefor.
(q) ANNUAL APPRAISAL. Agent may at its option obtain at Grantor's
reasonable expense, once in each year (or as otherwise requested by Agent but
in any event no more than once each year) an appraisal of the Mortgaged
Property or any part thereof prepared in accordance with written instructions
from Agent by a third-party appraiser engaged directly by Agent. Each such
appraiser and appraisal shall be reasonably satisfactory to Agent. The costs
of each such appraisal shall be a part of the secured indebtedness and shall be
payable by Grantor to Agent on demand (which obligation Grantor hereby promises
to pay).
Section 2.2. PERFORMANCE BY AGENT ON GRANTOR'S BEHALF. Grantor
agrees that, if Grantor fails to perform any act or to take any action which
under any Loan Document Grantor is required to perform or take, or to pay any
money which under any Loan Document Grantor is required to pay, and whether or
not the failure then constitutes a default hereunder or thereunder, and whether
or not there has occurred any default or defaults hereunder or the secured
indebtedness has been accelerated, Agent, in Grantor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act
or take such action or pay such money, and any reasonable expenses so incurred
by Agent and any money so paid by Agent shall be a demand obligation owing by
Grantor to Agent (which obligation Grantor hereby promises to pay), shall be a
part of the indebtedness secured hereby, and Agent, upon making such payment,
shall be subrogated to all of the rights of the person, entity or body politic
receiving such payment. Agent and its designees shall have the right to enter
upon the Mortgaged Property at any reasonable time for any such purposes. No
such payment or performance by Agent shall waive or cure any default or waive
any right, remedy or recourse of Agent. Any such payment may be made by Agent
in reliance on any statement, invoice or claim without inquiry into the
validity or accuracy thereof. Each amount due and owing by Grantor to Agent
pursuant to this Mortgage shall bear interest, from the date such amount
becomes due until paid, at the rate per annum provided in the Notes for
interest on past due principal owed on the Notes but never in excess of the
maximum non-usurious amount permitted by applicable law, which interest shall
be payable to Agent on demand; and all such amounts, together with such
interest thereon, shall automatically and without notice be a part of the
indebtedness secured hereby. The amount and nature of any expense by Agent
hereunder and the time when paid shall be fully established by the certificate
of Agent or any of Agent's officers or agents.
Section 2.3. ABSENCE OF OBLIGATIONS OF AGENT WITH RESPECT TO
MORTGAGED PROPERTY. Notwithstanding anything in this Mortgage to the contrary,
including, without limitation, the definition of "Mortgaged Property" and/or
the provisions of ARTICLE 3 hereof, (i) to the extent permitted by applicable
law, the Mortgaged Property is composed of Grantor's rights, title and
interests therein but not Grantor's obligations, duties or liabilities
pertaining thereto, (ii) neither Agent nor any other Holder assumes or shall
have any obligations, duties or liabilities in connection with any portion of
the items described in the definition of "Mortgaged Property" herein, prior to
obtaining title to such Mortgaged Property, whether by foreclosure sale, the
granting of a deed in lieu of foreclosure or otherwise, and (iii) Agent, and
each other Holder may, at any time prior to acquisition of title to any portion
of the Mortgaged Property as above described, advise any party in writing as to
the extent of such Holder's interest therein and/or expressly disaffirm in
writing any rights, interests, obligations, duties and/or liabilities with
respect to such Mortgaged Property or matters related thereto. Without
limiting the generality of the foregoing, it is understood and
12 SWI TEXAS DEED OF TRUST
<PAGE> 13
agreed that Agent and each other Holder shall have no obligations, duties or
liabilities prior to acquisition of title to any portion of the Mortgaged
Property, as lessee under any lease or purchaser or seller under any contract
or option unless Agent and each other Holder elects otherwise by written
notification.
ARTICLE 3
COLLATERAL ASSIGNMENT OF RENTS AND LEASES
Section 3.1. ASSIGNMENT. As additional security for the
indebtedness secured hereby, Grantor hereby assigns to Agent, as agent for the
Banks, all Rents (hereinafter defined) and all of Grantor's rights in and under
all Leases (hereinafter defined). Upon the occurrence of a default hereunder,
Agent shall have the right, power and privilege (but shall be under no duty) to
demand possession of the Rents, which demand shall to the fullest extent
permitted by applicable law be sufficient action by Agent to entitle Agent to
immediate and direct payment of the Rents (including delivery to Agent of Rents
collected for the period in which the demand occurs and for any subsequent
period), for application as provided in this Mortgage, all without the
necessity of any further action by Agent, including, without limitation, any
action to obtain possession of the Land, Improvements or any other portion of
the Mortgaged Property. Grantor hereby authorizes and directs the tenants
under the Leases to pay Rents to Agent upon written demand by Agent, without
further consent of Grantor, without any obligation to determine whether a
default has in fact occurred and regardless of whether Agent has taken
possession of any portion of the Mortgaged Property, and the tenants may rely
upon any written statement delivered by Agent to the tenants. Any such payment
to Agent shall constitute payment to Grantor under the Leases, and Grantor
hereby appoints Agent as Grantor's lawful attorney-in-fact for giving, and
Agent is hereby empowered to give, acquittances to any tenants for such
payments to Agent after a default. The assignment contained in this Section
shall become null and void upon the release of this Mortgage. As used herein:
(i) "Lease" means each existing or future lease, sublease (to the extent of
Grantor's rights thereunder) or other agreement under the terms of which any
person has or acquires any right to occupy or use the Mortgaged Property, or
any part thereof, or interest therein, and each existing or future guaranty of
payment or performance thereunder, and all extensions, renewals, modifications
and replacements of each such lease, sublease, agreement or guaranty; and (ii)
"Rents" means all of the rents, revenue, income, profits and proceeds derived
and to be derived from the Mortgaged Property or arising from the use or
enjoyment of any portion thereof or from any Lease, including, but not limited
to liquidated damages following default under any such Lease, all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property, all of
Grantor's rights to recover monetary amounts from any tenant in bankruptcy
including, without limitation, rights of recovery for use and occupancy and
damage claims arising out of Lease defaults, including rejections, under any
applicable Debtor Relief Law (as hereinafter defined), together with any sums
of money that may now or at any time hereafter be or become due and payable to
Grantor by virtue of any and all royalties, overriding royalties, bonuses,
delay rentals and any other amount of any kind or character arising under any
and all present and all future oil, gas, mineral and mining leases covering the
Mortgaged Property or any part thereof, and all proceeds and other amounts paid
or owing to Grantor under or pursuant to any and all contracts and bonds
relating to the construction or renovation of the Mortgaged Property.
Section 3.2. COVENANTS, REPRESENTATIONS AND WARRANTIES CONCERNING
LEASES AND RENTS. Grantor covenants, represents and warrants to each Holder
that: (i) Grantor has good title to, and is the owner of the entire landlord's
interest in, the Leases and Rents hereby assigned and authority to assign them;
(ii) all Leases are valid and enforceable, and in full force and effect, and
are unmodified except as stated therein; (iii) unless otherwise stated in a
Permitted Encumbrance, no Rents or Leases have been or will be assigned,
13 SWI TEXAS DEED OF TRUST
<PAGE> 14
mortgaged, pledged or otherwise encumbered and no other person has or will
acquire any right, title or interest in such Rents or Leases; (iv) no Rents
have been waived, released, discounted, set off or compromised; (v) except as
stated in the Leases, Grantor has not received any funds or deposits from any
tenant for which credit has not already been made on account of accrued Rents;
(vi) Grantor shall perform all of its obligations under the Leases and enforce
the tenants' obligations under the leases to the extent enforcement is prudent
under the circumstances; (vii) Grantor will not without the prior written
consent of Agent, enter into any Lease after the date hereof, or waive,
release, discount, set off, compromise, reduce or defer any Rent, receive or
collect Rents more than one (1) month in advance, grant any rent- free period
to any tenant, reduce any Lease term or waive, release or otherwise modify any
other material obligation under any Lease, renew or extend any Lease except in
accordance with a right of the tenant thereto in such Lease, approve or consent
to an assignment of a Lease or a subletting of any part of the premises covered
by a Lease, or settle or compromise any claim against a tenant under a Lease in
bankruptcy or otherwise; provided, however, Agent will not unreasonably
withhold or delay its consent to any of the foregoing actions; (viii) Grantor
will not, except in good faith where the tenant is in material default
thereunder, terminate or consent to the cancellation or surrender of any Lease
having an unexpired term of one year or more unless promptly after the
cancellation or surrender a new Lease of such premises is made with a new
tenant having a credit standing, in Agent's judgment, at least equivalent to
that of the tenant whose Lease was canceled, on substantially the same terms as
the terminated or canceled Lease; (ix) Grantor will not execute any Lease
except in accordance with the Loan Documents and for actual occupancy by the
tenant thereunder; (x) Grantor shall give prompt notice to Agent, as soon as
Grantor first obtains notice, of any claim, or the commencement of any action,
by any tenant or subtenant under or with respect to a Lease regarding any
claimed damage, default, diminution of or offset against Rent, cancellation of
the Lease, or constructive eviction, excluding, however, notices of default
under residential Leases, and Grantor shall defend, at Grantor's reasonable
expense, any proceeding pertaining to any Lease, including, if Agent so
requests, any such proceeding, to which Agent is a party; (xi) Grantor shall as
requested by Agent (but in any event no more than once per calendar quarter),
within ten (10) days of each written request, deliver to Agent a complete rent
roll of the Mortgaged Property in such detail as Agent may require, and
financial statements of the tenants, subtenants and guarantors under the Leases
to the extent available to Grantor, and deliver to such of the tenants and
others obligated under the Leases specified by Agent written notice of the
assignment in SECTION 3.1 hereof in form and content satisfactory to Agent;
(xii) promptly upon written request by Agent, Grantor shall deliver to Agent
copies of all Leases and copies of all records relating thereto; (xiii) there
shall be no merger of the leasehold estates, created by the Leases, with the
fee estate of the Land without the prior written consent of Agent; and (xiv)
Agent may at any time and from time to time by specific written instrument
intended for the purpose, unilaterally subordinate the lien of this Mortgage to
any Lease, without joinder or consent of, or notice to, Grantor, any tenant or
any other person, and notice is hereby given to each tenant under a Lease of
such right to subordinate. No such subordination shall constitute a
subordination to any lien or other encumbrance, whenever arising, or improve
the right of any junior lienholder; and nothing herein shall be construed as
subordinating this Mortgage to any Lease.
Section 3.3. NO LIABILITY OF AGENT. Agent's acceptance of this
assignment shall not be deemed to constitute Agent as a "mortgagee in
possession," nor obligate Agent to appear in or defend any proceeding relating
to any Lease or to the Mortgaged Property, or to take any action hereunder,
expend any money, incur any expenses, or perform any obligation or liability
under any Lease, or assume any obligation for any deposit delivered to Grantor
by any tenant and not as such delivered to and accepted by Agent. Agent shall
not be liable for any injury or damage to person or property in or about the
Mortgaged Property unless due to Agent's gross negligence or willful
misconduct, or for Agent's failure to collect or to exercise diligence in
collecting, Rents, but shall be accountable only for Rents that it shall
actually receive. Neither the assignment of Leases and Rents nor enforcement
of Agent's rights regarding Leases and Rents (including collection of
14 SWI TEXAS DEED OF TRUST
<PAGE> 15
Rents) nor possession of the Mortgaged Property by Agent nor Agent's consent to
or approval of any Lease (nor all of the same), shall render Agent liable on
any obligation under or with respect to any Lease or constitute affirmation of,
or any subordination to, any Lease, occupancy, use or option. If Agent seeks
or obtains any judicial relief regarding Rents or Leases, the same shall in no
way prevent the concurrent or subsequent employment of any other appropriate
rights or remedies nor shall same constitute an election of judicial relief for
any foreclosure or any other purpose. Neither Agent has nor assumes any
obligations as lessor or landlord with respect to any Lease. The rights of
Agent under this ARTICLE 3 shall be cumulative of all other rights of Agent
under the Loan Documents or otherwise.
ARTICLE 4
DEFAULT
Section 4.1. EVENTS OF DEFAULT. The occurrence of any one of the
following shall be a default under this Mortgage ("DEFAULT"):
(a) DEFAULT UNDER CREDIT AGREEMENT. An Event of Default under the
Credit Agreement occurs and is continuing, subject to applicable notice and
cure periods.
(b) TRANSFER OF THE MORTGAGED PROPERTY. Any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Mortgaged Property or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, except: (i) sales or transfers of
items of the Accessories which have become obsolete or worn beyond practical
use and which have been replaced by adequate substitutes, owned by Grantor,
having a value equal to or greater than the replaced items when new; (ii) the
grant, in the ordinary course of business, of a leasehold interest in a part of
the Improvements to a tenant for occupancy, not containing a right or option to
purchase and not in contravention of any provision of this Mortgage or of any
other Loan Document; and (iii) such sales, leases, conveyances, assignments,
pledges, encumbrances or transfers permitted under the Credit Agreement.
Agent, on behalf of and upon the direction of Required Banks (as defined in the
Credit Agreement) may, in its sole discretion, waive a default under this
paragraph, but it shall have no obligation to do so, and any waiver may be
conditioned upon such one or more of the following, (if any) which Agent may
require: the grantee's integrity, reputation, character, creditworthiness and
management ability being reasonably satisfactory to Agent in its sole judgment
and grantee executing, prior to such sale or transfer, a written assumption
agreement containing such terms as Agent may require, a principal paydown on
the Notes, an increase in the rate of interest payable under the Notes, a
transfer fee, a modification of the term of the Notes, and any other
modification of the Loan Documents which Agent may require.
(c) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge,
encumbrance, assignment or transfer, voluntarily or involuntarily, whether by
operation of law or otherwise, of any interest in Grantor (if Grantor is not a
natural person but is a corporation, partnership, trust or other legal entity),
without the prior written consent of Agent (including, without limitation, if
Grantor is a partnership or joint venture, the withdrawal from or admission
into it of any general partner or joint venturer), which consent shall not be
unreasonably withheld, except: (i) sales, pledges, encumbrances, assignments or
transfers permitted under the Credit Agreement, and (ii) sales or transfers of
stock in Grantor if Grantor is a corporation or sales or transfers of limited
partnership interests in Grantor if Grantor is a limited partnership provided
that such sales or transfers, together with any prior sales or transfers of
interests in Grantor, do not result in more than 49% of the total beneficial
interests in Grantor having been sold or transferred since the date of this
Mortgage.
15 SWI TEXAS DEED OF TRUST
<PAGE> 16
(d) GRANT OF EASEMENT, ETC. Without the prior written consent of
Agent, which consent shall not be unreasonably withheld, Grantor grants any
easement or dedication, files any plat, condominium declaration, or
restriction, or otherwise encumbers the Mortgaged Property, or seeks or permits
any zoning reclassification or variance, unless such action is expressly
permitted by the Loan Documents or does not affect the Mortgaged Property.
(e) ABANDONMENT. The owner of the Mortgaged Property abandons any
of the Mortgaged Property for a period in excess of thirty (30) consecutive
days.
(f) DEFAULT UNDER OTHER LIEN. A default or event of default
occurs under any lien, security interest or assignment covering the Mortgaged
Property or any part thereof (whether or not Agent has consented, and without
hereby implying Agent's consent, to any such lien, security interest or
assignment not created hereunder) and such default is not cured within any
applicable grace period provided by such document, or the holder of any such
lien, security interest or assignment declares a default or institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
(g) INTENTIONALLY DELETED
(h) INTENTIONALLY DELETED
(i) LIQUIDATION, ETC. The liquidation, termination, dissolution,
merger, consolidation or failure to maintain good standing in the State of
Texas (or in the case of an individual, the death or legal incapacity) of the
owner of the Mortgaged Property or any person obligated to pay any part of the
secured indebtedness.
(j) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any
reason without Agent's specific written consent cease to be in full force and
effect, or shall be declared null and void or unenforceable in whole or in
part, or the validity or enforceability thereof, in whole or in part, shall be
challenged or denied by any party thereto other than Agent; or the liens,
mortgages or security interests of Agent or any other Holder in any of the
Mortgaged Property become unenforceable in whole or in part, or cease to be of
the priority herein required, or the validity or enforceability thereof, in
whole or in part, shall be challenged or denied by Grantor or any person
obligated to pay any part of the secured indebtedness.
Section 4.2. NOTICE AND CURE. If any provision of this Mortgage or
any other Loan Document provides for Holder to give to Grantor any notice
regarding a default or incipient default, then if Agent shall fail to give such
notice to Grantor as provided, the sole and exclusive remedy of Grantor for
such failure shall be to seek appropriate equitable relief to enforce the
agreement to give such notice and to have any acceleration of the maturity of
the Notes and the secured indebtedness postponed or revoked and foreclosure
proceedings in connection therewith delayed or terminated pending or upon the
curing of such default in the manner and during the period of time permitted by
such agreement, if any, and Grantor shall have no right to damages or any other
type of relief not herein specifically set out against Agent or any other
Holder, all of which damages or other relief are hereby waived by Grantor.
Nothing herein or in any other Loan Document shall operate or be construed to
add on or make cumulative any cure or grace periods specified in any of the
Loan Documents.
16 SWI TEXAS DEED OF TRUST
<PAGE> 17
ARTICLE 5
REMEDIES
Section 5.1. CERTAIN REMEDIES. If a default shall occur, Agent, upon
the direction of Required Banks (as defined in the Credit Agreement), may (but
shall have no obligation to) exercise any one or more of the following
remedies, without notice (unless notice is required by applicable statute or
the terms hereof or any of the Loan Documents):
(a) ACCELERATION. Agent may at any time and from time to time
declare any or all of the secured indebtedness immediately due and payable and
such secured indebtedness shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest, notice of acceleration
or of intention to accelerate or any other notice or declaration of any kind,
all of which are hereby expressly waived by Grantor, except as provided above.
(b) ENFORCEMENT OF ASSIGNMENT OF RENTS. Prior or subsequent to
taking possession of any portion of the Mortgaged Property or taking any action
with respect to such possession, Agent may: (1) collect and/or sue for the
Rents in Agent's own name, give receipts and releases therefor, and after
deducting all reasonable expenses of collection, including attorneys' fees and
expenses, apply the net proceeds thereof to the secured indebtedness in such
manner and order as Agent may elect and/or to the operation and management of
the Mortgaged Property, including the payment of management, brokerage and
attorney's fees and expenses; and (2) require Grantor to transfer all security
deposits and records thereof to Agent together with original counterparts of
the Leases.
(c) FORECLOSURE. Upon the occurrence of a default, Trustee, or
his successor or substitute, is authorized and empowered and it shall be his
special duty at the request of Agent to sell the Mortgaged Property or any part
thereof situated in the State of Texas, at the courthouse of any county
(whether or not the counties in which the Mortgaged Property is located are
contiguous, if the Mortgaged Property is located in more than one county) in
the State of Texas in which any part of the Mortgaged Property is situated, at
public vendue to the highest bidder for cash between the hours of ten o'clock
a.m. and four o'clock p.m. on the first Tuesday in any month or at such other
place, time and date as provided by the statutes of the State of Texas then in
force governing sales of real estate under powers of sale conferred by deed of
trust, after having given notice of such sale in accordance with such statutes.
Any sale made by Trustee hereunder may be as an entirety or in such parcels as
Agent may request. To the extent permitted by applicable law, any sale may be
adjourned by announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive sale
or sales under such power until the whole of the Mortgaged Property shall be
sold; and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby
and the expense of executing this trust as provided herein, this Mortgage and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property but Agent shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Mortgaged
Property. Trustee may, after any request or direction by Agent, sell not only
the real property but also the Collateral and other interests which are a part
of the Mortgaged Property, or any part thereof, as a unit and as a part of a
single sale, or may sell any part of the Mortgaged Property separately from the
remainder of the Mortgaged Property. It shall not be necessary for Trustee to
have taken possession of any part of the Mortgaged Property or to have present
or to exhibit at any sale any of the Collateral. After each sale, Trustee
shall make to the purchaser or purchasers at such sale good and sufficient
conveyances in the name of Grantor, conveying the property so sold to the
purchaser or purchasers with
17 SWI TEXAS DEED OF TRUST
<PAGE> 18
general warranty of title by Grantor, subject to the Permitted Encumbrances
(and to such leases and other matters, if any, as Trustee may elect upon
request of Agent), and shall receive the proceeds of said sale or sales and
apply the same as herein provided. Payment of the purchase price to the
Trustee shall satisfy the obligation of purchaser at such sale therefor, and
such purchaser shall not be responsible for the application thereof. The power
of sale granted herein shall not be exhausted by any sale held hereunder by
Trustee or his substitute or successor, and such power of sale may be exercised
from time to time and as many times as Agent may deem necessary until all of
the Mortgaged Property has been duly sold and all secured indebtedness has been
fully paid. In the event any sale hereunder is not completed or is defective
in the opinion of Agent, such sale shall not exhaust the power of sale
hereunder and Agent shall have the right to cause a subsequent sale or sales to
be made hereunder. Any and all statements of fact or other recitals made in
any deed or deeds or other conveyances given by Trustee or any successor or
substitute appointed hereunder as to nonpayment of the secured indebtedness or
as to the occurrence of any default, or as to Agent having declared all of said
indebtedness to be due and payable, or as to the request to sell, or as to
notice of time, place and terms of sale and the properties to be sold having
been duly given, or as to the refusal, failure or inability to act of Trustee
or any substitute or successor trustee, or as to the appointment of any
substitute or successor trustee, or as to any other act or thing having been
duly done by Agent or by such Trustee, substitute or successor, shall be taken
as prima facie evidence of the truth of the facts so stated and recited. The
Trustee or his successor or substitute may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Trustee, including the posting of notices and the conduct of sale, but
in the name and on behalf of Trustee, his successor or substitute. If Trustee
or his successor or substitute shall have given notice of sale hereunder, any
successor or substitute Trustee thereafter appointed may complete the sale and
the conveyance of the property pursuant thereto as if such notice had been
given by the successor or substitute Trustee conducting the sale.
(d) UNIFORM COMMERCIAL CODE. Without limitation of Agent's rights
of enforcement with respect to the Collateral or any part thereof in accordance
with the procedures for foreclosure of real estate, Agent may exercise its
rights of enforcement with respect to the Collateral or any part thereof under
the Texas Business and Commerce Code as amended (or under the Uniform
Commercial Code in force in any other state to the extent the same is
applicable law) and in conjunction with, in addition to or in substitution for
those rights and remedies: (1) Agent may enter upon Grantor's premises to take
possession of, assemble and collect the Collateral or, to the extent and for
those items of the Collateral permitted under applicable law, to render it
unusable; (2) Agent may require Grantor to assemble the Collateral and make it
available at a place Agent designates which is mutually convenient to allow
Agent to take possession or dispose of the Collateral; (3) written notice
mailed to Grantor as provided herein at least ten (10) days prior to the date
of public sale of the Collateral or prior to the date after which private sale
of the Collateral will be made shall constitute reasonable notice; (4) any sale
made pursuant to the provisions of this paragraph shall be deemed to have been
a public sale conducted in a commercially reasonable manner if held
contemporaneously with and upon the same notice as required for the sale of the
Mortgaged Property under power of sale as provided in paragraph (c) above in
this SECTION 5.1; (5) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the Collateral
and the other Mortgaged Property may, at the option of Agent, be sold as a
whole; (6) it shall not be necessary that Agent take possession of the
Collateral or any part thereof prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale; (7)
with respect to application of proceeds of disposition of the Collateral under
SECTION 5.3 hereof, the costs and expenses incident to disposition shall
include the reasonable expenses of retaking, holding, preparing for sale or
lease, selling, leasing, and the like and the reasonable attorneys' fees and
legal expenses incurred by Agent and each other Holder; (8) any and all
statements of fact or other recitals made in any bill of sale or assignment or
other instrument evidencing any foreclosure sale hereunder as to nonpayment of
the
18 SWI TEXAS DEED OF TRUST
<PAGE> 19
secured indebtedness or as to the occurrence of any default, or as to Agent
having declared all of such indebtedness to be due and payable, or as to notice
of time, place and terms of sale and of the properties to be sold having been
duly given, or as to any other act or thing having been duly done by Agent,
shall be taken as prima facie evidence of the truth of the facts so stated and
recited; and (9) Agent may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Agent,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Agent.
(e) LAWSUITS. Agent may proceed by a suit or suits in equity or
at law, whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction.
(f) ENTRY ON MORTGAGED PROPERTY. Agent is authorized, prior or
subsequent to the institution of any foreclosure proceedings, to the fullest
extent permitted by applicable law, to enter upon the Mortgaged Property, or
any part thereof, and to take possession of the Mortgaged Property and all
books and records relating thereto, and to exercise without interference from
Grantor any and all rights which Grantor has with respect to the management,
possession, operation, protection or preservation of the Mortgaged Property.
Agent shall not be deemed to have taken possession of the Mortgaged Property or
any part thereof except upon the exercise of its right to do so, and then only
to the extent evidenced by its demand and overt act specifically for such
purpose. All reasonable costs, expenses and liabilities of every character
incurred by Agent in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property shall constitute a demand obligation of
Grantor (which obligation Grantor hereby promises to pay) to Agent pursuant to
this Mortgage. If necessary to obtain the possession provided for above, Agent
may invoke any and all legal remedies to dispossess Grantor. In connection
with any action taken by Agent pursuant to this Section, Agent shall not be
liable for any loss sustained by Grantor resulting from any failure to let the
Mortgaged Property, or any part thereof, or from any act or omission of Agent
in managing the Mortgaged Property unless such loss is caused by the willful
misconduct and bad faith of Agent, nor shall Agent be obligated to perform or
discharge any obligation, duty or liability of Grantor arising under any lease
or other agreement relating to the Mortgaged Property or arising under any
Permitted Encumbrance or otherwise arising. Grantor hereby assents to,
ratifies and confirms any and all actions of Agent with respect to the
Mortgaged Property taken under this Section.
(g) RECEIVER. Agent shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Mortgaged
Property, whether such receivership be incident to a proposed sale (or sales)
of such property or otherwise, and without regard to the value of the Mortgaged
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Grantor does hereby irrevocably consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, agrees not to oppose any application therefor by Agent, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Agent to application of Rents as provided in this Mortgage.
Nothing herein is to be construed to deprive Agent of any other right, remedy
or privilege it may have under the law to have a receiver appointed. Any
reasonable amount of money advanced by Agent in connection with any such
receivership shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent pursuant to this Mortgage.
(h) TERMINATION OF COMMITMENT TO LEND. Agent and each other
Holder may terminate any commitment or obligation to lend or disburse funds
under any Loan Document.
19 SWI TEXAS DEED OF TRUST
<PAGE> 20
(i) OTHER RIGHTS AND REMEDIES. Agent may exercise any and all
other rights and remedies which Agent may have under the Loan Documents, or at
law or in equity or otherwise.
Section 5.2. EFFECTIVE AS MORTGAGE. This instrument shall be
effective as a mortgage as well as a deed of trust and upon the occurrence of a
default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by applicable law, and any foreclosure suit may be brought by Trustee
or by Agent; and to the extent, if any, required to cause this instrument to be
so effective as a mortgage as well as a deed of trust, Grantor hereby mortgages
the Mortgaged Property to Agent, as agent for itself and the other Banks. In
the event a foreclosure hereunder shall be commenced by Trustee, or his
substitute or successor, Agent may at any time before the sale of the Mortgaged
Property direct Trustee to abandon the sale, and may then institute suit for
the collection of the Notes and/or any other secured indebtedness, and for the
foreclosure of this Mortgage. It is agreed that if Agent should institute a
suit for the collection of the Notes or any other secured indebtedness and for
the foreclosure of this Mortgage, Agent may at any time before the entry of a
final judgment in said suit dismiss the same, and require Trustee, his
substitute or successor to sell the Mortgaged Property in accordance with the
provisions of this Mortgage.
Section 5.3. PROCEEDS OF FORECLOSURE. The proceeds of any sale held
by Trustee or Agent or any receiver or public officer in foreclosure of the
liens and security interests evidenced hereby shall be applied: FIRST, to the
payment of all necessary costs and expenses incident to such foreclosure sale,
including but not limited to all reasonable attorneys' fees and legal expenses,
all court costs and charges of every character, and to the payment of the other
secured indebtedness, pro rata, including specifically without limitation the
principal, accrued interest and attorneys' fees due and unpaid on the Notes and
the amounts due and unpaid and owed to Agent and each other Holder under this
Mortgage, the order and manner of application to the items in this clause to be
in Agent's sole discretion; and SECOND, the remainder, if any there shall be,
shall be paid to Grantor, or to Grantor's heirs, devisees, representatives,
successors or assigns, or such other persons (including the holder or
beneficiary of any inferior lien) as may be entitled thereto by law; provided,
however, that if Agent is uncertain which person or persons are so entitled,
Agent may interplead such remainder in any court of competent jurisdiction and
the amount of any reasonable attorneys' fees, court costs and expenses incurred
in such action shall be a part of the secured indebtedness and shall be
reimbursable (without limitation) from such remainder.
Section 5.4. AGENT AS PURCHASER. Agent shall have the right to
become the purchaser as agent for, and for the benefit of the Banks, at any
sale held by Trustee or substitute or successor or by any receiver or public
officer or at any public sale, and Agent shall have the right to credit upon
the amount of Agent's successful bid, to the extent necessary to satisfy such
bid, all or any part of the secured indebtedness in such manner and order as
Agent may elect.
Section 5.5. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence
of a default, Agent shall have the right to proceed with foreclosure judicial
or non-judicial) of the liens and security interests hereunder without
declaring the entire secured indebtedness due, and in such event any such
foreclosure sale may be made subject to the unmatured part of the secured
indebtedness; and any such sale shall not in any manner affect the unmatured
part of the secured indebtedness, but as to such unmatured part this Mortgage
shall remain in full force and effect just as though no sale had been made.
The proceeds of such sale shall be applied as provided in SECTION 5.3 hereof
except that the amount paid under clause FIRST thereof shall be only the
matured portion of the secured indebtedness and any proceeds of such sale in
excess of those provided for in clause FIRST (modified as provided above) shall
be applied to the prepayment (without penalty) of any other secured
indebtedness in such manner and order and to such extent as Agent deems
advisable, and the
20 SWI TEXAS DEED OF TRUST
<PAGE> 21
remainder, if any, shall be applied as provided in clause second of SECTION 5.3
hereof. Several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the secured indebtedness.
Section 5.6. REMEDIES CUMULATIVE. All rights and remedies
provided for herein and in any other Loan Document are cumulative of each other
and of any and all other rights and remedies existing at law or in equity, and
Trustee and Agent shall, in addition to the rights and remedies provided herein
or in any other Loan Document, be entitled to avail themselves of all such
other rights and remedies as may now or hereafter exist at law or in equity for
the collection of the secured indebtedness and the enforcement of the covenants
herein and the foreclosure of the liens and security interests evidenced
hereby, and the resort to any right or remedy provided for hereunder or under
any such other Loan Document or provided for by law or in equity shall not
prevent the concurrent or subsequent employment of any other appropriate right
or rights or remedy or remedies.
Section 5.7. AGENT'S DISCRETION AS TO SECURITY. Agent may resort
to any security given by this Mortgage or to any other security now existing,
or hereafter given to secure the payment of the secured indebtedness, in whole
or in part, and in such portions and in such order as may seem best to Agent in
its sole and uncontrolled discretion, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 5.8. GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full
extent Grantor may do so, Grantor agrees that Grantor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension
or redemption, and Grantor, for Grantor, Grantor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by
applicable law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of
assets of Grantor, including the Mortgaged Property, or to a sale in inverse
order of alienation in the event of foreclosure of the liens and/or security
interests hereby created. Grantor shall not have or assert any right under any
statute or rule of law pertaining to the marshaling of assets, sale in inverse
order of alienation, the exemption of homestead, the administration of estates
of decedents, or other matters whatever to defeat, reduce or affect the right
of Agent under the terms of this Mortgage to a sale of the Mortgaged Property
for the collection of the secured indebtedness without any prior or different
resort for collection, or the right of Agent under the terms of this Mortgage
to the payment of the secured indebtedness out of the proceeds of sale of the
Mortgaged Property in preference to every other claimant whatever. Grantor
waives any right or remedy which Grantor may have or be able to assert pursuant
to Chapter 34 of the Texas Business and Commerce Code, or any other provision
of Texas law, pertaining to the rights and remedies of sureties. If any law
referred to in this Section and now in force, of which Grantor or Grantor's
heirs, devisees, representatives, successors or assigns or any other persons
claiming any interest in the Mortgaged Property might take advantage despite
this Section, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to preclude the application of this Section.
Section 5.9. DELIVERY OF POSSESSION AFTER FORECLOSURE. In the
event there is a foreclosure sale hereunder and at the time of such sale,
Grantor or Grantor's heirs, devisees, representatives, successors or assigns
are occupying or using the Mortgaged Property, or any part thereof, each and
all shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
property occupied, such rental to be due daily to the purchaser; and to the
extent permitted by applicable law, the
21 SWI TEXAS DEED OF TRUST
<PAGE> 22
purchaser at such sale shall, notwithstanding any language herein apparently to
the contrary, have the sole option to demand immediate possession following the
sale or to permit the occupants to remain as tenants at will. In the event the
tenant fails to surrender possession of said property upon demand, the
purchaser shall be entitled to institute and maintain a summary action for
possession of the property (such as an action for forcible detainer) in any
court having jurisdiction.
ARTICLE 6
MISCELLANEOUS
Section 6.1. SCOPE OF MORTGAGE. This Mortgage is a deed of trust
and mortgage of both real and personal property, a security agreement, a
financing statement and a collateral assignment, and also covers proceeds and
fixtures.
Section 6.2. EFFECTIVE AS A FINANCING STATEMENT. This Mortgage
shall be effective as a financing statement filed as a fixture filing with
respect to all fixtures included within the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property (including said fixtures) is situated. This Mortgage
shall also be effective as a financing statement covering minerals or the like
(including oil and gas) and accounts subject to Subsection (e) of Section 9.103
of the Texas Business and Commerce Code, as amended, and similar provisions (if
any) of the Uniform Commercial Code as enacted in any other state where the
Mortgaged Property is situated which will be financed at the wellhead or
minehead of the wells or mines located on the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property is situated. This Mortgage shall also be effective as a
financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of
Grantor is the address of Grantor set forth at the end of this Mortgage and the
address of Agent from which information concerning the security interests
hereunder may be obtained is the address of Agent set forth at the end of this
Mortgage. A carbon photographic or other reproduction of this Mortgage or of
any financing statement relating to this Mortgage shall be sufficient as a
financing statement for any of the purposes referred to in this Section.
Section 6.3. NOTICE TO ACCOUNT DEBTORS. In addition to the rights
granted elsewhere in this Mortgage, Agent may at any time notify the account
debtors or obligors of any accounts, chattel paper, negotiable instruments or
other evidences of indebtedness included in the Collateral to pay Agent
directly.
Section 6.4. WAIVER BY AGENT. Agent, at the direction of Required
Banks (as defined in the Credit Agreement), may at any time and from time to
time by a specific writing intended for the purpose: (a) waive compliance by
Grantor with any covenant herein made by Grantor to the extent and in the
manner specified in such writing; (b) consent to Grantor's doing any act which
hereunder Grantor is prohibited from doing, or to Grantor's failing to do any
act which hereunder Grantor is required to do, to the extent and in the manner
specified in such writing; (c) release any part of the Mortgaged Property or
any interest therein from the lien and security interest of this Mortgage,
without the joinder of Trustee; or (d) release any party liable, either
directly or indirectly, for the secured indebtedness or for any covenant herein
or in any other Loan Document, without impairing or releasing the liability of
any other party. No such act shall in any way affect the rights or powers of
Agent or Trustee hereunder except to the extent specifically agreed to by Agent
in such writing.
22 SWI TEXAS DEED OF TRUST
<PAGE> 23
Section 6.5. NO IMPAIRMENT OF SECURITY. The lien, security
interest and other security rights of Agent and each other Holder hereunder or
under any other Loan Document shall not be impaired by any indulgence,
moratorium or release granted by Agent including, but not limited to, any
renewal, extension or modification which Holders may grant with respect to any
secured indebtedness, or any surrender, compromise, release, renewal,
extension, exchange or substitution which Agent may grant in respect of the
Mortgaged Property, or any part thereof or any interest therein, or any release
or indulgence granted to any endorser, guarantor or surety of any secured
indebtedness. The taking of additional security by Agent or any other Holder
shall not release or impair the lien, security interest or other security
rights of Agent and each other Holder hereunder or affect the liability of
Grantor or of any endorser, guarantor or surety, or improve the right of any
junior lienholder in the Mortgaged Property (without implying hereby Agent's
consent to any junior lien).
Section 6.6. ACTS NOT CONSTITUTING WAIVER BY AGENT. Agent, on
behalf of Required Banks (as defined in the Credit Agreement), may waive any
default without waiving any other prior or subsequent default. Agent may
remedy any default without waiving the default remedied. Neither failure by
Agent to exercise, nor delay by Agent in exercising, nor discontinuance of the
exercise of any right, power or remedy (including but not limited to the right
to accelerate the maturity of the secured indebtedness or any part thereof)
upon or after any default shall be construed as a waiver of such default or as
a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Agent of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
then such waiver or consent shall be effective only in the specific instance,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Grantor in any case shall of itself entitle Grantor to any
other or further notice or demand in similar or other circumstances.
Remittances in payment of any part of the secured indebtedness other than in
the required amount in immediately available U.S. funds shall not, regardless
of any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Agent in immediately available U.S. funds and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting
bank or banks. Acceptance by Agent of any payment in an amount less than the
amount then due on any secured indebtedness shall be deemed an acceptance on
account only and shall not in any way excuse the existence of a default
hereunder.
Section 6.7. GRANTOR'S SUCCESSORS. If the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, Agent may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Mortgage and to the indebtedness
secured hereby in the same manner as with Grantor, without in any way vitiating
or discharging Grantor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Mortgaged Property, no forbearance on the part of Agent, and no extension
of the time for the payment of the indebtedness secured hereby given by Agent,
upon direction of Banks, shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Grantor hereunder for the payment
of the indebtedness or performance of the obligations secured hereby or the
liability of any other person hereunder for the payment of the indebtedness
secured hereby. Grantor agrees that it shall be bound by any modification of
this Mortgage or any of the other Loan Documents made by Agent and any
subsequent owner of the Mortgaged Property, with or without notice to such
Grantor, and no such modifications shall impair the obligations of such Grantor
under this Mortgage or any other Loan Document. Nothing in this Section or
23 SWI TEXAS DEED OF TRUST
<PAGE> 24
elsewhere in this Mortgage shall be construed to imply Agent's consent to any
transfer of the Mortgaged Property.
Section 6.8. PLACE OF PAYMENT; FORUM. All secured indebtedness
which may be owing hereunder at any time by Grantor shall be payable at the
place designated in the Notes or the other Loan Documents (or if no such
designation is made, at the address of Agent indicated at the end of this
Mortgage). Grantor hereby irrevocably submits generally and unconditionally
for itself and in respect of its property to the non-exclusive jurisdiction of
any Texas state court, or any United States federal court, sitting in the
county in which the secured indebtedness is payable, and to the non- exclusive
jurisdiction of any state or United States federal court sitting in the state
in which any of the Mortgaged Property is located, over any suit, action or
proceeding arising out of or relating to this Mortgage or the secured
indebtedness. Grantor hereby agrees and consents that, in addition to any
methods of service of process provided for under applicable law, all service of
process in any such suit, action or proceeding in any Texas state court, or any
United States federal court, sitting in the county in which the secured
indebtedness is payable may be made by certified or registered mail, return
receipt requested, directed to Grantor at its address stated in this Mortgage,
or at a subsequent address of Grantor of which Agent received actual notice
from Grantor in accordance with this Mortgage, and service so made shall be
complete five (5) days after the same shall have been so mailed.
Section 6.9. SUBROGATION TO EXISTING LIENS; VENDOR'S LIEN. To the
extent that proceeds of the Notes are used to pay indebtedness secured by any
outstanding, lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Holders at Grantor's
request, and Holders shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, however remote, irrespective of
whether said liens, security interests, charges or encumbrances are released,
and all of the same are recorded as valid and subsisting and are renewed and
continued and merged herein to secure the secured indebtedness, but the terms
and provisions of this Mortgage shall govern and control the manner and terms
of enforcement of the liens, security interests, charges and encumbrances to
which Holders are subrogated hereunder. It is expressly understood that in
consideration of the payment of such indebtedness by Holders, Grantor hereby
waives and releases all demands and causes of action for offsets and payments
in connection with the said indebtedness. If all or any portion of the
proceeds of the loan evidenced by the Notes or of any other secured
indebtedness has been advanced for the purpose of paying the purchase price for
all or a part of the Mortgaged Property, no vendor's lien is waived; and Agent
and each other Holder shall have, and is hereby granted, a vendor's lien on the
Mortgaged Property as cumulative additional security for the secured
indebtedness. Agent may foreclose under this Mortgage or under the vendor's
lien without waiving the other or may foreclose under both.
Section 6.10. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If
any part of the secured indebtedness cannot be lawfully secured by this
Mortgage or if any part of the Mortgaged Property cannot be lawfully subject to
the lien and security interest hereof to the full extent of such indebtedness,
then an payments made shall be applied on said indebtedness first in discharge
of that portion thereof which is not secured by this Mortgage.
Section 6.11. COMPLIANCE WITH USURY LAWS. It is the intent of
Grantor, Agent and each other Holder and all other parties to the Loan
Documents to conform to and contract in strict compliance with applicable usury
law from time to time in effect. All agreements between each Holder and
Grantor (or any other party liable with respect to any indebtedness under the
Loan Documents) are hereby limited by the provisions of this Section which
shall override and control all such agreements, whether now existing or
24 SWI TEXAS DEED OF TRUST
<PAGE> 25
hereafter arising. In no way, nor in any event or contingency (including but
not limited to prepayment, default, demand for payment, or acceleration of the
maturity of any obligation), shall the interest taken, reserved, contracted
for, charged, chargeable, or received under this Mortgage, the Notes or any
other Loan Document or otherwise, exceed the maximum non-usurious amount
permitted by applicable law (the "MAXIMUM AMOUNT"). If, from any possible
construction of any document, interest would otherwise be payable in excess of
the Maximum Amount, any such construction shall be subject to the provisions of
this Section and such document shall ipso facto be automatically reformed and
the interest payable shall be automatically reduced to the Maximum Amount,
without the necessity of execution of any amendment or new document. If any
Holder shall ever receive anything of value which is characterized as interest
under applicable law and which would apart from this provision be in excess of
the Maximum Amount, an amount equal to the amount which would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the secured indebtedness in the inverse order of its
maturity and not to the payment of interest, or refunded to Grantor or the
other payor thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal. The right to accelerate maturity of
the Notes or any other secured indebtedness does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Holders do not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid
to each Holder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such indebtedness so that the amount of interest on
account of such indebtedness does not exceed the Maximum Amount. As used in
this Section, the term "APPLICABLE LAW" shall mean the laws of the State of
Texas or the federal laws of the United States applicable to this transaction,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Section 6.12. SUBSTITUTE TRUSTEE. The Trustee may resign by an
instrument in writing addressed to Agent, or Trustee may be removed at any time
with or without cause by an instrument in writing executed by Agent. In case
of the death, resignation, removal, or disqualification of Trustee, or if for
any reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without
other formality than appointment and designation in writing, executed by Agent
and the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the indebtedness secured
hereby has been paid in full, or until the Mortgaged Property is fully and
finally sold hereunder. If Agent is a corporation or association and such
appointment is executed on its behalf by officers of such corporation or
association, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation or
association. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he or she shall thereupon succeed to,
and shall hold, possess and execute, all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All references herein to
"Trustee" shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time
acting hereunder.
Section 6.13. NO LIABILITY OF TRUSTEE. The Trustee shall not be
liable for any error of judgment or act done by Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever
(including Trustee's negligence), except for Trustee's gross negligence or
willful misconduct. The Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine. All
25 SWI TEXAS DEED OF TRUST
<PAGE> 26
moneys received by Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required
by law), and Trustee shall be under no liability for interest on any moneys
received by him hereunder. Grantor hereby ratifies and confirms any and all
acts which the herein named Trustee or his successor or successors, substitute
or substitutes, in this trust, shall do lawfully by virtue hereof. Grantor
will reimburse Trustee for, and save him harmless against, any and all
liability not due to gross negligence or willful misconduct and expenses which
may be incurred by him in the performance of his duties. The foregoing
indemnity shall not terminate upon discharge of the secured indebtedness or
foreclosure, or release or other termination, of this Mortgage.
Section 6.14. RELEASE OF MORTGAGE. If all of the secured
indebtedness be paid as the same becomes due and payable and all of the
covenants, warranties, undertakings and agreements made in this Mortgage are
kept and performed, and all obligations, if any, of Agent and each other Holder
for further advances have been terminated, then, and in that event only, all
rights under this Mortgage shall terminate (except to the extent expressly
provided herein with respect to indemnifications, representations and
warranties and other rights which are to continue following the release hereof)
and the Mortgaged Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, and such liens and
security interests shall be released by Agent in due form at Grantor's cost.
Without limitation, all provisions herein for indemnity of Agent and each other
Holder or Trustee shall survive discharge of the secured indebtedness and any
foreclosure, release or termination of this Mortgage.
Section 6.15. NOTICES. All notices, requests, consents, demands
and other communications required or which any party desires to give hereunder
or under any other Loan Document shall be in writing and, unless otherwise
specifically provided in such other Loan Document, shall be deemed sufficiently
given or furnished if delivered by personal delivery, by courier, or by
registered or certified United States mail, postage prepaid, addressed to the
party to whom directed at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party
whose address is to be changed) or by telegram, telex, or facsimile. Any such
notice or communication shall be deemed to have been given either at the time
of personal delivery or, in the case of courier or mail, as of the date of
first attempted delivery at the address and in the manner provided herein, or,
in the case of telegram, telex or facsimile, upon receipt; provided that,
service of a notice required by Texas Property Code Section 51.002, as amended,
shall be considered complete when the requirements of that statute are met.
Notwithstanding the forgoing, no notice of change of address shall be effective
except upon receipt. This Section shall not be construed in any way to affect
or impair any waiver of notice or demand provided in any Loan Document or to
require giving of notice or demand to or upon any person in any situation or
for any reason.
Section 6.16. INVALIDITY OF CERTAIN PROVISIONS. A determination
that any provision of this Mortgage is unenforceable or invalid shall not
affect the enforceability or validity of any other provision and the
determination that the application of any provision of this Mortgage to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other persons
or circumstances.
Section 6.17. GENDER; TITLES; CONSTRUCTION. Within this Mortgage,
words of any gender shall be held and construed to include any other gender,
and words in the singular number shall be held and construed to include the
plural, unless the context otherwise requires. Titles appearing at the
beginning of any subdivisions hereof are for convenience only, do not
constitute any part of such subdivisions, and shall be disregarded in
construing the language contained in such subdivisions. The use of the words
"herein," "hereof," "hereunder" and other similar compounds of the word "here"
shall refer to this entire Mortgage and
26 SWI TEXAS DEED OF TRUST
<PAGE> 27
not to any particular Article, Section, paragraph or provision. The term
"person" and words importing persons as used in this Mortgage shall include
firms, associations, partnerships (including limited partnerships), joint
ventures, trusts, corporations and other legal entities, including public or
governmental bodies, agencies or instrumentalities, as well as natural persons.
Section 6.18. REPORTING COMPLIANCE. Grantor agrees to comply with
any and all reporting requirements applicable to the transaction evidenced by
the Notes and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including but not limited to The International Investment Survey Act
of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of
1984 and further agrees upon written request of Agent to furnish Agent with
evidence of such compliance.
Section 6.19. REGARDING AGENT. Except where otherwise expressly
provided herein, (a) in any instance hereunder where the approval, consent or
the exercise of judgment of Agent is required or requested, no approval or
consent of Agent shall be deemed to have been given except by a specific
writing intended for the purpose and executed by an authorized representative
of Agent, and (b) any payments made to Agent hereunder in respect of the
Mortgaged Property shall be made to Agent for the ratable benefit of all of the
Banks based upon the outstanding principal amount of the secured indebtedness
(except for reimbursements of Agent for sums expended by it hereunder, which
sums shall be retained by Agent for its own account).
Section 6.20. GRANTOR. Unless the context clearly indicates
otherwise, as used in this Mortgage, "GRANTOR" means the grantors named in
SECTION 1.1 hereof or any of them. The obligations of Grantor hereunder shall
be joint and several. If any Grantor, or any signatory who signs on behalf of
any Grantor, is a corporation, partnership or other legal entity, Grantor and
any such signatory, and the person or persons signing for it, represent and
warrant to Agent that this instrument is executed, acknowledged and delivered
by Grantor's duly authorized representatives. If Grantor is an individual, no
power of attorney granted by Grantor herein shall terminate on Grantor's
disability.
Section 6.21. EXECUTION; RECORDING. This Mortgage has been
executed in several counterparts, all of which are identical, and all of which
counterparts together shall constitute one and the same instrument. The date
or dates reflected in the acknowledgments hereto indicate the date or dates of
actual execution of this Mortgage, but such execution is as of the date shown
on the first page hereof, and for purposes of identification and reference the
date of this Mortgage shall be deemed to be the date reflected on the first
page hereof. Grantor will cause this Mortgage and all amendments and
supplements thereto and substitutions therefor and all financing statements and
continuation statements relating thereto to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Trustee or Agent shall reasonably
request and will pay all such recording, filing, re-recording and re-filing
taxes, fees and other charges.
Section 6.22. SUCCESSORS AND ASSIGNS. The terms, provisions,
covenants and conditions hereof shall be binding upon Grantor, and the heirs,
devisees, representatives, successors and assigns of Grantor, and shall inure
to the benefit of Trustee, Agent and each other Holder and shall constitute
covenants running with the Land. All references in this Mortgage to Grantor
shall be deemed to include all such heirs, devisees, representatives,
successors and assigns of Grantor.
Section 6.23. MODIFICATION OR TERMINATION. The Loan Documents may
only be modified or terminated by a written instrument or instruments intended
for that purpose and executed by the party against
27 SWI TEXAS DEED OF TRUST
<PAGE> 28
which enforcement of the modification or termination is asserted. Any alleged
modification or termination which is not so documented shall not be effective
as to any party.
Section 6.24. NO PARTNERSHIP, ETC. The relationship between
Holders and Grantor is solely that of lenders and borrower. Neither Agent nor
any other Holder has any fiduciary or other special relationship with Grantor.
Nothing contained in the Loan Documents is intended to create any partnership,
joint venture, association or special relationship between Grantor and any
Holder or in any way make Agent or any other Holder a co-principal with Grantor
with reference to the Mortgaged Property. All agreed contractual duties
between or among Agent, each other Holder, Grantor and Trustee are set forth
herein and in the other Loan Documents and any additional implied covenants or
duties are hereby disclaimed. Any inferences to the contrary of any of the
foregoing are hereby expressly negated.
Section 6.25. APPLICABLE LAW. This Mortgage, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law.
Section 6.26. ENTIRE AGREEMENT. The Loan Documents constitute the
entire understanding and agreement between Grantor, Agent and each other Holder
with respect to the transactions arising in connection with the indebtedness
secured hereby and supersede all prior written or oral understandings and
agreements between Grantor, Agent and each other Holder with respect to the
matters addressed in the Loan Documents. Grantor hereby acknowledges that,
except as incorporated in writing in the Loan Documents, there are not, and
were not, and no persons are or were authorized by Agent or any other Holder to
make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Loan
Documents. To the extent any of the provisions contained herein conflict with
the terms set forth in the Credit Agreement, the provisions of the Credit
Agreement shall control.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this instrument is executed by Grantor as to the
date first written on page 1 hereof.
The address and federal tax identification number of Grantor are:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Federal Tax No.: 76-0533332
GRANTOR:
SOUTHWESTERN ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
28 SWI TEXAS DEED OF TRUST
<PAGE> 29
The address of Agent is
The Frost National Bank, as Agent
P.O. Box 1600
San Antonio, Texas 78296
Attention: Richard D. Young, Senior Vice President
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on ____________, 1997, by
JAMES F. STUART, Chief Executive Officer of SOUTHWESTERN ICE, INC., a Texas
corporation, on behalf of such corporation.
----------------------------------
Notary Public, State of Texas
29 SWI TEXAS DEED OF TRUST
<PAGE> 30
EXHIBIT A
TO
DEED OF TRUST
PROPERTY
Grantor's fee simple interest in the following properties located in Harlingen,
Cameron County, Texas:
[TO BE ATTACHED]
Grantor's fee simple interest in the following properties located in McAllen,
Hidalgo County, Texas:
[TO BE ATTACHED]
SWI TEXAS DEED OF TRUST
<PAGE> 1
EXHIBIT 10.32
SUBORDINATION, ATTORNMENT
AND NON-DISTURBANCE AGREEMENT
THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (this
"AGREEMENT"), is made this _____ day of September, 1997, by and among MID
VALLEY INDUSTRIES, a Texas corporation, with principal offices at
__________________________________ ("TENANT"), and THE FROST NATIONAL BANK, a
national banking association, the address being 100 W. Houston Street, San
Antonio, Texas 78205 ("AGENT").
W I T N E S S E T H:
WHEREAS, by Standard Industrial/Commercial Single-Tenant Lease - Net
dated September 20, 1994 (hereinafter referred to as the "LEASE"), SOUTHWESTERN
ICE, INC. ("LANDLORD") leased to Tenant certain real property located in the
City of McAllen, Hidalgo County, Texas (the "PROPERTY"), a more particular
description of which Property appears in Exhibit A, attached hereto and by this
reference made a part hereof; and
WHEREAS, pursuant to that certain Credit Agreement, dated as of
September ___, 1997 (as modified, amended, supplemented, or restated from time
to time, the "CREDIT AGREEMENT"), among PACKAGED ICE, INC., a Texas corporation
(the "BORROWER"), the Agent, and certain other financial institutions who from
time to time are parties thereto (the "BANKS"), the Banks have extended
Commitments to make Revolving Credit Loans to the Borrower to be secured by,
inter alia, a Deed of Trust, Assignment Security Agreement and Financing
Statement covering the Property (the "MORTGAGE") and, as a condition precedent
to the making of loan (the "LOAN") by the Banks under the Credit Agreement, the
Tenant is required to execute and deliver this Agreement;
WHEREAS, Tenant and Agent, for the benefit of the Banks, desire hereby
to establish certain rights, safeguards, obligations, and priorities with
respect to their respective interests by means of the following Subordination,
Attornment and Non-Disturbance Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Tenant subordinates all of its right, title and interest in and
to the Lease and the leased premises to the liens of the Mortgage, and to all
renewals, extensions, modifications or replacements thereof.
2. Provided Tenant is not in default in the payment of rent or in
the performance of any of the terms, covenants and conditions of the Lease, the
right of possession of Tenant to the leased premises shall not be affected or
disturbed by Agent in the exercise of any of its rights under the Mortgage or
the note secured thereby, and any sale of the leased premises pursuant to the
exercise of any rights and remedies under the Mortgage or otherwise shall be
made subject to Tenant's right of possession under the Lease.
3. If Agent forecloses the lien of the Mortgage or accepts a
conveyance in lieu of such foreclosure, Tenant shall attorn to Agent or any
purchaser of the leased premises and the Lease shall continue in accordance
with its terms between Tenant and Agent or such other purchaser.
<PAGE> 2
4. The foregoing provisions shall be self operative; however,
Tenant agrees to execute and deliver to Agent or to any person to whom Tenant
herein agrees to attorn, such other appropriate instrument as either shall
request in order to effectuate such provisions.
5. Any successor to the interest of Landlord under the Lease shall
be bound to Tenant under all the terms, covenants, and conditions of the Lease
for the period of such successor's ownership of the leased premises; provided,
however, such successor owner shall not be (a) liable for any act or omission
of the Landlord or any prior landlord; (b) liable for the return of any
security deposit; (c) subject to any offsets or defenses that Tenant may have
against Landlord or any prior landlord; (d) bound by any rent that Tenant may
have paid for more than the current month to Landlord or any prior landlord; or
(e) bound by any agreement between Landlord and Tenant to which Agent had not
previously consented in writing.
6. Tenant covenants that the Lease has not been modified or altered
and that the Lease shall not, without the prior written consent of Agent, be
terminated, surrendered, modified or altered hereafter.
7. Tenant agrees that it will notify Agent in writing, by certified
mail, of any default by Landlord under the Lease and shall not cancel or
terminate the Lease without providing Agent thirty (30) days from the date of
such notice within which to cure said default, without any obligation to so.
If any default by Landlord is cured within the time period described above,
Tenant shall have no right to cancel or terminate the Lease by virtue of said
default.
8. The foregoing provisions shall be self-operative and effective
without the execution of any further instruments on the part of either party
hereto. However, Tenant agrees to execute and deliver to Agent or to any
person to whom Tenant herein agrees to attorn such other instruments as either
shall request in order to effectuate said provisions.
9. The agreements herein contained shall be binding upon and inure
to the benefit of the parties hereto, their respective successors,
successors-in-interest and assigns, and, without limiting such, the agreements
of Agent shall specifically be binding upon any purchaser of the Property at
foreclosure or by reason of the acceptance of a deed in lieu of foreclosure.
10. This agreement may not be modified other than by an agreement in
writing signed by the parties hereto or their respective
successors-in-interest.
11. This agreement may be signed in multiple counterparts, each of
which is an original, but all of which together comprise one agreement.
12. If any term or provision of this Agreement shall to any extent
be held invalid or unenforceable, the remaining terms and provisions hereof
shall not be affected thereby, but each term and provision hereof shall be
valid and enforceable to the fullest extent permitted by law.
13. Upon delivery of written notice to Tenant stating that a default
or event of default has occurred in connection with the Loan or the Credit
Agreement, Tenant shall make all payments of rent and other sums due under the
Lease directly to Agent or to the person and at the address specified by Agent,
notwithstanding any conflicting instructions or demands by Landlord or any
third party.
14. All exhibits attached to this Agreement are incorporated herein
for all purposes.
2
<PAGE> 3
IN WITNESS WHEREOF, Tenant and Agent have caused this instrument to be
executed as of the date and year first above written.
EXECUTED as of the date and year first above written.
TENANT:
MID VALLEY INDUSTRIES, a Texas
corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AGENT:
THE FROST NATIONAL BANK, a national
banking association
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE STATE OF TEXAS )
)
COUNTY OF ____________ )
This instrument was acknowledged before me on this ____ day of
_______________, 1997, by _____________________________,
_______________________________ of MID VALLEY INDUSTRIES, a Texas corporation,
on behalf of said corporation.
-----------------------------------
Notary Public, State of Texas
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on this ____ day of
_______________, 1997, by ___________________________, ___________________ of
THE FROST NATIONAL BANK, a national banking association, on behalf of said
association.
-----------------------------------
Notary Public, State of Texas
3
<PAGE> 1
EXHIBIT 10.33
When Recorded, Return To:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296
Attention: Loan No. _________________
Loan Documentation Department, RB-2
- --------------------------------------------------------------------------------
LEASEHOLD DEED OF TRUST, ASSIGNMENT,
SECURITY AGREEMENT AND FINANCING STATEMENT
THE STATE OF TEXAS )
)
COUNTY OF NUECES )
THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND
FINANCING STATEMENT (this "MORTGAGE") dated as of September 15, 1997, is
executed and delivered by Grantor for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by Grantor.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
Section 1.1. CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition
to the other terms defined herein, each of the following terms shall have the
meaning assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWER": Packaged Ice, Inc., a Texas corporation.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrower, The Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
"GRANTOR": Mission Party Ice, Inc., a Texas corporation, and its
successors and assigns.
"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrower, and payable to the order
of any Bank, evidencing loans advanced to Borrower under the Credit Agreement,
in an aggregate principal face amount of $20,000,000, bearing interest as
therein provided, containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and finally maturing on April 15, 2003,
together with any renewals, increases, extensions, restatements, or
modifications thereof.
MPI TEXAS LEASEHOLD DEED OF TRUST
<PAGE> 2
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
Section 1.2. MORTGAGED PROPERTY. Grantor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: (a)
Grantor's leasehold estate in the real estate (herein called the "LAND")
described in EXHIBIT A which is attached hereto and incorporated herein by
reference, and (i) all improvements now or hereafter situated or to be situated
on the Land (herein together called the "IMPROVEMENTS"); and (ii) all right,
title and interest of Grantor in and to (1) all streets, roads, alleys,
easements, rights-of-way, licenses, rights of ingress and egress, vehicle
parking rights and public places, existing or proposed, abutting, adjacent,
used in connection with or pertaining, to the Land or the Improvements; (2) any
strips or gores between the Land and abutting or adjacent properties; and (3)
all water and water rights, timber, crops and mineral interests on or
pertaining to the Land or the Improvements (the Land, Improvements and other
rights, titles and interests referred to in this clause (a) being herein
sometimes collectively called the "PREMISES"); (b) all fixtures, equipment,
systems, machinery, furniture, furnishings, appliances, inventory, goods,
building and construction materials, supplies, and articles of personal
property, of every kind and character, now owned or hereafter acquired by
Grantor, which are now or hereafter attached to or situated in, on or about the
Land or the Improvements, or used in or necessary to the complete and proper
planning, development, use, occupancy or operation thereof, or acquired
(whether delivered to the Land or stored elsewhere) for use or installation in
or on the Land or the Improvements, and all renewals and replacements of,
substitutions for and additions to the foregoing (the properties referred to in
this clause (b) being herein sometimes collectively called the "ACCESSORIES,"
all of which are hereby declared to be permanent accessions to the Land); (c)
all (i) plans and specifications for the Improvements; (ii) Grantor's rights,
but not liability for any breach by Grantor, under all commitments (including
any commitment for financing to pay any of the secured indebtedness, as defined
below), insurance policies and other contracts and general intangibles
(including, but not limited to trademarks, trade names and symbols) related to
the Premises or the Accessories or the operation thereof; (iii) deposits
(including, but not limited to Grantor's rights in tenants' security deposits,
deposits with respect to utility services to the Premises, and any deposits or
reserves hereunder or under any other Loan Document for taxes, insurance or
otherwise), money, accounts, instruments, documents, notes and chattel paper
arising from or by virtue of any transactions related to the Premises or the
Accessories (without derogation of ARTICLE 3 hereof); (iv) permits, licenses,
franchises, certificates, development rights, commitments and rights for
utilities, and other rights and privileges obtained in connection with the
Premises or the Accessories; (v) leases, rents, royalties, bonuses, issues,
profits, revenues and other benefits of the Premises and the Accessories
(without derogation of ARTICLE 3 hereof); (vi) oil, gas and other hydrocarbons
and other minerals produced from or allocated to the Land and all products
processed or obtained therefrom, and the proceeds thereof; and (vii)
engineering, accounting, title, legal, and other technical or business data
concerning the Mortgaged Property which are in the possession of Grantor or in
which Grantor can otherwise grant a security interest; and (d) all (i) proceeds
of or arising from the properties, rights, titles and interests referred to
above in this SECTION 1.2, including, but not limited to proceeds of any sale,
lease or other disposition thereof, proceeds of each policy of insurance
relating thereto (including premium refunds), proceeds of the taking thereof or
of any rights appurtenant thereto, including change of grade of streets, curb
cuts or other rights of access, by eminent domain or transfer in lieu thereof
for public or quasi-public use under any law, and proceeds arising out of any
damage thereto; and (ii) other interests of every kind and character which
Grantor now has or hereafter acquires in, to or for the benefit of the
properties, rights, titles and interests referred to above in this SECTION 1.2
and all property used or useful in connection therewith, including, but not
limited to rights of ingress and egress and remainders, reversions and
reversionary rights or interests; and if the estate of Grantor in any of the
property referred to above in this SECTION 1.2 is a leasehold estate, this
conveyance shall include, and the lien and security interest created
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hereby shall encumber and extend to, all other or additional title, estates,
interests or rights which are now owned or may hereafter be acquired by Grantor
in or to the property demised under the lease creating the leasehold estate; TO
HAVE AND TO HOLD the foregoing rights, interests and properties, and all
rights, estates, powers and privileges appurtenant thereto (herein collectively
called the "MORTGAGED PROPERTY"), unto Trustee, and to his successors or
substitutes in this trust, and to his or their successors and assigns, in
trust, however, upon the terms, provisions and conditions herein set forth.
Section 1.3. SECURITY INTEREST. Grantor hereby grants to Agent, as
agent for the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business and
Commerce Code, or under the Uniform Commercial Code in force in any other state
to the extent the same is applicable law.
Section 1.4. NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage
is made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities and all renewals,
extensions, supplements, increases, and modifications thereof in whole or in
part from time to time:
(i) the Promissory Notes and all other notes given in substitution
therefor or in modification, supplement, increase, renewal or extension
thereof, in whole or in part (such notes, as from time to time renewed,
extended, supplemented, increased, or modified and all other notes given in
substitution therefor, or in modification, renewal or extension thereof, in
whole or in part, being hereinafter collectively called the "NOTES," and
individually a "NOTE," and Agent and the other Banks, or the subsequent holders
at the time in question of the Notes or any of the secured indebtedness, as
hereinafter defined, being collectively herein called "HOLDERS" and
individually a "HOLDER"); (ii) all indebtedness and other obligations owed by
the Borrower to any Holder now or hereafter incurred or arising pursuant to or
permitted by the provisions of the Notes, this Mortgage, or any other document
now or hereafter evidencing, governing, guaranteeing, securing, or otherwise
executed in connection with the loans evidenced by the Notes, including, but
not limited to any loan or credit agreement, tri-party financing agreement or
other agreement between the Borrower and Holders, or among the Borrower,
Holders and any other party or parties, pertaining to the repayment or use of
the proceeds of the loan evidenced by the Notes (the Credit Agreement, the
Notes, this Mortgage, any other "LOAN PAPERS" (as such term is defined in the
Credit Agreement), and such other documents, as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS");
(iii) all other loans and future advances made by any Holder to the Borrower
and all other debts, obligations and liabilities of Grantor of every kind and
character now or hereafter existing in favor of any Holder, and arising under
the Credit Agreement, any of the Notes, or any of the other Loan Documents, and
whether direct or indirect, primary or secondary, joint or several, fixed or
contingent, secured or unsecured, and whether originally payable to such Holder
or to a third party and subsequently acquired by such Holder, it being
contemplated that Grantor may hereafter become indebted to one or more Holders
for such other debts, obligations and liabilities arising under the Credit
Agreement, any of the Notes, or any of the other Loan Documents; provided,
however, and notwithstanding the foregoing provisions of this clause (iii),
this Mortgage shall not secure any such other loan, advance, debt, obligation
or liability with respect to which any such Holder is by applicable law
prohibited from obtaining a lien on real estate nor shall this clause (iii)
operate or be effective to constitute or require any assumption or payment by
any person, in any way, of any debt of any other person to the extent that the
same would violate or exceed the limit provided in any applicable usury or
other law.
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The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY."
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Grantor represents, warrants, and covenants as follows:
(a) PAYMENT AND PERFORMANCE. Grantor will, and will cause the
Borrower to, make due and punctual payment of the secured indebtedness.
Grantor will, and will cause the Borrower to, timely and properly perform and
comply with all of the covenants, agreements, and conditions imposed upon them
by this Mortgage and the other Loan Documents and will not permit a default to
occur hereunder or thereunder which shall remain uncured. Time shall be of the
essence in this Mortgage.
(b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has in Grantor's
own right, and Grantor covenants to maintain, lawful, good and indefeasible
title to the Mortgaged Property, free and clear of all liens, charges, claims,
security interests, and encumbrances except for (i) any and all matters of
record as of the date hereof and disclosed to Agent only to the extent the same
are valid and subsisting and affect the Mortgaged Property, (ii) the liens and
security interests evidenced by this Mortgage, (iii) statutory liens for ad
valorem taxes and standby fees on the Mortgaged Property which are not yet
delinquent, and (iv) other liens and security interests (if any) in favor of
any Bank (the matters described in the foregoing clauses (i), (ii), (iii) and
(iv) being herein called the "PERMITTED ENCUMBRANCES"). Grantor, and Grantor's
successors and assigns, will warrant and forever defend title to the Mortgaged
Property, subject as aforesaid to Trustee and his successors or substitutes and
assigns, against the claims and demands of all persons claiming or to claim the
same or any part thereof. Grantor will punctually pay, perform, observe and
keep all covenants, obligations and conditions in or pursuant to any Permitted
Encumbrance and will not modify or permit modification of any Permitted
Encumbrance without the prior written consent of Agent. Inclusion of any
matter as a Permitted Encumbrance does not constitute approval or waiver by
Agent of any existing or future violation or other breach thereof by Grantor,
by the Mortgaged Property or otherwise. No part of the Mortgaged Property
constitutes all or any part of the homestead of Grantor. If any right or
interest of Agent or any Bank in the Mortgaged Property or any part thereof
shall be endangered or questioned or shall be attacked directly or indirectly,
Trustee and Agent, or either of them (whether or not named as parties to legal
proceedings with respect thereto), are hereby authorized and empowered to take
such reasonable steps as in their discretion may be proper for the defense of
any such legal proceedings or the protection of such right or interest of Agent
or any Bank, including, but not limited to the employment of independent
counsel, the prosecution or defense of litigation, and the compromise or
discharge of adverse claims. All reasonable expenditures so made of every kind
and character shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent or Trustee (as the case may be), and
the party (Agent or Trustee, as the case may be) making such expenditures shall
be subrogated to all rights of the person receiving such payment.
(c) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Mortgaged Property or the ownership, use,
occupancy or enjoyment of any portion thereof, or any utility service thereto,
as the same become due and payable, including, but not limited to all ad
valorem taxes assessed against the Mortgaged Property or any part thereof,
except for any such taxes or charges being contested in good faith and by
proper proceedings for which adequate reserves in accordance with generally
accepted accounting principles have
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been taken, and shall deliver promptly to Agent such evidence of the payment
thereof as Agent may reasonably require.
(d) INSURANCE. Grantor shall obtain and maintain at Grantor's
sole expense: (1) all-risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning, windstorm, explosion,
hail, tornado and such hazards as are presently included in so-called
"all-risk" coverage and against such other insurable hazards as Agent may
require, in an amount not less than 100% of the full replacement cost,
including the cost of debris removal, without deduction for depreciation and
sufficient to prevent Grantor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (2) if and to the extent any portion of
the Premises is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Grantor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Premises; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts,
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Grantor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Grantor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan Document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Grantor shall, in each instance promptly upon the request of Agent and at
Grantor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss of or damage to the Mortgaged Property shall contain a
standard mortgage clause (without contribution) naming Agent, as agent for the
Banks, as mortgagee with loss proceeds payable to Agent notwithstanding (i) any
act, failure to act or negligence of or violation of any warranty, declaration
or condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Grantor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to Agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Grantor has failed to perform Grantor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or for Grantor, to the
same extent as if it
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had been made payable to Agent. Upon any foreclosure hereof or transfer of
title to the Mortgaged Property in extinguishment of the whole or any part of
the secured indebtedness, all of Grantor's right, title and interest in and to
the insurance policies referred to in this Section (including unearned
premiums) and all proceeds payable thereunder shall thereupon vest in the
purchaser at foreclosure or other such transferee, to the extent permissible
under such policies. Agent shall have the right (but not the obligation) to
make proof of loss for, settle and adjust any claim under, and receive the
proceeds of, all insurance for loss of or damage to the Mortgaged Property, and
the expenses incurred by Agent in the adjustment and collection of insurance
proceeds shall be a part of the secured indebtedness and shall be due and
payable to Agent on demand. Agent shall not be, under any circumstances,
liable or responsible for the obtaining, maintaining or adequacy of any
insurance or for failure to collect or exercise diligence in the collection of
any of such proceeds or for failure to see to the proper application of any
amount paid over to Grantor. Any such proceeds received by Agent shall, after
deduction therefrom of all reasonable expenses actually incurred by Agent,
including attorneys' fees, at Agent's option be (1) released to Grantor, or (2)
applied (upon compliance with such terms and conditions as may be required by
Agent) to repair or restoration, either partly or entirely, of the Mortgaged
Property so damaged, or (3) applied to the payment of the secured indebtedness
in such order and manner as Agent, in its sole discretion, may elect, whether
or not due. Grantor shall at all times comply with the requirements of the
insurance policies required hereunder and of the issuers of such policies and
of any board of fire underwriters or similar body as applicable to or affecting
the Mortgaged Property.
(e) RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence of a default and upon the written request of Agent, to secure
certain of Grantor's obligations in paragraphs (c) and (d) above, but not in
lieu of such obligations, Grantor will deposit with Agent a sum equal to ad
valorem taxes, assessments and charges (which charges for the purpose of this
paragraph shall include without limitation any recurring charge which could
result in a lien against the Mortgaged Property) against the Mortgaged Property
for the current year and the premiums for such policies of insurance for the
current year, all as estimated by Agent and prorated to the end of the calendar
month following the month during which Agent's request is made, and thereafter
will deposit with Agent, on each date when an installment of principal and/or
interest is due on the Notes, sufficient funds (as estimated from time to time
by Agent) to permit Agent to pay at least fifteen (15) days prior to the due
date thereof, the next maturing ad valorem taxes, assessments and charges and
premiums for such policies of insurance. Agent shall have the right to rely
upon tax information furnished by applicable taxing authorities in the payment
of such taxes or assessments and shall have no obligation to make any protest
of any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Agent for future use, applied to any secured
indebtedness or refunded to Grantor, at Agent's option, and any deficiency in
such funds so deposited shall be made up by Grantor upon demand of Agent. All
such funds so deposited shall bear no interest, may be mingled with the general
funds of Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Grantor (which statements shall be presented by Grantor to Agent a
reasonable time before the applicable amount is due); provided, however, that,
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Grantor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Grantor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
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(f) CONDEMNATION. Grantor shall notify Agent immediately after
Grantor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Grantor shall, at Grantor's expense, diligently prosecute any
such proceedings. Agent shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its own
choice. Agent shall be entitled to receive all sums which may be awarded or
become payable to Grantor for the condemnation of the Mortgaged Property, or
any part thereof, for public or quasi-public use, or by virtue of private sale
in lieu thereof, and any sums which may be awarded or become payable to Grantor
for injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Grantor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option be (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any such sum
or for failure to see to the proper application of any amount paid over to
Grantor. Agent is hereby authorized, in the name of Grantor, to execute and
deliver valid acquittances for, and to appeal from, any such award, judgment or
decree. All reasonable costs and expenses (including but not limited to
reasonable attorneys' fees) incurred by Agent in connection with any
condemnation shall be a demand obligation owing by Grantor (which Grantor
hereby promises to pay) to Agent pursuant to this Mortgage.
(g) COMPLIANCE WITH LEGAL REQUIREMENTS. The Mortgaged Property
and the use, operation and maintenance thereof and all activities thereon do
and shall at all times comply with all applicable Legal Requirements (defined
below). The Mortgaged Property is not, and shall not be, dependent on any
other property or premises or any interest therein other than the Mortgaged
Property to fulfill any requirement of any Legal Requirement. Grantor shall
not, by act or omission, permit any building or other improvement not subject
to the lien of this Mortgage to rely on the Mortgaged Property or any interest
therein to fulfill any requirement of any Legal Requirement. No part of the
Mortgaged Property constitutes a non-conforming use under any zoning law or
similar law or ordinance applicable thereto. Grantor has obtained and shall
preserve in force all requisite zoning, utility, building, health and operating
permits from the governmental authorities having jurisdiction over the
Mortgaged Property. If Grantor receives a written notice or claim from any
authority having jurisdiction over the Mortgaged Property that the Mortgaged
Property, or any use, activity, operation or maintenance thereof or thereon, is
not in compliance with any Legal Requirement, Grantor will promptly furnish a
copy of such notice or claim to Agent. Grantor has received no notice and has
no knowledge of any such noncompliance. As used in this Mortgage: (i) the term
"LEGAL REQUIREMENT" means any applicable law (defined below), agreement,
covenant, restriction, easement or condition, as any of the same now exists or
may be changed or amended or come into effect in the future; and (ii) the term
"LAW" means any applicable federal, state or local law, statute, ordinance,
code, rule, regulation, license, permit, authorization, decision, order,
injunction or decree, domestic or foreign.
(h) MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the
Mortgaged Property in good first class order, repair, operating condition and
appearance, reasonable wear and tear excepted, causing all reasonably necessary
repairs, renewals, replacements, additions and improvements to be promptly
made, and will not allow any of the Mortgaged Property to be wasted or to
deteriorate. Notwithstanding the foregoing, Grantor will not, without the
prior written consent of Agent, (i) remove from the Mortgaged Property any
fixtures or personal property covered by this Mortgage except as permitted by
the Credit Agreement or as
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such as is replaced by Grantor by an article of equal suitability and value,
owned by Grantor, free and clear of any lien or security interest (except that
created by this Mortgage), or (ii) make any structural alteration to the
Mortgaged Property or any other alteration thereto which materially impairs the
value thereof. If any act or occurrence of any kind or nature (including any
condemnation or any casualty for which insurance was not obtained or
obtainable) shall result in material damage to or loss or destruction of the
Mortgaged Property, Grantor shall give prompt notice thereof to Agent and
Grantor shall promptly, at Grantor's sole cost and expense and regardless of
whether insurance or condemnation proceeds (if any) shall be available or
sufficient for the purpose, commence and continue diligently to completion to
restore, repair, replace and rebuild the Mortgaged Property as nearly as
possible to its value, condition and character immediately prior to the damage,
loss or destruction.
(i) NO OTHER LIENS. Grantor will not, without the prior written
consent of Agent, create, place or permit to be created or placed, or through
any act or failure to act, acquiesce in the placing of, or allow to remain, any
deed of trust, mortgage, voluntary or involuntary lien, whether statutory,
constitutional or contractual, security interest, encumbrance or charge, or
conditional sale or other title retention document, against or covering the
Mortgaged Property, or any part thereof, other than the Permitted Encumbrances,
regardless of whether the same are expressly or otherwise subordinate to the
lien or security interest created in this Mortgage, and should any of the
foregoing become attached hereafter in any manner to any part of the Mortgaged
Property without the prior written consent of Agent, Grantor will cause the
same to be promptly discharged and released. Grantor will own all parts of the
Mortgaged Property and will not acquire any fixtures, equipment or other
property forming a part of the Mortgaged Property pursuant to a lease, license,
security agreement or similar agreement, whereby any party has or may obtain
the right to repossess or remove same, without the prior written consent of
Agent. If Agent consents to the voluntary grant by Grantor of any lien,
security interest, or other encumbrance (hereinafter called "SUBORDINATE
MORTGAGE") covering any of the Mortgaged Property or if the foregoing
prohibition is determined by a court of competent jurisdiction to be
unenforceable as to a Subordinate Mortgage, any such Subordinate Mortgage shall
contain express covenants to the effect that: (1) the Subordinate Mortgage is
unconditionally subordinate to this Mortgage and all Leases (hereinafter
defined); (2) if any action (whether judicial or pursuant to a power of sale)
shall be instituted to foreclose or otherwise enforce the Subordinate Mortgage,
no tenant of any of the Leases shall be named as a party defendant, and no
action shall be taken that would terminate any occupancy or tenancy without the
prior written consent of Agent; (3) Rents (hereinafter defined), if collected
by or for the holder of the Subordinate Mortgage, shall be applied first to the
payment of the secured indebtedness then due and expenses incurred in the
ownership, operation and maintenance of the Mortgaged Property in such order as
Agent may determine, prior to being applied to any indebtedness secured by the
Subordinate Mortgage; (4) written notice of default under the Subordinate
Mortgage and written notice of the commencement of any action (whether judicial
or pursuant to a power of sale) to foreclose or otherwise enforce the
Subordinate Mortgage or to seek the appointment of a receiver for all or any
part of the Mortgaged Property shall be given to Agent with or immediately
after the occurrence of any such default or commencement; and (5) neither the
holder of the Subordinate Mortgage, nor any purchaser at foreclosure
thereunder, nor anyone claiming, by, through or under any of them shall succeed
to any of Grantor's rights hereunder without the prior written consent of
Agent.
(j) OPERATION OF MORTGAGED PROPERTY. Grantor will operate the
Mortgaged Property in a good and workmanlike manner and in accordance with all
Legal Requirements and will pay all fees or charges of any kind in connection
therewith. Grantor will keep the Mortgaged Property occupied so as not to
impair the insurance carried thereon. Grantor will not use or occupy or
conduct any activity on or allow the use or occupancy of or the conduct of any
activity on, the Mortgaged Property in any manner which violates any Legal
Requirement or which constitutes a public or private nuisance or which makes
void, voidable or
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cancelable, or increases the premium of, any insurance then in force with
respect thereto. Grantor will not initiate or permit any zoning
reclassification of the Mortgaged Property or seek any variance under existing
zoning ordinances applicable to the Mortgaged Property or use or permit the use
of the Mortgaged Property in such a manner which would result in such use
becoming a non-conforming use under applicable zoning ordinances or other Legal
Requirement. Grantor will not impose any easement, restrictive covenant or
encumbrance upon the Mortgaged Property, execute or file any subdivision plat
or condominium declaration affecting the Mortgaged Property or consent to the
annexation of the Mortgaged Property to any municipality, without the prior
written consent of Agent. Grantor will not do or suffer to be done any act
whereby the value of any part of the Mortgaged Property may be materially
lessened. Grantor will preserve, protect, renew, extend and retain all
material rights and privileges granted for or applicable to the Mortgaged
Property. Without the prior written consent of Agent, there shall be no
drilling or exploration for or extraction, removal or production of any
mineral, hydrocarbon, gas, natural element, compound or substance (including
sand and gravel) from the surface or subsurface of the Land regardless of the
depth thereof or the method of mining or extraction thereof. Grantor will
cause all debts and liabilities of any character (including without limitation
all debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Mortgaged Property) incurred in the
construction, maintenance, operation and development of the Mortgaged Property
to be promptly paid, unless the same are diligently contested in good faith.
(k) SUITS AND CLAIMS; LOAN DOCUMENTS. Except as disclosed to
Agent in writing, there is no suit, action, claim, investigation, inquiry,
proceeding or demand pending (or, to Grantor's knowledge, threatened) which
affects the Mortgaged Property (including, without limitation, any which
challenges or otherwise pertains to Grantor's title to the Mortgaged Property)
or the validity, enforceability or priority of any of the Loan Documents. The
Loan Documents constitute legal, valid and binding obligations of Grantor (and
of each guarantor, if any) enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Debtor Relief Laws (hereinafter
defined) and except as the availability of certain remedies may be limited by
general principles of equity. Grantor is not a "foreign person" within the
meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and
7701 (i.e. Grantor is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined therein
and in any regulations promulgated thereunder). The loan evidenced by the
Notes is solely for business purposes, and is not for personal, family,
household or agricultural purposes.
(l) FURTHER ASSURANCES. Grantor will, promptly on the reasonable
request of Agent, (i) correct any defect, error or omission which may be
discovered in the contents, execution or acknowledgment of this Mortgage or any
other Loan Document; (ii) execute, acknowledge, deliver, procure and record
and/or file such further documents (including, without limitation, further
deeds of trust, security agreements, financing, statements, continuation
statements, and assignments of rents or leases) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
this Mortgage and the other Loan Documents, to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby (including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Mortgaged
Property) or as deemed advisable by any Holder to protect the lien or the
security interest hereunder against the rights or interests of third persons;
and (iii) provide such certificates, documents, reports, information,
affidavits and other instruments and do such further acts as may be necessary,
desirable or proper in the reasonable determination of Agent or any other
Holder to enable Agent or such other Holder to comply with the requirements or
requests of any agency having jurisdiction over Agent or such other Holder or
any examiners of such agencies with respect to the indebtedness secured hereby,
Grantor or the Mortgaged Property. Grantor shall pay all reasonable costs
connected with any of the foregoing, which shall be a demand obligation owing
by Grantor (which Grantor hereby promises to pay) to Agent or such other Holder
pursuant to this Mortgage.
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(m) FEES AND EXPENSES. Without limitation of any other provision
of this Mortgage or of any other Loan Document and to the extent not prohibited
by applicable law, Grantor will pay, and will reimburse to Agent and each other
Holder and/or Trustee on demand to the extent paid by Agent or such other
Holder and/or Trustee, provided such amounts are reasonable: (i) all appraisal
fees, filing and recording fees, taxes, abstract fees, title search or
examination fees, uniform commercial code search fees, escrow fees, reasonable
attorneys' fees, environmental inspection fees, and all other out-of-pocket
costs and expenses of every character incurred by Grantor, Agent or any other
Holder and/or Trustee in connection with the preparation of the Loan Documents,
the evaluation, closing and funding of the loan evidenced by the Loan
Documents, and any and all amendments and supplements to this Mortgage, the
Notes or any other Loan Documents or any approval, consent, waiver, release or
other matter requested or required hereunder or thereunder, or otherwise
attributable or chargeable to Grantor as owner of the Mortgaged Property; and
(ii) all reasonable costs and expenses, including, reasonable attorneys' fees
and expenses, incurred or expended in connection with the exercise of any right
or remedy, or the enforcement of any obligation of Grantor, hereunder or under
any other Loan Document.
(n) INDEMNIFICATION.
(i) Grantor will indemnify and hold harmless Agent, each
other Holder and Trustee from and against, and reimburse them on demand for,
any and all Indemnified Matters (defined below). For purposes of this
paragraph (n), the terms "Agent," "Holder" and "Trustee" shall include the
directors, officers, partners, employees and agents of Agent, each Holder and
Trustee, respectively, and any persons owned or controlled by, owning or
controlling, or under common control or affiliated with Agent, each Holder or
Trustee, respectively. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PERSON. However, such indemnities shall not apply to a particular
indemnified person to the extent that the subject of the indemnification is
caused by or arises out of the gross negligence or willful misconduct of that
indemnified person. Any amount to be paid under this paragraph (n) by Grantor
to Agent, any other Holder and/or Trustee shall be a demand obligation owing by
Grantor (which Grantor hereby promises to pay) to Agent, such other Holder
and/or Trustee pursuant to this Mortgage. Nothing in this paragraph, elsewhere
in this Mortgage or in any other Loan Document shall limit or impair any rights
or remedies of Agent, any other Holder and/or Trustee (including without
limitation any rights of contribution or indemnification) against Grantor or
any other person under any other provision of this Mortgage, any other Loan
Document, any other agreement or any applicable Legal Requirement.
(ii) As used herein, the term "INDEMNIFIED MATTERS" means
any and all claims, demands, liabilities (including strict liability), losses,
damages (including consequential damages), causes of action, judgments,
penalties, costs and expenses (including without limitation, reasonable fees
and expenses of attorneys and other professional consultants and experts, and
of the investigation and defense of any claim, whether or not such claim is
ultimately defeated, and the settlement of any claim or judgment including all
value paid or given in settlement) of every kind, known or unknown, foreseeable
or unforeseeable, which may be imposed upon, asserted against or incurred or
paid by Agent, any other Holder and/or Trustee at any time and from time to
time, whenever imposed, asserted or incurred, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Mortgaged Property or with this
Mortgage or any other Loan Document, including, but not limited to any bodily
injury or death or property damage occurring in or upon or in the vicinity of
the Mortgaged Property through any cause whatsoever at any time on or before
the Release Date (defined below), any act performed
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or omitted to be performed hereunder or under any other Loan Document, any
breach by Grantor of any representation, warranty, covenant, agreement or
condition contained in this Mortgage or in any other Loan Document, any default
as defined herein, and any claim under or with respect to any Lease or any
Environmental Matters. As used herein, the term "ENVIRONMENTAL MATTER" means:
(a) the presence of any Hazardous Substance on, in, under, above or about the
Mortgaged Property, or the migration or release or threatened migration or
release of any Hazardous Substance on, to, from or through the Mortgaged
Property, on or at any time before the Release Date; or (b) any act, omission,
event or circumstance existing or occurring in connection with the handling,
treatment, containment, removal, storage, decontamination, clean-up, transport
or disposal of any Hazardous Substance which is at any time on or before the
Release Date present on, in, under, above or about the Mortgaged Property; or
(c) any violation on or before the Release Date, of any Environmental
Requirement in effect on or before the Release Date, regardless of whether any
act, omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission,
event or circumstance; or (d) any Environmental Claim, or the filing or
imposition of any environmental lien against the Mortgaged Property, because
of, resulting from, in connection with, or arising out of any of the matters
referred to in clauses (a) through (c) preceding; and regardless of whether any
of the matters referred to in the foregoing clauses (a) through (d) was caused
by Grantor or Grantor's tenant or any subtenant, or a prior owner of the
Mortgaged Property or its tenant or any subtenant, or any third party. The
term "RELEASE DATE" as used herein means the earlier of the following two
dates: (i) the date on which the indebtedness and obligations secured hereby
have been paid and performed in full and this Mortgage has been released, or
(ii) the date on which the lien of this Mortgage is fully and finally
foreclosed or a conveyance by deed in lieu of such foreclosure is fully and
finally effective, and possession of the Mortgaged Property has been given to
the purchaser or grantee free of occupancy and claims to occupancy by Grantor
and Grantor's heirs, devisees, representatives, successors and assigns;
provided, that if such payment, performance, release, foreclosure or conveyance
is challenged, in bankruptcy proceedings or otherwise, the Release Date shall
be deemed not to have occurred until such challenge is rejected, dismissed or
withdrawn with prejudice. The indemnities in this paragraph (n) shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of this Mortgage but will survive the Release Date, foreclosure of
this Mortgage or conveyance in lieu of foreclosure, the repayment of the
secured indebtedness, the discharge and release of this Mortgage and the other
Loan Documents, any bankruptcy or other debtor relief proceeding, and any other
event whatsoever.
(o) TAXES ON NOTES OR MORTGAGE. Grantor will promptly pay all
income, franchise and other taxes owing by Grantor and any stamp taxes or other
taxes (unless such payment by Grantor is prohibited by law) which may be
required to be paid with respect to the Notes, this Mortgage or any other
instrument evidencing or securing any of the secured indebtedness. In the
event of the enactment after this date of any law of any governmental entity
applicable to Agent any other Holder, the Notes, the Mortgaged Property, this
Mortgage or any other Loan Document deducting from the value of property for
the purpose of taxation any lien or security interest thereon, or imposing upon
Agent or any other Holder the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Grantor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or
mortgages or security agreements or the interest of the mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to affect this Mortgage or the indebtedness secured hereby or
Agent or any other Holder, then, and in any such event, Grantor, upon demand by
Agent or any such other Holder, shall pay such taxes, assessments, charges or
liens, or reimburse Agent or such other Holder therefor to the extent permitted
by law.
(p) STATEMENT CONCERNING NOTES OR MORTGAGE. Grantor shall at any
time and from time to time furnish within seven (7) days of a written request
by Agent a written statement in such form as may be
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required by Agent stating that: (i) the Notes, this Mortgage and the other
Loan Documents are valid and binding obligations of Grantor, enforceable
against Grantor in accordance with their terms; (ii) the unpaid principal
balance of the Notes; (iii) the date to which interest on the Notes are paid;
(iv) the Notes, this Mortgage and the other Loan Documents have not been
released, subordinated or modified; and (v) there are no offsets or defenses
against the enforcement of the Notes, this Mortgage or any other Loan Document.
If any of the foregoing statements are untrue, Grantor shall, alternatively,
specify the reasons therefor.
(q) ANNUAL APPRAISAL. Agent may at its option obtain at Grantor's
reasonable expense, once in each year (or as otherwise requested by Agent but
in any event no more than once each year) an appraisal of the Mortgaged
Property or any part thereof prepared in accordance with written instructions
from Agent by a third-party appraiser engaged directly by Agent. Each such
appraiser and appraisal shall be reasonably satisfactory to Agent. The costs
of each such appraisal shall be a part of the secured indebtedness and shall be
payable by Grantor to Agent on demand (which obligation Grantor hereby promises
to pay).
Section 2.2. PERFORMANCE BY AGENT ON GRANTOR'S BEHALF. Grantor
agrees that, if Grantor fails to perform any act or to take any action which
under any Loan Document Grantor is required to perform or take, or to pay any
money which under any Loan Document Grantor is required to pay, and whether or
not the failure then constitutes a default hereunder or thereunder, and whether
or not there has occurred any default or defaults hereunder or the secured
indebtedness has been accelerated, Agent, in Grantor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act
or take such action or pay such money, and any reasonable expenses so incurred
by Agent and any money so paid by Agent shall be a demand obligation owing by
Grantor to Agent (which obligation Grantor hereby promises to pay), shall be a
part of the indebtedness secured hereby, and Agent, upon making such payment,
shall be subrogated to all of the rights of the person, entity or body politic
receiving such payment. Agent and its designees shall have the right to enter
upon the Mortgaged Property at any reasonable time for any such purposes. No
such payment or performance by Agent shall waive or cure any default or waive
any right, remedy or recourse of Agent. Any such payment may be made by Agent
in reliance on any statement, invoice or claim without inquiry into the
validity or accuracy thereof. Each amount due and owing by Grantor to Agent
pursuant to this Mortgage shall bear interest, from the date such amount
becomes due until paid, at the rate per annum provided in the Notes for
interest on past due principal owed on the Notes but never in excess of the
maximum non-usurious amount permitted by applicable law, which interest shall
be payable to Agent on demand; and all such amounts, together with such
interest thereon, shall automatically and without notice be a part of the
indebtedness secured hereby. The amount and nature of any expense by Agent
hereunder and the time when paid shall be fully established by the certificate
of Agent or any of Agent's officers or agents.
Section 2.3. ABSENCE OF OBLIGATIONS OF AGENT WITH RESPECT TO
MORTGAGED PROPERTY. Notwithstanding anything in this Mortgage to the contrary,
including, without limitation, the definition of "Mortgaged Property" and/or
the provisions of ARTICLE 3 hereof, (i) to the extent permitted by applicable
law, the Mortgaged Property is composed of Grantor's rights, title and
interests therein but not Grantor's obligations, duties or liabilities
pertaining thereto, (ii) neither Agent nor any other Holder assumes or shall
have any obligations, duties or liabilities in connection with any portion of
the items described in the definition of "Mortgaged Property" herein, prior to
obtaining title to such Mortgaged Property, whether by foreclosure sale, the
granting of a deed in lieu of foreclosure or otherwise, and (iii) Agent, and
each other Holder may, at any time prior to acquisition of title to any portion
of the Mortgaged Property as above described, advise any party in writing as to
the extent of such Holder's interest therein and/or expressly disaffirm in
writing any rights, interests, obligations, duties and/or liabilities with
respect to such Mortgaged Property or matters related thereto. Without
limiting the generality of the foregoing, it is understood and
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agreed that Agent and each other Holder shall have no obligations, duties or
liabilities prior to acquisition of title to any portion of the Mortgaged
Property, as lessee under any lease or purchaser or seller under any contract
or option unless Agent and each other Holder elects otherwise by written
notification.
ARTICLE 3
COLLATERAL ASSIGNMENT OF RENTS AND LEASES
Section 3.1. ASSIGNMENT. As additional security for the
indebtedness secured hereby, Grantor hereby assigns to Agent, as agent for the
Banks, all Rents (hereinafter defined) and all of Grantor's rights in and under
all Leases (hereinafter defined). Upon the occurrence of a default hereunder,
Agent shall have the right, power and privilege (but shall be under no duty) to
demand possession of the Rents, which demand shall to the fullest extent
permitted by applicable law be sufficient action by Agent to entitle Agent to
immediate and direct payment of the Rents (including delivery to Agent of Rents
collected for the period in which the demand occurs and for any subsequent
period), for application as provided in this Mortgage, all without the
necessity of any further action by Agent, including, without limitation, any
action to obtain possession of the Land, Improvements or any other portion of
the Mortgaged Property. Grantor hereby authorizes and directs the tenants
under the Leases to pay Rents to Agent upon written demand by Agent, without
further consent of Grantor, without any obligation to determine whether a
default has in fact occurred and regardless of whether Agent has taken
possession of any portion of the Mortgaged Property, and the tenants may rely
upon any written statement delivered by Agent to the tenants. Any such payment
to Agent shall constitute payment to Grantor under the Leases, and Grantor
hereby appoints Agent as Grantor's lawful attorney-in-fact for giving, and
Agent is hereby empowered to give, acquittances to any tenants for such
payments to Agent after a default. The assignment contained in this Section
shall become null and void upon the release of this Mortgage. As used herein:
(i) "Lease" means each existing or future lease, sublease (to the extent of
Grantor's rights thereunder) or other agreement under the terms of which any
person has or acquires any right to occupy or use the Mortgaged Property, or
any part thereof, or interest therein, and each existing or future guaranty of
payment or performance thereunder, and all extensions, renewals, modifications
and replacements of each such lease, sublease, agreement or guaranty; and (ii)
"Rents" means all of the rents, revenue, income, profits and proceeds derived
and to be derived from the Mortgaged Property or arising from the use or
enjoyment of any portion thereof or from any Lease, including, but not limited
to liquidated damages following default under any such Lease, all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property, all of
Grantor's rights to recover monetary amounts from any tenant in bankruptcy
including, without limitation, rights of recovery for use and occupancy and
damage claims arising out of Lease defaults, including rejections, under any
applicable Debtor Relief Law (as hereinafter defined), together with any sums
of money that may now or at any time hereafter be or become due and payable to
Grantor by virtue of any and all royalties, overriding royalties, bonuses,
delay rentals and any other amount of any kind or character arising under any
and all present and all future oil, gas, mineral and mining leases covering the
Mortgaged Property or any part thereof, and all proceeds and other amounts paid
or owing to Grantor under or pursuant to any and all contracts and bonds
relating to the construction or renovation of the Mortgaged Property.
Section 3.2. COVENANTS, REPRESENTATIONS AND WARRANTIES CONCERNING
LEASES AND RENTS. Grantor covenants, represents and warrants to each Holder
that: (i) Grantor has good title to, and is the owner of the entire landlord's
interest in, the Leases and Rents hereby assigned and authority to assign them;
(ii) all Leases are valid and enforceable, and in full force and effect, and
are unmodified except as stated therein; (iii) unless otherwise stated in a
Permitted Encumbrance, no Rents or Leases have been or will be assigned,
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mortgaged, pledged or otherwise encumbered and no other person has or will
acquire any right, title or interest in such Rents or Leases; (iv) no Rents
have been waived, released, discounted, set off or compromised; (v) except as
stated in the Leases, Grantor has not received any funds or deposits from any
tenant for which credit has not already been made on account of accrued Rents;
(vi) Grantor shall perform all of its obligations under the Leases and enforce
the tenants' obligations under the leases to the extent enforcement is prudent
under the circumstances; (vii) Grantor will not without the prior written
consent of Agent, enter into any Lease after the date hereof, or waive,
release, discount, set off, compromise, reduce or defer any Rent, receive or
collect Rents more than one (1) month in advance, grant any rent- free period
to any tenant, reduce any Lease term or waive, release or otherwise modify any
other material obligation under any Lease, renew or extend any Lease except in
accordance with a right of the tenant thereto in such Lease, approve or consent
to an assignment of a Lease or a subletting of any part of the premises covered
by a Lease, or settle or compromise any claim against a tenant under a Lease in
bankruptcy or otherwise; provided, however, Agent will not unreasonably
withhold or delay its consent to any of the foregoing actions; (viii) Grantor
will not, except in good faith where the tenant is in material default
thereunder, terminate or consent to the cancellation or surrender of any Lease
having an unexpired term of one year or more unless promptly after the
cancellation or surrender a new Lease of such premises is made with a new
tenant having a credit standing, in Agent's judgment, at least equivalent to
that of the tenant whose Lease was canceled, on substantially the same terms as
the terminated or canceled Lease; (ix) Grantor will not execute any Lease
except in accordance with the Loan Documents and for actual occupancy by the
tenant thereunder; (x) Grantor shall give prompt notice to Agent, as soon as
Grantor first obtains notice, of any claim, or the commencement of any action,
by any tenant or subtenant under or with respect to a Lease regarding any
claimed damage, default, diminution of or offset against Rent, cancellation of
the Lease, or constructive eviction, excluding, however, notices of default
under residential Leases, and Grantor shall defend, at Grantor's reasonable
expense, any proceeding pertaining to any Lease, including, if Agent so
requests, any such proceeding, to which Agent is a party; (xi) Grantor shall as
requested by Agent (but in any event no more than once per calendar year),
within ten (10) days of each written request, deliver to Agent a complete rent
roll of the Mortgaged Property in such detail as Agent may require, and
financial statements of the tenants, subtenants and guarantors under the Leases
to the extent available to Grantor, and deliver to such of the tenants and
others obligated under the Leases specified by Agent written notice of the
assignment in SECTION 3.1 hereof in form and content satisfactory to Agent;
(xii) promptly upon written request by Agent, Grantor shall deliver to Agent
copies of all Leases and copies of all records relating thereto; (xiii) there
shall be no merger of the leasehold estates, created by the Leases, with the
fee estate of the Land without the prior written consent of Agent; and (xiv)
Agent may at any time and from time to time by specific written instrument
intended for the purpose, unilaterally subordinate the lien of this Mortgage to
any Lease, without joinder or consent of, or notice to, Grantor, any tenant or
any other person, and notice is hereby given to each tenant under a Lease of
such right to subordinate. No such subordination shall constitute a
subordination to any lien or other encumbrance, whenever arising, or improve
the right of any junior lienholder; and nothing herein shall be construed as
subordinating this Mortgage to any Lease.
Section 3.3. NO LIABILITY OF AGENT. Agent's acceptance of this
assignment shall not be deemed to constitute Agent as a "mortgagee in
possession," nor obligate Agent to appear in or defend any proceeding relating
to any Lease or to the Mortgaged Property, or to take any action hereunder,
expend any money, incur any expenses, or perform any obligation or liability
under any Lease, or assume any obligation for any deposit delivered to Grantor
by any tenant and not as such delivered to and accepted by Agent. Agent shall
not be liable for any injury or damage to person or property in or about the
Mortgaged Property unless due to Agent's gross negligence or willful
misconduct, or for Agent's failure to collect or to exercise diligence in
collecting, Rents, but shall be accountable only for Rents that it shall
actually receive. Neither the assignment of Leases and Rents nor enforcement
of Agent's rights regarding Leases and Rents (including collection of
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Rents) nor possession of the Mortgaged Property by Agent nor Agent's consent to
or approval of any Lease (nor all of the same), shall render Agent liable on
any obligation under or with respect to any Lease or constitute affirmation of,
or any subordination to, any Lease, occupancy, use or option. If Agent seeks
or obtains any judicial relief regarding Rents or Leases, the same shall in no
way prevent the concurrent or subsequent employment of any other appropriate
rights or remedies nor shall same constitute an election of judicial relief for
any foreclosure or any other purpose. Neither Agent has nor assumes any
obligations as lessor or landlord with respect to any Lease. The rights of
Agent under this ARTICLE 3 shall be cumulative of all other rights of Agent
under the Loan Documents or otherwise.
ARTICLE 4
DEFAULT
Section 4.1. EVENTS OF DEFAULT. The occurrence of any one of the
following shall be a default under this Mortgage ("DEFAULT"):
(a) DEFAULT UNDER CREDIT AGREEMENT. An Event of Default under the
Credit Agreement occurs and is continuing, subject to applicable notice and
cure periods.
(b) TRANSFER OF THE MORTGAGED PROPERTY. Any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Mortgaged Property or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, except: (i) sales or transfers of
items of the Accessories which have become obsolete or worn beyond practical
use and which have been replaced by adequate substitutes, owned by Grantor,
having a value equal to or greater than the replaced items when new; (ii) the
grant, in the ordinary course of business, of a leasehold interest in a part of
the Improvements to a tenant for occupancy, not containing a right or option to
purchase and not in contravention of any provision of this Mortgage or of any
other Loan Document; and (iii) such sales, leases, conveyances, assignments,
pledges, encumbrances or transfers permitted under the Credit Agreement.
Agent, on behalf of and upon the direction of Required Banks (as defined in the
Credit Agreement) may, in its sole discretion, waive a default under this
paragraph, but it shall have no obligation to do so, and any waiver may be
conditioned upon such one or more of the following, (if any) which Agent may
require: the grantee's integrity, reputation, character, creditworthiness and
management ability being reasonably satisfactory to Agent in its sole judgment
and grantee executing, prior to such sale or transfer, a written assumption
agreement containing such terms as Agent may require, a principal paydown on
the Notes, an increase in the rate of interest payable under the Notes, a
transfer fee, a modification of the term of the Notes, and any other
modification of the Loan Documents which Agent may require.
(c) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge,
encumbrance, assignment or transfer, voluntarily or involuntarily, whether by
operation of law or otherwise, of any interest in Grantor (if Grantor is not a
natural person but is a corporation, partnership, trust or other legal entity),
without the prior written consent of Agent (including, without limitation, if
Grantor is a partnership or joint venture, the withdrawal from or admission
into it of any general partner or joint venturer), which consent shall not be
unreasonably withheld, except: (i) sales, pledges, encumbrances, assignments or
transfers permitted under the Credit Agreement, and (ii) sales or transfers of
stock in Grantor if Grantor is a corporation or sales or transfers of limited
partnership interests in Grantor if Grantor is a limited partnership provided
that such sales or transfers, together with any prior sales or transfers of
interests in Grantor, do not result in more than 49% of the total beneficial
interests in Grantor having been sold or transferred since the date of this
Mortgage.
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(d) GRANT OF EASEMENT, ETC. Without the prior written consent of
Agent, which consent shall not be unreasonably withheld, Grantor grants any
easement or dedication, files any plat, condominium declaration, or
restriction, or otherwise encumbers the Mortgaged Property, or seeks or permits
any zoning reclassification or variance, unless such action is expressly
permitted by the Loan Documents or does not affect the Mortgaged Property.
(e) ABANDONMENT. The owner of the Mortgaged Property abandons any
of the Mortgaged Property for a period in excess of thirty (30) consecutive
days.
(f) DEFAULT UNDER OTHER LIEN. A default or event of default
occurs under any lien, security interest or assignment covering the Mortgaged
Property or any part thereof (whether or not Agent has consented, and without
hereby implying Agent's consent, to any such lien, security interest or
assignment not created hereunder) and such default is not cured within any
applicable grace period provided by such document, or the holder of any such
lien, security interest or assignment declares a default or institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
(g) INTENTIONALLY DELETED.
(h) INTENTIONALLY DELETED.
(i) LIQUIDATION, ETC. The liquidation, termination, dissolution,
merger, consolidation or failure to maintain good standing in the State of
Texas (or in the case of an individual, the death or legal incapacity) of the
owner of the Mortgaged Property or any person obligated to pay any part of the
secured indebtedness.
(j) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any
reason without Agent's specific written consent cease to be in full force and
effect, or shall be declared null and void or unenforceable in whole or in
part, or the validity or enforceability thereof, in whole or in part, shall be
challenged or denied by any party thereto other than Agent; or the liens,
mortgages or security interests of Agent or any other Holder in any of the
Mortgaged Property become unenforceable in whole or in part, or cease to be of
the priority herein required, or the validity or enforceability thereof, in
whole or in part, shall be challenged or denied by Grantor or any person
obligated to pay any part of the secured indebtedness.
Section 4.2. NOTICE AND CURE. If any provision of this Mortgage or
any other Loan Document provides for Holder to give to Grantor any notice
regarding a default or incipient default, then if Agent shall fail to give such
notice to Grantor as provided, the sole and exclusive remedy of Grantor for
such failure shall be to seek appropriate equitable relief to enforce the
agreement to give such notice and to have any acceleration of the maturity of
the Notes and the secured indebtedness postponed or revoked and foreclosure
proceedings in connection therewith delayed or terminated pending or upon the
curing of such default in the manner and during the period of time permitted by
such agreement, if any, and Grantor shall have no right to damages or any other
type of relief not herein specifically set out against Agent or any other
Holder, all of which damages or other relief are hereby waived by Grantor.
Nothing herein or in any other Loan Document shall operate or be construed to
add on or make cumulative any cure or grace periods specified in any of the
Loan Documents.
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ARTICLE 5
REMEDIES
Section 5.1. CERTAIN REMEDIES. If a default shall occur, Agent, upon
the direction of Required Banks (as defined in the Credit Agreement), may (but
shall have no obligation to) exercise any one or more of the following
remedies, without notice (unless notice is required by applicable statute or
the terms hereof or any of the Loan Documents):
(a) ACCELERATION. Agent may at any time and from time to time
declare any or all of the secured indebtedness immediately due and payable and
such secured indebtedness shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest, notice of acceleration
or of intention to accelerate or any other notice or declaration of any kind,
all of which are hereby expressly waived by Grantor, except as provided above.
(b) ENFORCEMENT OF ASSIGNMENT OF RENTS. Prior or subsequent to
taking possession of any portion of the Mortgaged Property or taking any action
with respect to such possession, Agent may: (1) collect and/or sue for the
Rents in Agent's own name, give receipts and releases therefor, and after
deducting all reasonable expenses of collection, including attorneys' fees and
expenses, apply the net proceeds thereof to the secured indebtedness in such
manner and order as Agent may elect and/or to the operation and management of
the Mortgaged Property, including the payment of management, brokerage and
attorney's fees and expenses; and (2) require Grantor to transfer all security
deposits and records thereof to Agent together with original counterparts of
the Leases.
(c) FORECLOSURE. Upon the occurrence of a default, Trustee, or
his successor or substitute, is authorized and empowered and it shall be his
special duty at the request of Agent to sell the Mortgaged Property or any part
thereof situated in the State of Texas, at the courthouse of any county
(whether or not the counties in which the Mortgaged Property is located are
contiguous, if the Mortgaged Property is located in more than one county) in
the State of Texas in which any part of the Mortgaged Property is situated, at
public vendue to the highest bidder for cash between the hours of ten o'clock
a.m. and four o'clock p.m. on the first Tuesday in any month or at such other
place, time and date as provided by the statutes of the State of Texas then in
force governing sales of real estate under powers of sale conferred by deed of
trust, after having given notice of such sale in accordance with such statutes.
Any sale made by Trustee hereunder may be as an entirety or in such parcels as
Agent may request. To the extent permitted by applicable law, any sale may be
adjourned by announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive sale
or sales under such power until the whole of the Mortgaged Property shall be
sold; and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby
and the expense of executing this trust as provided herein, this Mortgage and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property but Agent shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Mortgaged
Property. Trustee may, after any request or direction by Agent, sell not only
the real property but also the Collateral and other interests which are a part
of the Mortgaged Property, or any part thereof, as a unit and as a part of a
single sale, or may sell any part of the Mortgaged Property separately from the
remainder of the Mortgaged Property. It shall not be necessary for Trustee to
have taken possession of any part of the Mortgaged Property or to have present
or to exhibit at any sale any of the Collateral. After each sale, Trustee
shall make to the purchaser or purchasers at such sale good and sufficient
conveyances in the name of Grantor, conveying the property so sold to the
purchaser or purchasers with
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general warranty of title by Grantor, subject to the Permitted Encumbrances
(and to such leases and other matters, if any, as Trustee may elect upon
request of Agent), and shall receive the proceeds of said sale or sales and
apply the same as herein provided. Payment of the purchase price to the
Trustee shall satisfy the obligation of purchaser at such sale therefor, and
such purchaser shall not be responsible for the application thereof. The power
of sale granted herein shall not be exhausted by any sale held hereunder by
Trustee or his substitute or successor, and such power of sale may be exercised
from time to time and as many times as Agent may deem necessary until all of
the Mortgaged Property has been duly sold and all secured indebtedness has been
fully paid. In the event any sale hereunder is not completed or is defective
in the opinion of Agent, such sale shall not exhaust the power of sale
hereunder and Agent shall have the right to cause a subsequent sale or sales to
be made hereunder. Any and all statements of fact or other recitals made in
any deed or deeds or other conveyances given by Trustee or any successor or
substitute appointed hereunder as to nonpayment of the secured indebtedness or
as to the occurrence of any default, or as to Agent having declared all of said
indebtedness to be due and payable, or as to the request to sell, or as to
notice of time, place and terms of sale and the properties to be sold having
been duly given, or as to the refusal, failure or inability to act of Trustee
or any substitute or successor trustee, or as to the appointment of any
substitute or successor trustee, or as to any other act or thing having been
duly done by Agent or by such Trustee, substitute or successor, shall be taken
as prima facie evidence of the truth of the facts so stated and recited. The
Trustee or his successor or substitute may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Trustee, including the posting of notices and the conduct of sale, but
in the name and on behalf of Trustee, his successor or substitute. If Trustee
or his successor or substitute shall have given notice of sale hereunder, any
successor or substitute Trustee thereafter appointed may complete the sale and
the conveyance of the property pursuant thereto as if such notice had been
given by the successor or substitute Trustee conducting the sale.
(d) UNIFORM COMMERCIAL CODE. Without limitation of Agent's rights
of enforcement with respect to the Collateral or any part thereof in accordance
with the procedures for foreclosure of real estate, Agent may exercise its
rights of enforcement with respect to the Collateral or any part thereof under
the Texas Business and Commerce Code as amended (or under the Uniform
Commercial Code in force in any other state to the extent the same is
applicable law) and in conjunction with, in addition to or in substitution for
those rights and remedies: (1) Agent may enter upon Grantor's premises to take
possession of, assemble and collect the Collateral or, to the extent and for
those items of the Collateral permitted under applicable law, to render it
unusable; (2) Agent may require Grantor to assemble the Collateral and make it
available at a place Agent designates which is mutually convenient to allow
Agent to take possession or dispose of the Collateral; (3) written notice
mailed to Grantor as provided herein at least ten (10) days prior to the date
of public sale of the Collateral or prior to the date after which private sale
of the Collateral will be made shall constitute reasonable notice; (4) any sale
made pursuant to the provisions of this paragraph shall be deemed to have been
a public sale conducted in a commercially reasonable manner if held
contemporaneously with and upon the same notice as required for the sale of the
Mortgaged Property under power of sale as provided in paragraph (c) above in
this SECTION 5.1; (5) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the Collateral
and the other Mortgaged Property may, at the option of Agent, be sold as a
whole; (6) it shall not be necessary that Agent take possession of the
Collateral or any part thereof prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale; (7)
with respect to application of proceeds of disposition of the Collateral under
SECTION 5.3 hereof, the costs and expenses incident to disposition shall
include the reasonable expenses of retaking, holding, preparing for sale or
lease, selling, leasing, and the like and the reasonable attorneys' fees and
legal expenses incurred by Agent and each other Holder; (8) any and all
statements of fact or other recitals made in any bill of sale or assignment or
other instrument evidencing any foreclosure sale hereunder as to nonpayment of
the
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secured indebtedness or as to the occurrence of any default, or as to Agent
having declared all of such indebtedness to be due and payable, or as to notice
of time, place and terms of sale and of the properties to be sold having been
duly given, or as to any other act or thing having been duly done by Agent,
shall be taken as prima facie evidence of the truth of the facts so stated and
recited; and (9) Agent may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Agent,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Agent.
(e) LAWSUITS. Agent may proceed by a suit or suits in equity or
at law, whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction.
(f) ENTRY ON MORTGAGED PROPERTY. Agent is authorized, prior or
subsequent to the institution of any foreclosure proceedings, to the fullest
extent permitted by applicable law, to enter upon the Mortgaged Property, or
any part thereof, and to take possession of the Mortgaged Property and all
books and records relating thereto, and to exercise without interference from
Grantor any and all rights which Grantor has with respect to the management,
possession, operation, protection or preservation of the Mortgaged Property.
Agent shall not be deemed to have taken possession of the Mortgaged Property or
any part thereof except upon the exercise of its right to do so, and then only
to the extent evidenced by its demand and overt act specifically for such
purpose. All reasonable costs, expenses and liabilities of every character
incurred by Agent in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property shall constitute a demand obligation of
Grantor (which obligation Grantor hereby promises to pay) to Agent pursuant to
this Mortgage. If necessary to obtain the possession provided for above, Agent
may invoke any and all legal remedies to dispossess Grantor. In connection
with any action taken by Agent pursuant to this Section, Agent shall not be
liable for any loss sustained by Grantor resulting from any failure to let the
Mortgaged Property, or any part thereof, or from any act or omission of Agent
in managing the Mortgaged Property unless such loss is caused by the willful
misconduct and bad faith of Agent, nor shall Agent be obligated to perform or
discharge any obligation, duty or liability of Grantor arising under any lease
or other agreement relating to the Mortgaged Property or arising under any
Permitted Encumbrance or otherwise arising. Grantor hereby assents to,
ratifies and confirms any and all actions of Agent with respect to the
Mortgaged Property taken under this Section.
(g) RECEIVER. Agent shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Mortgaged
Property, whether such receivership be incident to a proposed sale (or sales)
of such property or otherwise, and without regard to the value of the Mortgaged
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Grantor does hereby irrevocably consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, agrees not to oppose any application therefor by Agent, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Agent to application of Rents as provided in this Mortgage.
Nothing herein is to be construed to deprive Agent of any other right, remedy
or privilege it may have under the law to have a receiver appointed. Any
reasonable amount of money advanced by Agent in connection with any such
receivership shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent pursuant to this Mortgage.
(h) TERMINATION OF COMMITMENT TO LEND. Agent and each other
Holder may terminate any commitment or obligation to lend or disburse funds
under any Loan Document.
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(i) OTHER RIGHTS AND REMEDIES. Agent may exercise any and all
other rights and remedies which Agent may have under the Loan Documents, or at
law or in equity or otherwise.
Section 5.2. EFFECTIVE AS MORTGAGE. This instrument shall be
effective as a mortgage as well as a deed of trust and upon the occurrence of a
default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by applicable law, and any foreclosure suit may be brought by Trustee
or by Agent; and to the extent, if any, required to cause this instrument to be
so effective as a mortgage as well as a deed of trust, Grantor hereby mortgages
the Mortgaged Property to Agent, as agent for itself and the other Banks. In
the event a foreclosure hereunder shall be commenced by Trustee, or his
substitute or successor, Agent may at any time before the sale of the Mortgaged
Property direct Trustee to abandon the sale, and may then institute suit for
the collection of the Notes and/or any other secured indebtedness, and for the
foreclosure of this Mortgage. It is agreed that if Agent should institute a
suit for the collection of the Notes or any other secured indebtedness and for
the foreclosure of this Mortgage, Agent may at any time before the entry of a
final judgment in said suit dismiss the same, and require Trustee, his
substitute or successor to sell the Mortgaged Property in accordance with the
provisions of this Mortgage.
Section 5.3. PROCEEDS OF FORECLOSURE. The proceeds of any sale held
by Trustee or Agent or any receiver or public officer in foreclosure of the
liens and security interests evidenced hereby shall be applied: FIRST, to the
payment of all necessary costs and expenses incident to such foreclosure sale,
including but not limited to all reasonable attorneys' fees and legal expenses,
all court costs and charges of every character, and to the payment of the other
secured indebtedness, pro rata, including specifically without limitation the
principal, accrued interest and attorneys' fees due and unpaid on the Notes and
the amounts due and unpaid and owed to Agent and each other Holder under this
Mortgage, the order and manner of application to the items in this clause to be
in Agent's sole discretion; and SECOND, the remainder, if any there shall be,
shall be paid to Grantor, or to Grantor's heirs, devisees, representatives,
successors or assigns, or such other persons (including the holder or
beneficiary of any inferior lien) as may be entitled thereto by law; provided,
however, that if Agent is uncertain which person or persons are so entitled,
Agent may interplead such remainder in any court of competent jurisdiction and
the amount of any reasonable attorneys' fees, court costs and expenses incurred
in such action shall be a part of the secured indebtedness and shall be
reimbursable (without limitation) from such remainder.
Section 5.4. AGENT AS PURCHASER. Agent shall have the right to
become the purchaser as agent for, and for the benefit of the Banks, at any
sale held by Trustee or substitute or successor or by any receiver or public
officer or at any public sale, and Agent shall have the right to credit upon
the amount of Agent's successful bid, to the extent necessary to satisfy such
bid, all or any part of the secured indebtedness in such manner and order as
Agent may elect.
Section 5.5. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence
of a default, Agent shall have the right to proceed with foreclosure judicial
or non-judicial) of the liens and security interests hereunder without
declaring the entire secured indebtedness due, and in such event any such
foreclosure sale may be made subject to the unmatured part of the secured
indebtedness; and any such sale shall not in any manner affect the unmatured
part of the secured indebtedness, but as to such unmatured part this Mortgage
shall remain in full force and effect just as though no sale had been made.
The proceeds of such sale shall be applied as provided in SECTION 5.3 hereof
except that the amount paid under clause FIRST thereof shall be only the
matured portion of the secured indebtedness and any proceeds of such sale in
excess of those provided for in clause FIRST (modified as provided above) shall
be applied to the prepayment (without penalty) of any other secured
indebtedness in such manner and order and to such extent as Agent deems
advisable, and the
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remainder, if any, shall be applied as provided in clause second of SECTION 5.3
hereof. Several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the secured indebtedness.
Section 5.6. REMEDIES CUMULATIVE. All rights and remedies
provided for herein and in any other Loan Document are cumulative of each other
and of any and all other rights and remedies existing at law or in equity, and
Trustee and Agent shall, in addition to the rights and remedies provided herein
or in any other Loan Document, be entitled to avail themselves of all such
other rights and remedies as may now or hereafter exist at law or in equity for
the collection of the secured indebtedness and the enforcement of the covenants
herein and the foreclosure of the liens and security interests evidenced
hereby, and the resort to any right or remedy provided for hereunder or under
any such other Loan Document or provided for by law or in equity shall not
prevent the concurrent or subsequent employment of any other appropriate right
or rights or remedy or remedies.
Section 5.7. AGENT'S DISCRETION AS TO SECURITY. Agent may resort
to any security given by this Mortgage or to any other security now existing,
or hereafter given to secure the payment of the secured indebtedness, in whole
or in part, and in such portions and in such order as may seem best to Agent in
its sole and uncontrolled discretion, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 5.8. GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full
extent Grantor may do so, Grantor agrees that Grantor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension
or redemption, and Grantor, for Grantor, Grantor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by
applicable law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of
assets of Grantor, including the Mortgaged Property, or to a sale in inverse
order of alienation in the event of foreclosure of the liens and/or security
interests hereby created. Grantor shall not have or assert any right under any
statute or rule of law pertaining to the marshaling of assets, sale in inverse
order of alienation, the exemption of homestead, the administration of estates
of decedents, or other matters whatever to defeat, reduce or affect the right
of Agent under the terms of this Mortgage to a sale of the Mortgaged Property
for the collection of the secured indebtedness without any prior or different
resort for collection, or the right of Agent under the terms of this Mortgage
to the payment of the secured indebtedness out of the proceeds of sale of the
Mortgaged Property in preference to every other claimant whatever. Grantor
waives any right or remedy which Grantor may have or be able to assert pursuant
to Chapter 34 of the Texas Business and Commerce Code, or any other provision
of Texas law, pertaining to the rights and remedies of sureties. If any law
referred to in this Section and now in force, of which Grantor or Grantor's
heirs, devisees, representatives, successors or assigns or any other persons
claiming any interest in the Mortgaged Property might take advantage despite
this Section, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to preclude the application of this Section.
Section 5.9. DELIVERY OF POSSESSION AFTER FORECLOSURE. In the
event there is a foreclosure sale hereunder and at the time of such sale,
Grantor or Grantor's heirs, devisees, representatives, successors or assigns
are occupying or using the Mortgaged Property, or any part thereof, each and
all shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
property occupied, such rental to be due daily to the purchaser; and to the
extent permitted by applicable law, the
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purchaser at such sale shall, notwithstanding any language herein apparently to
the contrary, have the sole option to demand immediate possession following the
sale or to permit the occupants to remain as tenants at will. In the event the
tenant fails to surrender possession of said property upon demand, the
purchaser shall be entitled to institute and maintain a summary action for
possession of the property (such as an action for forcible detainer) in any
court having jurisdiction.
ARTICLE 6
MISCELLANEOUS
Section 6.1. SCOPE OF MORTGAGE. This Mortgage is a deed of trust
and mortgage of both real and personal property, a security agreement, a
financing statement and a collateral assignment, and also covers proceeds and
fixtures.
Section 6.2. EFFECTIVE AS A FINANCING STATEMENT. This Mortgage
shall be effective as a financing statement filed as a fixture filing with
respect to all fixtures included within the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property (including said fixtures) is situated. This Mortgage
shall also be effective as a financing statement covering minerals or the like
(including oil and gas) and accounts subject to Subsection (e) of Section 9.103
of the Texas Business and Commerce Code, as amended, and similar provisions (if
any) of the Uniform Commercial Code as enacted in any other state where the
Mortgaged Property is situated which will be financed at the wellhead or
minehead of the wells or mines located on the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property is situated. This Mortgage shall also be effective as a
financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of
Grantor is the address of Grantor set forth at the end of this Mortgage and the
address of Agent from which information concerning the security interests
hereunder may be obtained is the address of Agent set forth at the end of this
Mortgage. A carbon photographic or other reproduction of this Mortgage or of
any financing statement relating to this Mortgage shall be sufficient as a
financing statement for any of the purposes referred to in this Section.
Section 6.3. NOTICE TO ACCOUNT DEBTORS. In addition to the rights
granted elsewhere in this Mortgage, Agent may at any time notify the account
debtors or obligors of any accounts, chattel paper, negotiable instruments or
other evidences of indebtedness included in the Collateral to pay Agent
directly.
Section 6.4. WAIVER BY AGENT. Agent, at the direction of Required
Banks (as defined in the Credit Agreement), may at any time and from time to
time by a specific writing intended for the purpose: (a) waive compliance by
Grantor with any covenant herein made by Grantor to the extent and in the
manner specified in such writing; (b) consent to Grantor's doing any act which
hereunder Grantor is prohibited from doing, or to Grantor's failing to do any
act which hereunder Grantor is required to do, to the extent and in the manner
specified in such writing; (c) release any part of the Mortgaged Property or
any interest therein from the lien and security interest of this Mortgage,
without the joinder of Trustee; or (d) release any party liable, either
directly or indirectly, for the secured indebtedness or for any covenant herein
or in any other Loan Document, without impairing or releasing the liability of
any other party. No such act shall in any way affect the rights or powers of
Agent or Trustee hereunder except to the extent specifically agreed to by Agent
in such writing.
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Section 6.5. NO IMPAIRMENT OF SECURITY. The lien, security
interest and other security rights of Agent and each other Holder hereunder or
under any other Loan Document shall not be impaired by any indulgence,
moratorium or release granted by Agent including, but not limited to, any
renewal, extension or modification which Holders may grant with respect to any
secured indebtedness, or any surrender, compromise, release, renewal,
extension, exchange or substitution which Agent may grant in respect of the
Mortgaged Property, or any part thereof or any interest therein, or any release
or indulgence granted to any endorser, guarantor or surety of any secured
indebtedness. The taking of additional security by Agent or any other Holder
shall not release or impair the lien, security interest or other security
rights of Agent and each other Holder hereunder or affect the liability of
Grantor or of any endorser, guarantor or surety, or improve the right of any
junior lienholder in the Mortgaged Property (without implying hereby Agent's
consent to any junior lien).
Section 6.6. ACTS NOT CONSTITUTING WAIVER BY AGENT. Agent, on
behalf of Required Banks (as defined in the Credit Agreement), may waive any
default without waiving any other prior or subsequent default. Agent may
remedy any default without waiving the default remedied. Neither failure by
Agent to exercise, nor delay by Agent in exercising, nor discontinuance of the
exercise of any right, power or remedy (including but not limited to the right
to accelerate the maturity of the secured indebtedness or any part thereof)
upon or after any default shall be construed as a waiver of such default or as
a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Agent of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
then such waiver or consent shall be effective only in the specific instance,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Grantor in any case shall of itself entitle Grantor to any
other or further notice or demand in similar or other circumstances.
Remittances in payment of any part of the secured indebtedness other than in
the required amount in immediately available U.S. funds shall not, regardless
of any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Agent in immediately available U.S. funds and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting
bank or banks. Acceptance by Agent of any payment in an amount less than the
amount then due on any secured indebtedness shall be deemed an acceptance on
account only and shall not in any way excuse the existence of a default
hereunder.
Section 6.7. GRANTOR'S SUCCESSORS. If the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, Agent may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Mortgage and to the indebtedness
secured hereby in the same manner as with Grantor, without in any way vitiating
or discharging Grantor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Mortgaged Property, no forbearance on the part of Agent, and no extension
of the time for the payment of the indebtedness secured hereby given by Agent,
upon direction of Banks, shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Grantor hereunder for the payment
of the indebtedness or performance of the obligations secured hereby or the
liability of any other person hereunder for the payment of the indebtedness
secured hereby. Grantor agrees that it shall be bound by any modification of
this Mortgage or any of the other Loan Documents made by Agent and any
subsequent owner of the Mortgaged Property, with or without notice to such
Grantor, and no such modifications shall impair the obligations of such Grantor
under this Mortgage or any other Loan Document. Nothing in this Section or
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elsewhere in this Mortgage shall be construed to imply Agent's consent to any
transfer of the Mortgaged Property.
Section 6.8. PLACE OF PAYMENT; FORUM. All secured indebtedness
which may be owing hereunder at any time by Grantor shall be payable at the
place designated in the Notes or the other Loan Documents (or if no such
designation is made, at the address of Agent indicated at the end of this
Mortgage). Grantor hereby irrevocably submits generally and unconditionally
for itself and in respect of its property to the non-exclusive jurisdiction of
any Texas state court, or any United States federal court, sitting in the
county in which the secured indebtedness is payable, and to the non- exclusive
jurisdiction of any state or United States federal court sitting in the state
in which any of the Mortgaged Property is located, over any suit, action or
proceeding arising out of or relating to this Mortgage or the secured
indebtedness. Grantor hereby agrees and consents that, in addition to any
methods of service of process provided for under applicable law, all service of
process in any such suit, action or proceeding in any Texas state court, or any
United States federal court, sitting in the county in which the secured
indebtedness is payable may be made by certified or registered mail, return
receipt requested, directed to Grantor at its address stated in this Mortgage,
or at a subsequent address of Grantor of which Agent received actual notice
from Grantor in accordance with this Mortgage, and service so made shall be
complete five (5) days after the same shall have been so mailed.
Section 6.9. SUBROGATION TO EXISTING LIENS; VENDOR'S LIEN. To the
extent that proceeds of the Notes are used to pay indebtedness secured by any
outstanding, lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Holders at Grantor's
request, and Holders shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, however remote, irrespective of
whether said liens, security interests, charges or encumbrances are released,
and all of the same are recorded as valid and subsisting and are renewed and
continued and merged herein to secure the secured indebtedness, but the terms
and provisions of this Mortgage shall govern and control the manner and terms
of enforcement of the liens, security interests, charges and encumbrances to
which Holders are subrogated hereunder. It is expressly understood that in
consideration of the payment of such indebtedness by Holders, Grantor hereby
waives and releases all demands and causes of action for offsets and payments
in connection with the said indebtedness. If all or any portion of the
proceeds of the loan evidenced by the Notes or of any other secured
indebtedness has been advanced for the purpose of paying the purchase price for
all or a part of the Mortgaged Property, no vendor's lien is waived; and Agent
and each other Holder shall have, and is hereby granted, a vendor's lien on the
Mortgaged Property as cumulative additional security for the secured
indebtedness. Agent may foreclose under this Mortgage or under the vendor's
lien without waiving the other or may foreclose under both.
Section 6.10. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If
any part of the secured indebtedness cannot be lawfully secured by this
Mortgage or if any part of the Mortgaged Property cannot be lawfully subject to
the lien and security interest hereof to the full extent of such indebtedness,
then an payments made shall be applied on said indebtedness first in discharge
of that portion thereof which is not secured by this Mortgage.
Section 6.11. COMPLIANCE WITH USURY LAWS. It is the intent of
Grantor, Agent and each other Holder and all other parties to the Loan
Documents to conform to and contract in strict compliance with applicable usury
law from time to time in effect. All agreements between each Holder and
Grantor (or any other party liable with respect to any indebtedness under the
Loan Documents) are hereby limited by the provisions of this Section which
shall override and control all such agreements, whether now existing or
MPI TEXAS LEASEHOLD DEED OF TRUST
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<PAGE> 25
hereafter arising. In no way, nor in any event or contingency (including but
not limited to prepayment, default, demand for payment, or acceleration of the
maturity of any obligation), shall the interest taken, reserved, contracted
for, charged, chargeable, or received under this Mortgage, the Notes or any
other Loan Document or otherwise, exceed the maximum non-usurious amount
permitted by applicable law (the "MAXIMUM AMOUNT"). If, from any possible
construction of any document, interest would otherwise be payable in excess of
the Maximum Amount, any such construction shall be subject to the provisions of
this Section and such document shall ipso facto be automatically reformed and
the interest payable shall be automatically reduced to the Maximum Amount,
without the necessity of execution of any amendment or new document. If any
Holder shall ever receive anything of value which is characterized as interest
under applicable law and which would apart from this provision be in excess of
the Maximum Amount, an amount equal to the amount which would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the secured indebtedness in the inverse order of its
maturity and not to the payment of interest, or refunded to Grantor or the
other payor thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal. The right to accelerate maturity of
the Notes or any other secured indebtedness does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Holders do not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid
to each Holder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such indebtedness so that the amount of interest on
account of such indebtedness does not exceed the Maximum Amount. As used in
this Section, the term "APPLICABLE LAW" shall mean the laws of the State of
Texas or the federal laws of the United States applicable to this transaction,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Section 6.12. SUBSTITUTE TRUSTEE. The Trustee may resign by an
instrument in writing addressed to Agent, or Trustee may be removed at any time
with or without cause by an instrument in writing executed by Agent. In case
of the death, resignation, removal, or disqualification of Trustee, or if for
any reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without
other formality than appointment and designation in writing, executed by Agent
and the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the indebtedness secured
hereby has been paid in full, or until the Mortgaged Property is fully and
finally sold hereunder. If Agent is a corporation or association and such
appointment is executed on its behalf by officers of such corporation or
association, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation or
association. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he or she shall thereupon succeed to,
and shall hold, possess and execute, all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All references herein to
"Trustee" shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time
acting hereunder.
Section 6.13. NO LIABILITY OF TRUSTEE. The Trustee shall not be
liable for any error of judgment or act done by Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever
(including Trustee's negligence), except for Trustee's gross negligence or
willful misconduct. The Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine. All
MPI TEXAS LEASEHOLD DEED OF TRUST
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<PAGE> 26
moneys received by Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required
by law), and Trustee shall be under no liability for interest on any moneys
received by him hereunder. Grantor hereby ratifies and confirms any and all
acts which the herein named Trustee or his successor or successors, substitute
or substitutes, in this trust, shall do lawfully by virtue hereof. Grantor
will reimburse Trustee for, and save him harmless against, any and all
liability not due to gross negligence or willful misconduct and expenses which
may be incurred by him in the performance of his duties. The foregoing
indemnity shall not terminate upon discharge of the secured indebtedness or
foreclosure, or release or other termination, of this Mortgage.
Section 6.14. RELEASE OF MORTGAGE. If all of the secured
indebtedness be paid as the same becomes due and payable and all of the
covenants, warranties, undertakings and agreements made in this Mortgage are
kept and performed, and all obligations, if any, of Agent and each other Holder
for further advances have been terminated, then, and in that event only, all
rights under this Mortgage shall terminate (except to the extent expressly
provided herein with respect to indemnifications, representations and
warranties and other rights which are to continue following the release hereof)
and the Mortgaged Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, and such liens and
security interests shall be released by Agent in due form at Grantor's cost.
Without limitation, all provisions herein for indemnity of Agent and each other
Holder or Trustee shall survive discharge of the secured indebtedness and any
foreclosure, release or termination of this Mortgage.
Section 6.15. NOTICES. All notices, requests, consents, demands
and other communications required or which any party desires to give hereunder
or under any other Loan Document shall be in writing and, unless otherwise
specifically provided in such other Loan Document, shall be deemed sufficiently
given or furnished if delivered by personal delivery, by courier, or by
registered or certified United States mail, postage prepaid, addressed to the
party to whom directed at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party
whose address is to be changed) or by telegram, telex, or facsimile. Any such
notice or communication shall be deemed to have been given either at the time
of personal delivery or, in the case of courier or mail, as of the date of
first attempted delivery at the address and in the manner provided herein, or,
in the case of telegram, telex or facsimile, upon receipt; provided that,
service of a notice required by Texas Property Code Section 51.002, as amended,
shall be considered complete when the requirements of that statute are met.
Notwithstanding the forgoing, no notice of change of address shall be effective
except upon receipt. This Section shall not be construed in any way to affect
or impair any waiver of notice or demand provided in any Loan Document or to
require giving of notice or demand to or upon any person in any situation or
for any reason.
Section 6.16. INVALIDITY OF CERTAIN PROVISIONS. A determination
that any provision of this Mortgage is unenforceable or invalid shall not
affect the enforceability or validity of any other provision and the
determination that the application of any provision of this Mortgage to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other persons
or circumstances.
Section 6.17. GENDER; TITLES; CONSTRUCTION. Within this Mortgage,
words of any gender shall be held and construed to include any other gender,
and words in the singular number shall be held and construed to include the
plural, unless the context otherwise requires. Titles appearing at the
beginning of any subdivisions hereof are for convenience only, do not
constitute any part of such subdivisions, and shall be disregarded in
construing the language contained in such subdivisions. The use of the words
"herein," "hereof," "hereunder" and other similar compounds of the word "here"
shall refer to this entire Mortgage and
MPI TEXAS LEASEHOLD DEED OF TRUST
26
<PAGE> 27
not to any particular Article, Section, paragraph or provision. The term
"person" and words importing persons as used in this Mortgage shall include
firms, associations, partnerships (including limited partnerships), joint
ventures, trusts, corporations and other legal entities, including public or
governmental bodies, agencies or instrumentalities, as well as natural persons.
Section 6.18. REPORTING COMPLIANCE. Grantor agrees to comply with
any and all reporting requirements applicable to the transaction evidenced by
the Notes and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including but not limited to The International Investment Survey Act
of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of
1984 and further agrees upon written request of Agent to furnish Agent with
evidence of such compliance.
Section 6.19. REGARDING AGENT. Except where otherwise expressly
provided herein, (a) in any instance hereunder where the approval, consent or
the exercise of judgment of Agent is required or requested, no approval or
consent of Agent shall be deemed to have been given except by a specific
writing intended for the purpose and executed by an authorized representative
of Agent, and (b) any payments made to Agent hereunder in respect of the
Mortgaged Property shall be made to Agent for the ratable benefit of all of the
Banks based upon the outstanding principal amount of the secured indebtedness
(except for reimbursements of Agent for sums expended by it hereunder, which
sums shall be retained by Agent for its own account).
Section 6.20. GRANTOR. Unless the context clearly indicates
otherwise, as used in this Mortgage, "GRANTOR" means the grantors named in
SECTION 1.1 hereof or any of them. The obligations of Grantor hereunder shall
be joint and several. If any Grantor, or any signatory who signs on behalf of
any Grantor, is a corporation, partnership or other legal entity, Grantor and
any such signatory, and the person or persons signing for it, represent and
warrant to Agent that this instrument is executed, acknowledged and delivered
by Grantor's duly authorized representatives. If Grantor is an individual, no
power of attorney granted by Grantor herein shall terminate on Grantor's
disability.
Section 6.21. EXECUTION; RECORDING. This Mortgage has been
executed in several counterparts, all of which are identical, and all of which
counterparts together shall constitute one and the same instrument. The date
or dates reflected in the acknowledgments hereto indicate the date or dates of
actual execution of this Mortgage, but such execution is as of the date shown
on the first page hereof, and for purposes of identification and reference the
date of this Mortgage shall be deemed to be the date reflected on the first
page hereof. Grantor will cause this Mortgage and all amendments and
supplements thereto and substitutions therefor and all financing statements and
continuation statements relating thereto to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Trustee or Agent shall reasonably
request and will pay all such recording, filing, re-recording and re-filing
taxes, fees and other charges.
Section 6.22. SUCCESSORS AND ASSIGNS. The terms, provisions,
covenants and conditions hereof shall be binding upon Grantor, and the heirs,
devisees, representatives, successors and assigns of Grantor, and shall inure
to the benefit of Trustee, Agent and each other Holder and shall constitute
covenants running with the Land. All references in this Mortgage to Grantor
shall be deemed to include all such heirs, devisees, representatives,
successors and assigns of Grantor.
Section 6.23. MODIFICATION OR TERMINATION. The Loan Documents may
only be modified or terminated by a written instrument or instruments intended
for that purpose and executed by the party against
MPI TEXAS LEASEHOLD DEED OF TRUST
27
<PAGE> 28
which enforcement of the modification or termination is asserted. Any alleged
modification or termination which is not so documented shall not be effective
as to any party.
Section 6.24. NO PARTNERSHIP, ETC. The relationship between
Holders and Grantor is solely that of lenders and borrower. Neither Agent nor
any other Holder has any fiduciary or other special relationship with Grantor.
Nothing contained in the Loan Documents is intended to create any partnership,
joint venture, association or special relationship between Grantor and any
Holder or in any way make Agent or any other Holder a co-principal with Grantor
with reference to the Mortgaged Property. All agreed contractual duties
between or among Agent, each other Holder, Grantor and Trustee are set forth
herein and in the other Loan Documents and any additional implied covenants or
duties are hereby disclaimed. Any inferences to the contrary of any of the
foregoing are hereby expressly negated.
Section 6.25. APPLICABLE LAW. This Mortgage, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law.
Section 6.26. ENTIRE AGREEMENT. The Loan Documents constitute the
entire understanding and agreement between Grantor, Agent and each other Holder
with respect to the transactions arising in connection with the indebtedness
secured hereby and supersede all prior written or oral understandings and
agreements between Grantor, Agent and each other Holder with respect to the
matters addressed in the Loan Documents. Grantor hereby acknowledges that,
except as incorporated in writing in the Loan Documents, there are not, and
were not, and no persons are or were authorized by Agent or any other Holder to
make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Loan
Documents. To the extent any of the provisions contained herein conflict with
the terms set forth in the Credit Agreement, the provisions of the Credit
Agreement shall control.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this instrument is executed by Grantor as to the
date first written on page 1 hereof.
The address and federal tax identification number of Grantor are:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Federal Tax No.: 76-0533333
GRANTOR:
MISSION PARTY ICE, INC., a Texas corporation
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
MPI TEXAS LEASEHOLD DEED OF TRUST
28
<PAGE> 29
The address of Agent is
The Frost National Bank, as Agent
P.O. Box 1600
San Antonio, Texas 78296
Attention: Richard D. Young, Senior Vice President
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on ____________, 1997, by
James F. Stuart, Chief Executive Officer of MISSION PARTY ICE, INC., a Texas
corporation, on behalf of such corporation.
----------------------------------------
Notary Public, State of Texas
MPI TEXAS LEASEHOLD DEED OF TRUST
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<PAGE> 30
EXHIBIT A
TO
DEED OF TRUST
PROPERTY
Grantor's leasehold estate in the following property located in Nueces County,
Texas, created under that certain Lease Agreement dated March 15, 1990, by and
between Liza Billups Lewis, as landlord, and Grantor, as tenant, said property
being described on EXHIBIT A-1 attached hereto and incorporated herein for all
purposes.
MPI TEXAS LEASEHOLD DEED OF TRUST
<PAGE> 1
EXHIBIT 10.34
When Recorded, Return To:
THE FROST NATIONAL BANK
P.O. Box 1600
San Antonio, Texas 78296
Attention: Loan No. _________________
Loan Documentation Department, RB-2
LEASEHOLD DEED OF TRUST, ASSIGNMENT,
SECURITY AGREEMENT AND FINANCING STATEMENT
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND
FINANCING STATEMENT (this "MORTGAGE") dated as of September 15, 1997, is
executed and delivered by Grantor for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by Grantor.
ARTICLE 1
CERTAIN DEFINITIONS, GRANTING CLAUSES, SECURED INDEBTEDNESS
Section 1.1. CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition
to the other terms defined herein, each of the following terms shall have the
meaning assigned to it:
"AGENT": The Frost National Bank, a national banking association, in
its capacity as agent for the Banks, and its successors and assigns.
"BANKS": Collectively, each of the financial institutions listed on
the signature pages to the Credit Agreement, together with each other person or
entity becoming a Bank pursuant thereto from time to time, and their respective
successors and assigns.
"BORROWER": Grantor.
"CREDIT AGREEMENT": That certain Credit Agreement dated as of the
date hereof, executed by and among Borrower, The Frost National Bank, as Agent
and as Bank, and certain Banks named therein, as amended, supplemented,
modified, restated or extended from time to time.
"GRANTOR": Packaged Ice, Inc., a Texas corporation, and its
successors and assigns.
"PROMISSORY NOTES": Each Revolving Credit Note (as such term is
defined in the Credit Agreement) executed by Borrower, and payable to the order
of any Bank, evidencing loans advanced to Borrower under the Credit Agreement,
in an aggregate principal face amount of $20,000,000, bearing interest as
therein provided, containing a provision for the payment of a reasonable
additional amount as attorneys' fees, and finally maturing on April 15, 2003,
together with any renewals, increases, extensions, restatements, or
modifications thereof.
PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 2
"TRUSTEE": Jimmy R. Locke, of Bexar County, Texas, or any successor
or substitute appointed and designated as herein provided from time to time
acting hereunder.
Section 1.2. MORTGAGED PROPERTY. Grantor does hereby grant, bargain,
sell, convey, transfer, assign and set over to Trustee the following: (a)
Grantor's leasehold estate in the real estate (herein called the "LAND")
described in EXHIBIT A which is attached hereto and incorporated herein by
reference, and (i) all improvements now or hereafter situated or to be situated
on the Land (herein together called the "IMPROVEMENTS"); and (ii) all right,
title and interest of Grantor in and to (1) all streets, roads, alleys,
easements, rights-of-way, licenses, rights of ingress and egress, vehicle
parking rights and public places, existing or proposed, abutting, adjacent,
used in connection with or pertaining, to the Land or the Improvements; (2) any
strips or gores between the Land and abutting or adjacent properties; and (3)
all water and water rights, timber, crops and mineral interests on or
pertaining to the Land or the Improvements (the Land, Improvements and other
rights, titles and interests referred to in this clause (a) being herein
sometimes collectively called the "PREMISES"); (b) all fixtures, equipment,
systems, machinery, furniture, furnishings, appliances, inventory, goods,
building and construction materials, supplies, and articles of personal
property, of every kind and character, now owned or hereafter acquired by
Grantor, which are now or hereafter attached to or situated in, on or about the
Land or the Improvements, or used in or necessary to the complete and proper
planning, development, use, occupancy or operation thereof, or acquired
(whether delivered to the Land or stored elsewhere) for use or installation in
or on the Land or the Improvements, and all renewals and replacements of,
substitutions for and additions to the foregoing (the properties referred to in
this clause (b) being herein sometimes collectively called the "ACCESSORIES,"
all of which are hereby declared to be permanent accessions to the Land); (c)
all (i) plans and specifications for the Improvements; (ii) Grantor's rights,
but not liability for any breach by Grantor, under all commitments (including
any commitment for financing to pay any of the secured indebtedness, as defined
below), insurance policies and other contracts and general intangibles
(including, but not limited to trademarks, trade names and symbols) related to
the Premises or the Accessories or the operation thereof; (iii) deposits
(including, but not limited to Grantor's rights in tenants' security deposits,
deposits with respect to utility services to the Premises, and any deposits or
reserves hereunder or under any other Loan Document for taxes, insurance or
otherwise), money, accounts, instruments, documents, notes and chattel paper
arising from or by virtue of any transactions related to the Premises or the
Accessories (without derogation of ARTICLE 3 hereof); (iv) permits, licenses,
franchises, certificates, development rights, commitments and rights for
utilities, and other rights and privileges obtained in connection with the
Premises or the Accessories; (v) leases, rents, royalties, bonuses, issues,
profits, revenues and other benefits of the Premises and the Accessories
(without derogation of ARTICLE 3 hereof); (vi) oil, gas and other hydrocarbons
and other minerals produced from or allocated to the Land and all products
processed or obtained therefrom, and the proceeds thereof; and (vii)
engineering, accounting, title, legal, and other technical or business data
concerning the Mortgaged Property which are in the possession of Grantor or in
which Grantor can otherwise grant a security interest; and (d) all (i) proceeds
of or arising from the properties, rights, titles and interests referred to
above in this SECTION 1.2, including, but not limited to proceeds of any sale,
lease or other disposition thereof, proceeds of each policy of insurance
relating thereto (including premium refunds), proceeds of the taking thereof or
of any rights appurtenant thereto, including change of grade of streets, curb
cuts or other rights of access, by eminent domain or transfer in lieu thereof
for public or quasi-public use under any law, and proceeds arising out of any
damage thereto; and (ii) other interests of every kind and character which
Grantor now has or hereafter acquires in, to or for the benefit of the
properties, rights, titles and interests referred to above in this SECTION 1.2
and all property used or useful in connection therewith, including, but not
limited to rights of ingress and egress and remainders, reversions and
reversionary rights or interests; and if the estate of Grantor in any of the
property referred to above in this SECTION 1.2 is a leasehold estate, this
conveyance shall include, and the lien and security interest created
2 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 3
hereby shall encumber and extend to, all other or additional title, estates,
interests or rights which are now owned or may hereafter be acquired by Grantor
in or to the property demised under the lease creating the leasehold estate; TO
HAVE AND TO HOLD the foregoing rights, interests and properties, and all
rights, estates, powers and privileges appurtenant thereto (herein collectively
called the "MORTGAGED PROPERTY"), unto Trustee, and to his successors or
substitutes in this trust, and to his or their successors and assigns, in
trust, however, upon the terms, provisions and conditions herein set forth.
Section 1.3. SECURITY INTEREST. Grantor hereby grants to Agent, as
agent for the Banks, a security interest in all of the Mortgaged Property which
constitutes personal property or fixtures (herein sometimes collectively called
the "COLLATERAL"). In addition to its rights hereunder or otherwise, Agent
shall have all of the rights of a secured party under the Texas Business and
Commerce Code, or under the Uniform Commercial Code in force in any other state
to the extent the same is applicable law.
Section 1.4. NOTES, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Mortgage
is made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities and all renewals,
extensions, supplements, increases, and modifications thereof in whole or in
part from time to time:
(i) the Promissory Notes and all other notes given in substitution
therefor or in modification, supplement, increase, renewal or extension
thereof, in whole or in part (such notes, as from time to time renewed,
extended, supplemented, increased, or modified and all other notes given in
substitution therefor, or in modification, renewal or extension thereof, in
whole or in part, being hereinafter collectively called the "NOTES," and
individually a "NOTE," and Agent and the other Banks, or the subsequent holders
at the time in question of the Notes or any of the secured indebtedness, as
hereinafter defined, being collectively herein called "HOLDERS" and
individually a "HOLDER"); (ii) all indebtedness and other obligations owed by
the Borrower to any Holder now or hereafter incurred or arising pursuant to or
permitted by the provisions of the Notes, this Mortgage, or any other document
now or hereafter evidencing, governing, guaranteeing, securing, or otherwise
executed in connection with the loans evidenced by the Notes, including, but
not limited to any loan or credit agreement, tri-party financing agreement or
other agreement between the Borrower and Holders, or among the Borrower,
Holders and any other party or parties, pertaining to the repayment or use of
the proceeds of the loan evidenced by the Notes (the Credit Agreement, the
Notes, this Mortgage, any other "LOAN PAPERS" (as such term is defined in the
Credit Agreement), and such other documents, as they or any of them may have
been or may be from time to time renewed, extended, supplemented, increased or
modified, being herein sometimes collectively called the "LOAN DOCUMENTS");
(iii) all other loans and future advances made by any Holder to the Borrower
and all other debts, obligations and liabilities of Grantor of every kind and
character now or hereafter existing in favor of any Holder, and arising under
the Credit Agreement, any of the Notes, or any of the other Loan Documents, and
whether direct or indirect, primary or secondary, joint or several, fixed or
contingent, secured or unsecured, and whether originally payable to such Holder
or to a third party and subsequently acquired by such Holder, it being
contemplated that Grantor may hereafter become indebted to one or more Holders
for such other debts, obligations and liabilities arising under the Credit
Agreement, any of the Notes, or any of the other Loan Documents; provided,
however, and notwithstanding the foregoing provisions of this clause (iii),
this Mortgage shall not secure any such other loan, advance, debt, obligation
or liability with respect to which any such Holder is by applicable law
prohibited from obtaining a lien on real estate nor shall this clause (iii)
operate or be effective to constitute or require any assumption or payment by
any person, in any way, of any debt of any other person to the extent that the
same would violate or exceed the limit provided in any applicable usury or
other law.
3 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 4
The indebtedness referred to in this SECTION 1.4 is hereinafter
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS
SECURED HEREBY."
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Grantor represents, warrants, and covenants as follows:
(a) PAYMENT AND PERFORMANCE. Grantor will, and will cause the
Borrower to, make due and punctual payment of the secured indebtedness.
Grantor will, and will cause the Borrower to, timely and properly perform and
comply with all of the covenants, agreements, and conditions imposed upon them
by this Mortgage and the other Loan Documents and will not permit a default to
occur hereunder or thereunder which shall remain uncured. Time shall be of the
essence in this Mortgage.
(b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has in Grantor's
own right, and Grantor covenants to maintain, lawful, good and indefeasible
title to the Mortgaged Property, free and clear of all liens, charges, claims,
security interests, and encumbrances except for (i) any and all matters of
record as of the date hereof and disclosed to Agent only to the extent the same
are valid and subsisting and affect the Mortgaged Property, (ii) the liens and
security interests evidenced by this Mortgage, (iii) statutory liens for ad
valorem taxes and standby fees on the Mortgaged Property which are not yet
delinquent, and (iv) other liens and security interests (if any) in favor of
any Bank (the matters described in the foregoing clauses (i), (ii), (iii) and
(iv) being herein called the "PERMITTED ENCUMBRANCES"). Grantor, and Grantor's
successors and assigns, will warrant and forever defend title to the Mortgaged
Property, subject as aforesaid to Trustee and his successors or substitutes and
assigns, against the claims and demands of all persons claiming or to claim the
same or any part thereof. Grantor will punctually pay, perform, observe and
keep all covenants, obligations and conditions in or pursuant to any Permitted
Encumbrance and will not modify or permit modification of any Permitted
Encumbrance without the prior written consent of Agent. Inclusion of any
matter as a Permitted Encumbrance does not constitute approval or waiver by
Agent of any existing or future violation or other breach thereof by Grantor,
by the Mortgaged Property or otherwise. No part of the Mortgaged Property
constitutes all or any part of the homestead of Grantor. If any right or
interest of Agent or any Bank in the Mortgaged Property or any part thereof
shall be endangered or questioned or shall be attacked directly or indirectly,
Trustee and Agent, or either of them (whether or not named as parties to legal
proceedings with respect thereto), are hereby authorized and empowered to take
such reasonable steps as in their discretion may be proper for the defense of
any such legal proceedings or the protection of such right or interest of Agent
or any Bank, including, but not limited to the employment of independent
counsel, the prosecution or defense of litigation, and the compromise or
discharge of adverse claims. All reasonable expenditures so made of every kind
and character shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent or Trustee (as the case may be), and
the party (Agent or Trustee, as the case may be) making such expenditures shall
be subrogated to all rights of the person receiving such payment.
(c) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be
paid, all taxes, assessments and other charges or levies imposed upon or
against or with respect to the Mortgaged Property or the ownership, use,
occupancy or enjoyment of any portion thereof, or any utility service thereto,
as the same become due and payable, including, but not limited to all ad
valorem taxes assessed against the Mortgaged Property or any part thereof,
except for any such taxes or charges being contested in good faith and by
proper proceedings for which adequate reserves in accordance with generally
accepted accounting principles have
4 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 5
been taken, and shall deliver promptly to Agent such evidence of the payment
thereof as Agent may reasonably require.
(d) INSURANCE. Grantor shall obtain and maintain at Grantor's
sole expense: (1) all-risk insurance with respect to all insurable Mortgaged
Property, against loss or damage by fire, lightning, windstorm, explosion,
hail, tornado and such hazards as are presently included in so-called
"all-risk" coverage and against such other insurable hazards as Agent may
require, in an amount not less than 100% of the full replacement cost,
including the cost of debris removal, without deduction for depreciation and
sufficient to prevent Grantor and Agent from becoming a coinsurer, such
insurance to be in Builder's Risk (non-reporting) form during and with respect
to any construction on the Premises; (23) if and to the extent any portion of
the Premises is in a special flood hazard area, a flood insurance policy in an
amount equal to the lesser of the principal face amount of the Notes or the
maximum amount available; (3) commercial general public liability insurance, on
an "occurrence" basis, for the benefit of Grantor and Agent as named insureds;
(4) statutory workers' compensation insurance with respect to any work on or
about the Premises; and (5) such other insurance on the Mortgaged Property as
may from time to time be reasonably required by Agent (including, but not
limited to business interruption insurance, boiler and machinery insurance,
earthquake insurance, and war risk insurance) and against other insurable
hazards or casualties which at the time are commonly insured against in the
case of premises similarly situated, due regard being given to the height,
type, construction, location, use and occupancy of buildings and improvements.
All insurance policies shall be issued and maintained by insurers, in amounts,
with deductibles, and in form satisfactory to Agent, and shall require not less
than thirty (30) days' prior written notice to Agent of any cancellation or
change of coverage. All insurance policies maintained, or caused to be
maintained, by Grantor with respect to the Mortgaged Property, except for
public liability insurance, shall provide that each such policy shall be
primary without right of contribution from any other insurance that may be
carried by Grantor or Agent and that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. If any insurer which has issued a
policy of title, hazard, liability or other insurance required pursuant to this
Mortgage or any other Loan Document becomes insolvent or the subject of any
bankruptcy, receivership or similar proceeding or if in the Agent's reasonable
opinion the financial responsibility of such insurer is or becomes inadequate,
Grantor shall, in each instance promptly upon the request of Agent and at
Grantor's expense, obtain and deliver to Agent a like policy (or, if and to the
extent permitted by Agent, a certificate of insurance) issued by another
insurer, which insurer and policy meet the requirements of this Mortgage or
such other Loan Document, as the case may be. Without limiting the discretion
of Agent with respect to required endorsements to insurance policies, all such
policies for loss of or damage to the Mortgaged Property shall contain a
standard mortgage clause (without contribution) naming Agent, as agent for the
Banks, as mortgagee with loss proceeds payable to Agent notwithstanding (i) any
act, failure to act or negligence of or violation of any warranty, declaration
or condition contained in any such policy by any named insured; (ii) the
occupation or use of the Mortgaged Property for purposes more hazardous than
permitted by the terms of any such policy; (iii) any foreclosure or other
action by Agent under the Loan Documents; or (iv) any change in title to or
ownership of the Mortgaged Property or any portion thereof, such proceeds to be
held for application as provided in the Loan Documents. The originals of each
initial insurance policy (or to the extent permitted by Agent, a copy of the
original policy and a satisfactory certificate of insurance) shall be delivered
to Agent at the time of execution of this Mortgage, with premiums fully paid,
and each renewal or substitute policy (or certificate) shall be delivered to
Agent, with premiums fully paid, at least ten (10) days before the termination
of the policy it renews or replaces. Grantor shall pay all premiums on
policies required hereunder as they become due and payable and promptly deliver
to Agent evidence satisfactory to Agent of the timely payment thereof. If any
loss occurs at any time when Grantor has failed to perform Grantor's covenants
and agreements in this paragraph, Agent shall nevertheless be entitled to the
benefit of all insurance covering the loss and held by or
5 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 6
for Grantor, to the same extent as if it had been made payable to Agent. Upon
any foreclosure hereof or transfer of title to the Mortgaged Property in
extinguishment of the whole or any part of the secured indebtedness, all of
Grantor's right, title and interest in and to the insurance policies referred
to in this Section (including unearned premiums) and all proceeds payable
thereunder shall thereupon vest in the purchaser at foreclosure or other such
transferee, to the extent permissible under such policies. Agent shall have
the right (but not the obligation) to make proof of loss for, settle and adjust
any claim under, and receive the proceeds of, all insurance for loss of or
damage to the Mortgaged Property, and the expenses incurred by Agent in the
adjustment and collection of insurance proceeds shall be a part of the secured
indebtedness and shall be due and payable to Agent on demand. Agent shall not
be, under any circumstances, liable or responsible for the obtaining,
maintaining or adequacy of any insurance or for failure to collect or exercise
diligence in the collection of any of such proceeds or for failure to see to
the proper application of any amount paid over to Grantor. Any such proceeds
received by Agent shall, after deduction therefrom of all reasonable expenses
actually incurred by Agent, including attorneys' fees, at Agent's option be (1)
released to Grantor, or (2) applied (upon compliance with such terms and
conditions as may be required by Agent) to repair or restoration, either partly
or entirely, of the Mortgaged Property so damaged, or (3) applied to the
payment of the secured indebtedness in such order and manner as Agent, in its
sole discretion, may elect, whether or not due. Grantor shall at all times
comply with the requirements of the insurance policies required hereunder and
of the issuers of such policies and of any board of fire underwriters or
similar body as applicable to or affecting the Mortgaged Property.
(e) RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon the
occurrence of a default and upon the written request of Agent, to secure
certain of Grantor's obligations in paragraphs (c) and (d) above, but not in
lieu of such obligations, Grantor will deposit with Agent a sum equal to ad
valorem taxes, assessments and charges (which charges for the purpose of this
paragraph shall include without limitation any recurring charge which could
result in a lien against the Mortgaged Property) against the Mortgaged Property
for the current year and the premiums for such policies of insurance for the
current year, all as estimated by Agent and prorated to the end of the calendar
month following the month during which Agent's request is made, and thereafter
will deposit with Agent, on each date when an installment of principal and/or
interest is due on the Notes, sufficient funds (as estimated from time to time
by Agent) to permit Agent to pay at least fifteen (15) days prior to the due
date thereof, the next maturing ad valorem taxes, assessments and charges and
premiums for such policies of insurance. Agent shall have the right to rely
upon tax information furnished by applicable taxing authorities in the payment
of such taxes or assessments and shall have no obligation to make any protest
of any such taxes or assessments. Any excess over the amounts required for
such purposes shall be held by Agent for future use, applied to any secured
indebtedness or refunded to Grantor, at Agent's option, and any deficiency in
such funds so deposited shall be made up by Grantor upon demand of Agent. All
such funds so deposited shall bear no interest, may be mingled with the general
funds of Agent and shall be applied by Agent toward the payment of such taxes,
assessments, charges and premiums when statements therefor are presented to
Agent by Grantor (which statements shall be presented by Grantor to Agent a
reasonable time before the applicable amount is due); provided, however, that,
if a default shall have occurred hereunder, such funds may at Agent's option be
applied to the payment of the secured indebtedness in the order determined by
Agent in its sole discretion, and Agent may (but shall have no obligation) at
any time, in its discretion, apply all or any part of such funds toward the
payment of any such taxes, assessments, charges or premiums which are past due,
together with any penalties or late charges with respect thereto. The
conveyance or transfer of Grantor's interest in the Mortgaged Property for any
reason (including without limitation the foreclosure of a subordinate lien or
security interest or a transfer by operation of law) shall constitute an
assignment or transfer of Grantor's interest in and rights to such funds held
by Agent under this paragraph but subject to the rights of Agent hereunder.
6 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 7
(f) CONDEMNATION. Grantor shall notify Agent immediately after
Grantor becomes aware of any threatened or pending proceeding for condemnation
affecting the Mortgaged Property or arising out of damage to the Mortgaged
Property, and Grantor shall, at Grantor's expense, diligently prosecute any
such proceedings. Agent shall have the right (but not the obligation) to
participate in any such proceeding, and to be represented by counsel of its own
choice. Agent shall be entitled to receive all sums which may be awarded or
become payable to Grantor for the condemnation of the Mortgaged Property, or
any part thereof, for public or quasi-public use, or by virtue of private sale
in lieu thereof, and any sums which may be awarded or become payable to Grantor
for injury or damage to the Mortgaged Property, provided it is applied to the
secured indebtedness. Grantor shall, promptly upon request of Agent, execute
such additional assignments and other documents as may be necessary from time
to time to permit such participation and to enable Agent to collect and receipt
for any such sums. All such sums are hereby assigned to Agent, and shall,
after deduction therefrom of all reasonable expenses actually incurred by
Agent, including reasonable attorneys' fees, at Agent's option be (1) released
to Grantor, or (2) applied (upon compliance with such terms and conditions as
may be required by Agent) to repair or restoration of the Mortgaged Property so
affected, or (3) applied to the payment of the secured indebtedness in such
order and manner as Agent, in its sole discretion, may elect, whether or not
due. Agent shall not be, under any circumstances, liable or responsible for
failure to collect or to exercise diligence in the collection of any such sum
or for failure to see to the proper application of any amount paid over to
Grantor. Agent is hereby authorized, in the name of Grantor, to execute and
deliver valid acquittances for, and to appeal from, any such award, judgment or
decree. All reasonable costs and expenses (including but not limited to
reasonable attorneys' fees) incurred by Agent in connection with any
condemnation shall be a demand obligation owing by Grantor (which Grantor
hereby promises to pay) to Agent pursuant to this Mortgage.
(g) COMPLIANCE WITH LEGAL REQUIREMENTS. The Mortgaged Property
and the use, operation and maintenance thereof and all activities thereon do
and shall at all times comply with all applicable Legal Requirements (defined
below). The Mortgaged Property is not, and shall not be, dependent on any
other property or premises or any interest therein other than the Mortgaged
Property to fulfill any requirement of any Legal Requirement. Grantor shall
not, by act or omission, permit any building or other improvement not subject
to the lien of this Mortgage to rely on the Mortgaged Property or any interest
therein to fulfill any requirement of any Legal Requirement. No part of the
Mortgaged Property constitutes a non-conforming use under any zoning law or
similar law or ordinance applicable thereto. Grantor has obtained and shall
preserve in force all requisite zoning, utility, building, health and operating
permits from the governmental authorities having jurisdiction over the
Mortgaged Property. If Grantor receives a written notice or claim from any
authority having jurisdiction over the Mortgaged Property that the Mortgaged
Property, or any use, activity, operation or maintenance thereof or thereon, is
not in compliance with any Legal Requirement, Grantor will promptly furnish a
copy of such notice or claim to Agent. Grantor has received no notice and has
no knowledge of any such noncompliance. As used in this Mortgage: (i) the term
"LEGAL REQUIREMENT" means any applicable law (defined below), agreement,
covenant, restriction, easement or condition, as any of the same now exists or
may be changed or amended or come into effect in the future; and (ii) the term
"LAW" means any applicable federal, state or local law, statute, ordinance,
code, rule, regulation, license, permit, authorization, decision, order,
injunction or decree, domestic or foreign.
(h) MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the
Mortgaged Property in good first class order, repair, operating condition and
appearance, reasonable wear and tear excepted, causing all reasonably necessary
repairs, renewals, replacements, additions and improvements to be promptly
made, and will not allow any of the Mortgaged Property to be wasted or to
deteriorate. Notwithstanding the foregoing, Grantor will not, without the
prior written consent of Agent, (i) remove from the Mortgaged Property any
fixtures or personal property covered by this Mortgage except as permitted by
the Credit Agreement or as
7 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 8
such as is replaced by Grantor by an article of equal suitability and value,
owned by Grantor, free and clear of any lien or security interest (except that
created by this Mortgage), or (ii) make any structural alteration to the
Mortgaged Property or any other alteration thereto which materially impairs the
value thereof. If any act or occurrence of any kind or nature (including any
condemnation or any casualty for which insurance was not obtained or
obtainable) shall result in material damage to or loss or destruction of the
Mortgaged Property, Grantor shall give prompt notice thereof to Agent and
Grantor shall promptly, at Grantor's sole cost and expense and regardless of
whether insurance or condemnation proceeds (if any) shall be available or
sufficient for the purpose, commence and continue diligently to completion to
restore, repair, replace and rebuild the Mortgaged Property as nearly as
possible to its value, condition and character immediately prior to the damage,
loss or destruction.
(i) NO OTHER LIENS. Grantor will not, without the prior written
consent of Agent, create, place or permit to be created or placed, or through
any act or failure to act, acquiesce in the placing of, or allow to remain, any
deed of trust, mortgage, voluntary or involuntary lien, whether statutory,
constitutional or contractual, security interest, encumbrance or charge, or
conditional sale or other title retention document, against or covering the
Mortgaged Property, or any part thereof, other than the Permitted Encumbrances,
regardless of whether the same are expressly or otherwise subordinate to the
lien or security interest created in this Mortgage, and should any of the
foregoing become attached hereafter in any manner to any part of the Mortgaged
Property without the prior written consent of Agent, Grantor will cause the
same to be promptly discharged and released. Grantor will own all parts of the
Mortgaged Property and will not acquire any fixtures, equipment or other
property forming a part of the Mortgaged Property pursuant to a lease, license,
security agreement or similar agreement, whereby any party has or may obtain
the right to repossess or remove same, without the prior written consent of
Agent. If Agent consents to the voluntary grant by Grantor of any lien,
security interest, or other encumbrance (hereinafter called "SUBORDINATE
MORTGAGE") covering any of the Mortgaged Property or if the foregoing
prohibition is determined by a court of competent jurisdiction to be
unenforceable as to a Subordinate Mortgage, any such Subordinate Mortgage shall
contain express covenants to the effect that: (1) the Subordinate Mortgage is
unconditionally subordinate to this Mortgage and all Leases (hereinafter
defined); (2) if any action (whether judicial or pursuant to a power of sale)
shall be instituted to foreclose or otherwise enforce the Subordinate Mortgage,
no tenant of any of the Leases shall be named as a party defendant, and no
action shall be taken that would terminate any occupancy or tenancy without the
prior written consent of Agent; (3) Rents (hereinafter defined), if collected
by or for the holder of the Subordinate Mortgage, shall be applied first to the
payment of the secured indebtedness then due and expenses incurred in the
ownership, operation and maintenance of the Mortgaged Property in such order as
Agent may determine, prior to being applied to any indebtedness secured by the
Subordinate Mortgage; (4) written notice of default under the Subordinate
Mortgage and written notice of the commencement of any action (whether judicial
or pursuant to a power of sale) to foreclose or otherwise enforce the
Subordinate Mortgage or to seek the appointment of a receiver for all or any
part of the Mortgaged Property shall be given to Agent with or immediately
after the occurrence of any such default or commencement; and (5) neither the
holder of the Subordinate Mortgage, nor any purchaser at foreclosure
thereunder, nor anyone claiming, by, through or under any of them shall succeed
to any of Grantor's rights hereunder without the prior written consent of
Agent.
(j) OPERATION OF MORTGAGED PROPERTY. Grantor will operate the
Mortgaged Property in a good and workmanlike manner and in accordance with all
Legal Requirements and will pay all fees or charges of any kind in connection
therewith. Grantor will keep the Mortgaged Property occupied so as not to
impair the insurance carried thereon. Grantor will not use or occupy or
conduct any activity on or allow the use or occupancy of or the conduct of any
activity on, the Mortgaged Property in any manner which violates any Legal
Requirement or which constitutes a public or private nuisance or which makes
void, voidable or
8 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 9
cancelable, or increases the premium of, any insurance then in force with
respect thereto. Grantor will not initiate or permit any zoning
reclassification of the Mortgaged Property or seek any variance under existing
zoning ordinances applicable to the Mortgaged Property or use or permit the use
of the Mortgaged Property in such a manner which would result in such use
becoming a non-conforming use under applicable zoning ordinances or other Legal
Requirement. Grantor will not impose any easement, restrictive covenant or
encumbrance upon the Mortgaged Property, execute or file any subdivision plat
or condominium declaration affecting the Mortgaged Property or consent to the
annexation of the Mortgaged Property to any municipality, without the prior
written consent of Agent. Grantor will not do or suffer to be done any act
whereby the value of any part of the Mortgaged Property may be materially
lessened. Grantor will preserve, protect, renew, extend and retain all
material rights and privileges granted for or applicable to the Mortgaged
Property. Without the prior written consent of Agent, there shall be no
drilling or exploration for or extraction, removal or production of any
mineral, hydrocarbon, gas, natural element, compound or substance (including
sand and gravel) from the surface or subsurface of the Land regardless of the
depth thereof or the method of mining or extraction thereof. Grantor will
cause all debts and liabilities of any character (including without limitation
all debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Mortgaged Property) incurred in the
construction, maintenance, operation and development of the Mortgaged Property
to be promptly paid, unless the same are diligently contested in good faith.
(k) SUITS AND CLAIMS; LOAN DOCUMENTS. Except as disclosed to
Agent in writing, there is no suit, action, claim, investigation, inquiry,
proceeding or demand pending (or, to Grantor's knowledge, threatened) which
affects the Mortgaged Property (including, without limitation, any which
challenges or otherwise pertains to Grantor's title to the Mortgaged Property)
or the validity, enforceability or priority of any of the Loan Documents. The
Loan Documents constitute legal, valid and binding obligations of Grantor (and
of each guarantor, if any) enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Debtor Relief Laws (hereinafter
defined) and except as the availability of certain remedies may be limited by
general principles of equity. Grantor is not a "foreign person" within the
meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and
7701 (i.e. Grantor is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined therein
and in any regulations promulgated thereunder). The loan evidenced by the
Notes is solely for business purposes, and is not for personal, family,
household or agricultural purposes.
(l) FURTHER ASSURANCES. Grantor will, promptly on the reasonable
request of Agent, (i) correct any defect, error or omission which may be
discovered in the contents, execution or acknowledgment of this Mortgage or any
other Loan Document; (ii) execute, acknowledge, deliver, procure and record
and/or file such further documents (including, without limitation, further
deeds of trust, security agreements, financing, statements, continuation
statements, and assignments of rents or leases) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
this Mortgage and the other Loan Documents, to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby (including specifically, but without limitation, any renewals,
additions, substitutions, replacements, or appurtenances to the Mortgaged
Property) or as deemed advisable by any Holder to protect the lien or the
security interest hereunder against the rights or interests of third persons;
and (iii) provide such certificates, documents, reports, information,
affidavits and other instruments and do such further acts as may be necessary,
desirable or proper in the reasonable determination of Agent or any other
Holder to enable Agent or such other Holder to comply with the requirements or
requests of any agency having jurisdiction over Agent or such other Holder or
any examiners of such agencies with respect to the indebtedness secured hereby,
Grantor or the Mortgaged Property. Grantor shall pay all reasonable costs
connected with any of the foregoing, which shall be a demand obligation owing
by Grantor (which Grantor hereby promises to pay) to Agent or such other Holder
pursuant to this Mortgage.
9 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 10
(m) FEES AND EXPENSES. Without limitation of any other provision
of this Mortgage or of any other Loan Document and to the extent not prohibited
by applicable law, Grantor will pay, and will reimburse to Agent and each other
Holder and/or Trustee on demand to the extent paid by Agent or such other
Holder and/or Trustee, provided such amounts are reasonable: (i) all appraisal
fees, filing and recording fees, taxes, abstract fees, title search or
examination fees, uniform commercial code search fees, escrow fees, reasonable
attorneys' fees, environmental inspection fees, and all other out-of-pocket
costs and expenses of every character incurred by Grantor, Agent or any other
Holder and/or Trustee in connection with the preparation of the Loan Documents,
the evaluation, closing and funding of the loan evidenced by the Loan
Documents, and any and all amendments and supplements to this Mortgage, the
Notes or any other Loan Documents or any approval, consent, waiver, release or
other matter requested or required hereunder or thereunder, or otherwise
attributable or chargeable to Grantor as owner of the Mortgaged Property; and
(ii) all reasonable costs and expenses, including, reasonable attorneys' fees
and expenses, incurred or expended in connection with the exercise of any right
or remedy, or the enforcement of any obligation of Grantor, hereunder or under
any other Loan Document.
(n) INDEMNIFICATION.
(i) Grantor will indemnify and hold harmless Agent, each
other Holder and Trustee from and against, and reimburse them on demand for,
any and all Indemnified Matters (defined below). For purposes of this
paragraph (n), the terms "Agent," "Holder" and "Trustee" shall include the
directors, officers, partners, employees and agents of Agent, each Holder and
Trustee, respectively, and any persons owned or controlled by, owning or
controlling, or under common control or affiliated with Agent, each Holder or
Trustee, respectively. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PERSON. However, such indemnities shall not apply to a particular
indemnified person to the extent that the subject of the indemnification is
caused by or arises out of the gross negligence or willful misconduct of that
indemnified person. Any amount to be paid under this paragraph (n) by Grantor
to Agent, any other Holder and/or Trustee shall be a demand obligation owing by
Grantor (which Grantor hereby promises to pay) to Agent, such other Holder
and/or Trustee pursuant to this Mortgage. Nothing in this paragraph, elsewhere
in this Mortgage or in any other Loan Document shall limit or impair any rights
or remedies of Agent, any other Holder and/or Trustee (including without
limitation any rights of contribution or indemnification) against Grantor or
any other person under any other provision of this Mortgage, any other Loan
Document, any other agreement or any applicable Legal Requirement.
(ii) As used herein, the term "INDEMNIFIED MATTERS" means
any and all claims, demands, liabilities (including strict liability), losses,
damages (including consequential damages), causes of action, judgments,
penalties, costs and expenses (including without limitation, reasonable fees
and expenses of attorneys and other professional consultants and experts, and
of the investigation and defense of any claim, whether or not such claim is
ultimately defeated, and the settlement of any claim or judgment including all
value paid or given in settlement) of every kind, known or unknown, foreseeable
or unforeseeable, which may be imposed upon, asserted against or incurred or
paid by Agent, any other Holder and/or Trustee at any time and from time to
time, whenever imposed, asserted or incurred, because of, resulting from, in
connection with, or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Mortgaged Property or with this
Mortgage or any other Loan Document, including, but not limited to any bodily
injury or death or property damage occurring in or upon or in the vicinity of
the Mortgaged Property through any cause whatsoever at any time on or before
the Release Date (defined below), any act performed
10 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 11
or omitted to be performed hereunder or under any other Loan Document, any
breach by Grantor of any representation, warranty, covenant, agreement or
condition contained in this Mortgage or in any other Loan Document, any default
as defined herein, and any claim under or with respect to any Lease or any
Environmental Matters. As used herein, the term "ENVIRONMENTAL MATTER" means:
(a) the presence of any Hazardous Substance on, in, under, above or about the
Mortgaged Property, or the migration or release or threatened migration or
release of any Hazardous Substance on, to, from or through the Mortgaged
Property, on or at any time before the Release Date; or (b) any act, omission,
event or circumstance existing or occurring in connection with the handling,
treatment, containment, removal, storage, decontamination, clean-up, transport
or disposal of any Hazardous Substance which is at any time on or before the
Release Date present on, in, under, above or about the Mortgaged Property; or
(c) any violation on or before the Release Date, of any Environmental
Requirement in effect on or before the Release Date, regardless of whether any
act, omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission,
event or circumstance; or (d) any Environmental Claim, or the filing or
imposition of any environmental lien against the Mortgaged Property, because
of, resulting from, in connection with, or arising out of any of the matters
referred to in clauses (a) through (c) preceding; and regardless of whether any
of the matters referred to in the foregoing clauses (a) through (d) was caused
by Grantor or Grantor's tenant or any subtenant, or a prior owner of the
Mortgaged Property or its tenant or any subtenant, or any third party. The
term "RELEASE DATE" as used herein means the earlier of the following two
dates: (i) the date on which the indebtedness and obligations secured hereby
have been paid and performed in full and this Mortgage has been released, or
(ii) the date on which the lien of this Mortgage is fully and finally
foreclosed or a conveyance by deed in lieu of such foreclosure is fully and
finally effective, and possession of the Mortgaged Property has been given to
the purchaser or grantee free of occupancy and claims to occupancy by Grantor
and Grantor's heirs, devisees, representatives, successors and assigns;
provided, that if such payment, performance, release, foreclosure or conveyance
is challenged, in bankruptcy proceedings or otherwise, the Release Date shall
be deemed not to have occurred until such challenge is rejected, dismissed or
withdrawn with prejudice. The indemnities in this paragraph (n) shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of this Mortgage but will survive the Release Date, foreclosure of
this Mortgage or conveyance in lieu of foreclosure, the repayment of the
secured indebtedness, the discharge and release of this Mortgage and the other
Loan Documents, any bankruptcy or other debtor relief proceeding, and any other
event whatsoever.
(o) TAXES ON NOTES OR MORTGAGE. Grantor will promptly pay all
income, franchise and other taxes owing by Grantor and any stamp taxes or other
taxes (unless such payment by Grantor is prohibited by law) which may be
required to be paid with respect to the Notes, this Mortgage or any other
instrument evidencing or securing any of the secured indebtedness. In the
event of the enactment after this date of any law of any governmental entity
applicable to Agent any other Holder, the Notes, the Mortgaged Property, this
Mortgage or any other Loan Document deducting from the value of property for
the purpose of taxation any lien or security interest thereon, or imposing upon
Agent or any other Holder the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Grantor, or
changing in any way the laws relating to the taxation of deeds of trust or
mortgages or security agreements or debts secured by deeds of trust or
mortgages or security agreements or the interest of the mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to affect this Mortgage or the indebtedness secured hereby or
Agent or any other Holder, then, and in any such event, Grantor, upon demand by
Agent or any such other Holder, shall pay such taxes, assessments, charges or
liens, or reimburse Agent or such other Holder therefor to the extent permitted
by law.
(p) STATEMENT CONCERNING NOTES OR MORTGAGE. Grantor shall at any
time and from time to time furnish within seven (7) days of a written request
by Agent a written statement in such form as may be
11 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 12
required by Agent stating that: (i) the Notes, this Mortgage and the other
Loan Documents are valid and binding obligations of Grantor, enforceable
against Grantor in accordance with their terms; (ii) the unpaid principal
balance of the Notes; (iii) the date to which interest on the Notes are paid;
(iv) the Notes, this Mortgage and the other Loan Documents have not been
released, subordinated or modified; and (v) there are no offsets or defenses
against the enforcement of the Notes, this Mortgage or any other Loan Document.
If any of the foregoing statements are untrue, Grantor shall, alternatively,
specify the reasons therefor.
(q) ANNUAL APPRAISAL. Agent may at its option obtain at Grantor's
reasonable expense, once in each year (or as otherwise requested by Agent but
in any event no more that once each year) an appraisal of the Mortgaged
Property or any part thereof prepared in accordance with written instructions
from Agent by a third-party appraiser engaged directly by Agent. Each such
appraiser and appraisal shall be reasonably satisfactory to Agent. The costs
of each such appraisal shall be a part of the secured indebtedness and shall be
payable by Grantor to Agent on demand (which obligation Grantor hereby promises
to pay).
Section 2.2. PERFORMANCE BY AGENT ON GRANTOR'S BEHALF. Grantor
agrees that, if Grantor fails to perform any act or to take any action which
under any Loan Document Grantor is required to perform or take, or to pay any
money which under any Loan Document Grantor is required to pay, and whether or
not the failure then constitutes a default hereunder or thereunder, and whether
or not there has occurred any default or defaults hereunder or the secured
indebtedness has been accelerated, Agent, in Grantor's name or its own name,
may, but shall not be obligated to, perform or cause to be performed such act
or take such action or pay such money, and any reasonable expenses so incurred
by Agent and any money so paid by Agent shall be a demand obligation owing by
Grantor to Agent (which obligation Grantor hereby promises to pay), shall be a
part of the indebtedness secured hereby, and Agent, upon making such payment,
shall be subrogated to all of the rights of the person, entity or body politic
receiving such payment. Agent and its designees shall have the right to enter
upon the Mortgaged Property at any reasonable time for any such purposes. No
such payment or performance by Agent shall waive or cure any default or waive
any right, remedy or recourse of Agent. Any such payment may be made by Agent
in reliance on any statement, invoice or claim without inquiry into the
validity or accuracy thereof. Each amount due and owing by Grantor to Agent
pursuant to this Mortgage shall bear interest, from the date such amount
becomes due until paid, at the rate per annum provided in the Notes for
interest on past due principal owed on the Notes but never in excess of the
maximum non-usurious amount permitted by applicable law, which interest shall
be payable to Agent on demand; and all such amounts, together with such
interest thereon, shall automatically and without notice be a part of the
indebtedness secured hereby. The amount and nature of any expense by Agent
hereunder and the time when paid shall be fully established by the certificate
of Agent or any of Agent's officers or agents.
Section 2.3. ABSENCE OF OBLIGATIONS OF AGENT WITH RESPECT TO
MORTGAGED PROPERTY. Notwithstanding anything in this Mortgage to the contrary,
including, without limitation, the definition of "Mortgaged Property" and/or
the provisions of ARTICLE 3 hereof, (i) to the extent permitted by applicable
law, the Mortgaged Property is composed of Grantor's rights, title and
interests therein but not Grantor's obligations, duties or liabilities
pertaining thereto, (ii) neither Agent nor any other Holder assumes or shall
have any obligations, duties or liabilities in connection with any portion of
the items described in the definition of "Mortgaged Property" herein, prior to
obtaining title to such Mortgaged Property, whether by foreclosure sale, the
granting of a deed in lieu of foreclosure or otherwise, and (iii) Agent, and
each other Holder may, at any time prior to acquisition of title to any portion
of the Mortgaged Property as above described, advise any party in writing as to
the extent of such Holder's interest therein and/or expressly disaffirm in
writing any rights, interests, obligations, duties and/or liabilities with
respect to such Mortgaged Property or matters related thereto. Without
limiting the generality of the foregoing, it is understood and
12 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 13
agreed that Agent and each other Holder shall have no obligations, duties or
liabilities prior to acquisition of title to any portion of the Mortgaged
Property, as lessee under any lease or purchaser or seller under any contract
or option unless Agent and each other Holder elects otherwise by written
notification.
ARTICLE 3
COLLATERAL ASSIGNMENT OF RENTS AND LEASES
Section 3.1. ASSIGNMENT. As additional security for the
indebtedness secured hereby, Grantor hereby assigns to Agent, as agent for the
Banks, all Rents (hereinafter defined) and all of Grantor's rights in and under
all Leases (hereinafter defined). Upon the occurrence of a default hereunder,
Agent shall have the right, power and privilege (but shall be under no duty) to
demand possession of the Rents, which demand shall to the fullest extent
permitted by applicable law be sufficient action by Agent to entitle Agent to
immediate and direct payment of the Rents (including delivery to Agent of Rents
collected for the period in which the demand occurs and for any subsequent
period), for application as provided in this Mortgage, all without the
necessity of any further action by Agent, including, without limitation, any
action to obtain possession of the Land, Improvements or any other portion of
the Mortgaged Property. Grantor hereby authorizes and directs the tenants
under the Leases to pay Rents to Agent upon written demand by Agent, without
further consent of Grantor, without any obligation to determine whether a
default has in fact occurred and regardless of whether Agent has taken
possession of any portion of the Mortgaged Property, and the tenants may rely
upon any written statement delivered by Agent to the tenants. Any such payment
to Agent shall constitute payment to Grantor under the Leases, and Grantor
hereby appoints Agent as Grantor's lawful attorney-in-fact for giving, and
Agent is hereby empowered to give, acquittances to any tenants for such
payments to Agent after a default. The assignment contained in this Section
shall become null and void upon the release of this Mortgage. As used herein:
(i) "Lease" means each existing or future lease, sublease (to the extent of
Grantor's rights thereunder) or other agreement under the terms of which any
person has or acquires any right to occupy or use the Mortgaged Property, or
any part thereof, or interest therein, and each existing or future guaranty of
payment or performance thereunder, and all extensions, renewals, modifications
and replacements of each such lease, sublease, agreement or guaranty; and (ii)
"Rents" means all of the rents, revenue, income, profits and proceeds derived
and to be derived from the Mortgaged Property or arising from the use or
enjoyment of any portion thereof or from any Lease, including, but not limited
to liquidated damages following default under any such Lease, all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by damage to any part of the Mortgaged Property, all of
Grantor's rights to recover monetary amounts from any tenant in bankruptcy
including, without limitation, rights of recovery for use and occupancy and
damage claims arising out of Lease defaults, including rejections, under any
applicable Debtor Relief Law (as hereinafter defined), together with any sums
of money that may now or at any time hereafter be or become due and payable to
Grantor by virtue of any and all royalties, overriding royalties, bonuses,
delay rentals and any other amount of any kind or character arising under any
and all present and all future oil, gas, mineral and mining leases covering the
Mortgaged Property or any part thereof, and all proceeds and other amounts paid
or owing to Grantor under or pursuant to any and all contracts and bonds
relating to the construction or renovation of the Mortgaged Property.
Section 3.2. COVENANTS, REPRESENTATIONS AND WARRANTIES CONCERNING
LEASES AND RENTS. Grantor covenants, represents and warrants to each Holder
that: (i) Grantor has good title to, and is the owner of the entire landlord's
interest in, the Leases and Rents hereby assigned and authority to assign them;
(ii) all Leases are valid and enforceable, and in full force and effect, and
are unmodified except as stated therein; (iii) unless otherwise stated in a
Permitted Encumbrance, no Rents or Leases have been or will be assigned,
13 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 14
mortgaged, pledged or otherwise encumbered and no other person has or will
acquire any right, title or interest in such Rents or Leases; (iv) no Rents
have been waived, released, discounted, set off or compromised; (v) except as
stated in the Leases, Grantor has not received any funds or deposits from any
tenant for which credit has not already been made on account of accrued Rents;
(vi) Grantor shall perform all of its obligations under the Leases and enforce
the tenants' obligations under the leases to the extent enforcement is prudent
under the circumstances; (vii) Grantor will not without the prior written
consent of Agent, enter into any Lease after the date hereof, or waive,
release, discount, set off, compromise, reduce or defer any Rent, receive or
collect Rents more than one (1) month in advance, grant any rent- free period
to any tenant, reduce any Lease term or waive, release or otherwise modify any
other material obligation under any Lease, renew or extend any Lease except in
accordance with a right of the tenant thereto in such Lease, approve or consent
to an assignment of a Lease or a subletting of any part of the premises covered
by a Lease, or settle or compromise any claim against a tenant under a Lease in
bankruptcy or otherwise; provided, however, Agent will not unreasonably
withhold or delay its consent to any of the foregoing actions; (viii) Grantor
will not, except in good faith where the tenant is in material default
thereunder, terminate or consent to the cancellation or surrender of any Lease
having an unexpired term of one year or more unless promptly after the
cancellation or surrender a new Lease of such premises is made with a new
tenant having a credit standing, in Agent's judgment, at least equivalent to
that of the tenant whose Lease was canceled, on substantially the same terms as
the terminated or canceled Lease; (ix) Grantor will not execute any Lease
except in accordance with the Loan Documents and for actual occupancy by the
tenant thereunder; (x) Grantor shall give prompt notice to Agent, as soon as
Grantor first obtains notice, of any claim, or the commencement of any action,
by any tenant or subtenant under or with respect to a Lease regarding any
claimed damage, default, diminution of or offset against Rent, cancellation of
the Lease, or constructive eviction, excluding, however, notices of default
under residential Leases, and Grantor shall defend, at Grantor's reasonable
expense, any proceeding pertaining to any Lease, including, if Agent so
requests, any such proceeding, to which Agent is a party; (xi) Grantor shall as
requested by Agent (but in any event no more than once per calendar quarter),
within ten (10) days of each written request, deliver to Agent a complete rent
roll of the Mortgaged Property in such detail as Agent may require, and
financial statements of the tenants, subtenants and guarantors under the Leases
to the extent available to Grantor, and deliver to such of the tenants and
others obligated under the Leases specified by Agent written notice of the
assignment in SECTION 3.1 hereof in form and content satisfactory to Agent;
(xii) promptly upon written request by Agent, Grantor shall deliver to Agent
copies of all Leases and copies of all records relating thereto; (xiii) there
shall be no merger of the leasehold estates, created by the Leases, with the
fee estate of the Land without the prior written consent of Agent; and (xiv)
Agent may at any time and from time to time by specific written instrument
intended for the purpose, unilaterally subordinate the lien of this Mortgage to
any Lease, without joinder or consent of, or notice to, Grantor, any tenant or
any other person, and notice is hereby given to each tenant under a Lease of
such right to subordinate. No such subordination shall constitute a
subordination to any lien or other encumbrance, whenever arising, or improve
the right of any junior lienholder; and nothing herein shall be construed as
subordinating this Mortgage to any Lease.
Section 3.3. NO LIABILITY OF AGENT. Agent's acceptance of this
assignment shall not be deemed to constitute Agent as a "mortgagee in
possession," nor obligate Agent to appear in or defend any proceeding relating
to any Lease or to the Mortgaged Property, or to take any action hereunder,
expend any money, incur any expenses, or perform any obligation or liability
under any Lease, or assume any obligation for any deposit delivered to Grantor
by any tenant and not as such delivered to and accepted by Agent. Agent shall
not be liable for any injury or damage to person or property in or about the
Mortgaged Property unless due to Agent's gross negligence or willful
misconduct, or for Agent's failure to collect or to exercise diligence in
collecting, Rents, but shall be accountable only for Rents that it shall
actually receive. Neither the assignment of Leases and Rents nor enforcement
of Agent's rights regarding Leases and Rents (including collection of
14 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 15
Rents) nor possession of the Mortgaged Property by Agent nor Agent's consent to
or approval of any Lease (nor all of the same), shall render Agent liable on
any obligation under or with respect to any Lease or constitute affirmation of,
or any subordination to, any Lease, occupancy, use or option. If Agent seeks
or obtains any judicial relief regarding Rents or Leases, the same shall in no
way prevent the concurrent or subsequent employment of any other appropriate
rights or remedies nor shall same constitute an election of judicial relief for
any foreclosure or any other purpose. Neither Agent has nor assumes any
obligations as lessor or landlord with respect to any Lease. The rights of
Agent under this ARTICLE 3 shall be cumulative of all other rights of Agent
under the Loan Documents or otherwise.
ARTICLE 4
DEFAULT
Section 4.1. EVENTS OF DEFAULT. The occurrence of any one of the
following shall be a default under this Mortgage ("DEFAULT"):
(a) DEFAULT UNDER CREDIT AGREEMENT. An Event of Default under the
Credit Agreement occurs and is continuing, subject to applicable notice and
cure periods.
(b) TRANSFER OF THE MORTGAGED PROPERTY. Any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Mortgaged Property or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, except: (i) sales or transfers of
items of the Accessories which have become obsolete or worn beyond practical
use and which have been replaced by adequate substitutes, owned by Grantor,
having a value equal to or greater than the replaced items when new; (ii) the
grant, in the ordinary course of business, of a leasehold interest in a part of
the Improvements to a tenant for occupancy, not containing a right or option to
purchase and not in contravention of any provision of this Mortgage or of any
other Loan Document; and (iii) such sales, leases, conveyances, assignments,
pledges, encumbrances or transfer permitted under the Credit Agreement. Agent,
on behalf of and upon the direction of Required Banks (as defined in the Credit
Agreement) may, in its sole discretion, waive a default under this paragraph,
but it shall have no obligation to do so, and any waiver may be conditioned
upon such one or more of the following, (if any) which Agent may require: the
grantee's integrity, reputation, character, creditworthiness and management
ability being reasonably satisfactory to Agent in its sole judgment and grantee
executing, prior to such sale or transfer, a written assumption agreement
containing such terms as Agent may require, a principal paydown on the Notes,
an increase in the rate of interest payable under the Notes, a transfer fee, a
modification of the term of the Notes, and any other modification of the Loan
Documents which Agent may require.
(c) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge,
encumbrance, assignment or transfer, voluntarily or involuntarily, whether by
operation of law or otherwise, of any interest in Grantor (if Grantor is not a
natural person but is a corporation, partnership, trust or other legal entity),
without the prior written consent of Agent (including, without limitation, if
Grantor is a partnership or joint venture, the withdrawal from or admission
into it of any general partner or joint venturer), which consent shall not be
unreasonably withheld, except: (i) sales, pledges, encumbrances, assignments or
transfers permitted under the Credit Agreement, and (ii) sales or transfers of
stock in Grantor if Grantor is a corporation or sales or transfers of limited
partnership interests in Grantor if Grantor is a limited partnership provided
that such sales or transfers, together with any prior sales or transfers of
interests in Grantor, do not result in more than 49% of the total beneficial
interests in Grantor having been sold or transferred since the date of this
Mortgage.
15 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 16
(d) GRANT OF EASEMENT, ETC. Without the prior written consent of
Agent, which consent shall not be unreasonably withheld, Grantor grants any
easement or dedication, files any plat, condominium declaration, or
restriction, or otherwise encumbers the Mortgaged Property, or seeks or permits
any zoning reclassification or variance, unless such action is expressly
permitted by the Loan Documents or does not affect the Mortgaged Property.
(e) ABANDONMENT. The owner of the Mortgaged Property abandons any
of the Mortgaged Property for a period in excess of thirty (30) consecutive
days.
(f) DEFAULT UNDER OTHER LIEN. A default or event of default
occurs under any lien, security interest or assignment covering the Mortgaged
Property or any part thereof (whether or not Agent has consented, and without
hereby implying Agent's consent, to any such lien, security interest or
assignment not created hereunder) and such default is not cured within any
applicable grace period provided by such document, or the holder of any such
lien, security interest or assignment declares a default or institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
(g) INTENTIONALLY DELETED.
(h) INTENTIONALLY DELETED.
(i) LIQUIDATION, ETC. The liquidation, termination, dissolution,
merger, consolidation or failure to maintain good standing in the State of
Texas (or in the case of an individual, the death or legal incapacity) of the
owner of the Mortgaged Property or any person obligated to pay any part of the
secured indebtedness.
(j) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any
reason without Agent's specific written consent cease to be in full force and
effect, or shall be declared null and void or unenforceable in whole or in
part, or the validity or enforceability thereof, in whole or in part, shall be
challenged or denied by any party thereto other than Agent; or the liens,
mortgages or security interests of Agent or any other Holder in any of the
Mortgaged Property become unenforceable in whole or in part, or cease to be of
the priority herein required, or the validity or enforceability thereof, in
whole or in part, shall be challenged or denied by Grantor or any person
obligated to pay any part of the secured indebtedness.
Section 4.2. NOTICE AND CURE. If any provision of this Mortgage or
any other Loan Document provides for Holder to give to Grantor any notice
regarding a default or incipient default, then if Agent shall fail to give such
notice to Grantor as provided, the sole and exclusive remedy of Grantor for
such failure shall be to seek appropriate equitable relief to enforce the
agreement to give such notice and to have any acceleration of the maturity of
the Notes and the secured indebtedness postponed or revoked and foreclosure
proceedings in connection therewith delayed or terminated pending or upon the
curing of such default in the manner and during the period of time permitted by
such agreement, if any, and Grantor shall have no right to damages or any other
type of relief not herein specifically set out against Agent or any other
Holder, all of which damages or other relief are hereby waived by Grantor.
Nothing herein or in any other Loan Document shall operate or be construed to
add on or make cumulative any cure or grace periods specified in any of the
Loan Documents.
16 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 17
ARTICLE 5
REMEDIES
Section 5.1. CERTAIN REMEDIES. If a default shall occur, Agent, upon
the direction of Required Banks (as defined in the Credit Agreement), may (but
shall have no obligation to) exercise any one or more of the following
remedies, without notice (unless notice is required by applicable statute or
the terms hereof or any of the Loan Documents):
(a) ACCELERATION. Agent may at any time and from time to time
declare any or all of the secured indebtedness immediately due and payable and
such secured indebtedness shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest, notice of acceleration
or of intention to accelerate or any other notice or declaration of any kind,
all of which are hereby expressly waived by Grantor, except as provided above.
(b) ENFORCEMENT OF ASSIGNMENT OF RENTS. Prior or subsequent to
taking possession of any portion of the Mortgaged Property or taking any action
with respect to such possession, Agent may: (1) collect and/or sue for the
Rents in Agent's own name, give receipts and releases therefor, and after
deducting all reasonable expenses of collection, including attorneys' fees and
expenses, apply the net proceeds thereof to the secured indebtedness in such
manner and order as Agent may elect and/or to the operation and management of
the Mortgaged Property, including the payment of management, brokerage and
attorney's fees and expenses; and (2) require Grantor to transfer all security
deposits and records thereof to Agent together with original counterparts of
the Leases.
(c) FORECLOSURE. Upon the occurrence of a default, Trustee, or
his successor or substitute, is authorized and empowered and it shall be his
special duty at the request of Agent to sell the Mortgaged Property or any part
thereof situated in the State of Texas, at the courthouse of any county
(whether or not the counties in which the Mortgaged Property is located are
contiguous, if the Mortgaged Property is located in more than one county) in
the State of Texas in which any part of the Mortgaged Property is situated, at
public vendue to the highest bidder for cash between the hours of ten o'clock
a.m. and four o'clock p.m. on the first Tuesday in any month or at such other
place, time and date as provided by the statutes of the State of Texas then in
force governing sales of real estate under powers of sale conferred by deed of
trust, after having given notice of such sale in accordance with such statutes.
Any sale made by Trustee hereunder may be as an entirety or in such parcels as
Agent may request. To the extent permitted by applicable law, any sale may be
adjourned by announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by Trustee of less
than the whole of the Mortgaged Property shall not exhaust the power of sale
herein granted, and Trustee is specifically empowered to make successive sale
or sales under such power until the whole of the Mortgaged Property shall be
sold; and, if the proceeds of such sale of less than the whole of the Mortgaged
Property shall be less than the aggregate of the indebtedness secured hereby
and the expense of executing this trust as provided herein, this Mortgage and
the lien hereof shall remain in full force and effect as to the unsold portion
of the Mortgaged Property just as though no sale had been made; provided,
however, that Grantor shall never have any right to require the sale of less
than the whole of the Mortgaged Property but Agent shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Mortgaged
Property. Trustee may, after any request or direction by Agent, sell not only
the real property but also the Collateral and other interests which are a part
of the Mortgaged Property, or any part thereof, as a unit and as a part of a
single sale, or may sell any part of the Mortgaged Property separately from the
remainder of the Mortgaged Property. It shall not be necessary for Trustee to
have taken possession of any part of the Mortgaged Property or to have present
or to exhibit at any sale any of the Collateral. After each sale, Trustee
shall make to the purchaser or purchasers at such sale good and sufficient
conveyances in the name of Grantor, conveying the property so sold to the
purchaser or purchasers with
17 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 18
general warranty of title by Grantor, subject to the Permitted Encumbrances
(and to such leases and other matters, if any, as Trustee may elect upon
request of Agent), and shall receive the proceeds of said sale or sales and
apply the same as herein provided. Payment of the purchase price to the
Trustee shall satisfy the obligation of purchaser at such sale therefor, and
such purchaser shall not be responsible for the application thereof. The power
of sale granted herein shall not be exhausted by any sale held hereunder by
Trustee or his substitute or successor, and such power of sale may be exercised
from time to time and as many times as Agent may deem necessary until all of
the Mortgaged Property has been duly sold and all secured indebtedness has been
fully paid. In the event any sale hereunder is not completed or is defective
in the opinion of Agent, such sale shall not exhaust the power of sale
hereunder and Agent shall have the right to cause a subsequent sale or sales to
be made hereunder. Any and all statements of fact or other recitals made in
any deed or deeds or other conveyances given by Trustee or any successor or
substitute appointed hereunder as to nonpayment of the secured indebtedness or
as to the occurrence of any default, or as to Agent having declared all of said
indebtedness to be due and payable, or as to the request to sell, or as to
notice of time, place and terms of sale and the properties to be sold having
been duly given, or as to the refusal, failure or inability to act of Trustee
or any substitute or successor trustee, or as to the appointment of any
substitute or successor trustee, or as to any other act or thing having been
duly done by Agent or by such Trustee, substitute or successor, shall be taken
as prima facie evidence of the truth of the facts so stated and recited. The
Trustee or his successor or substitute may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Trustee, including the posting of notices and the conduct of sale, but
in the name and on behalf of Trustee, his successor or substitute. If Trustee
or his successor or substitute shall have given notice of sale hereunder, any
successor or substitute Trustee thereafter appointed may complete the sale and
the conveyance of the property pursuant thereto as if such notice had been
given by the successor or substitute Trustee conducting the sale.
(d) UNIFORM COMMERCIAL CODE. Without limitation of Agent's rights
of enforcement with respect to the Collateral or any part thereof in accordance
with the procedures for foreclosure of real estate, Agent may exercise its
rights of enforcement with respect to the Collateral or any part thereof under
the Texas Business and Commerce Code as amended (or under the Uniform
Commercial Code in force in any other state to the extent the same is
applicable law) and in conjunction with, in addition to or in substitution for
those rights and remedies: (1) Agent may enter upon Grantor's premises to take
possession of, assemble and collect the Collateral or, to the extent and for
those items of the Collateral permitted under applicable law, to render it
unusable; (2) Agent may require Grantor to assemble the Collateral and make it
available at a place Agent designates which is mutually convenient to allow
Agent to take possession or dispose of the Collateral; (3) written notice
mailed to Grantor as provided herein at least ten (10) days prior to the date
of public sale of the Collateral or prior to the date after which private sale
of the Collateral will be made shall constitute reasonable notice; (4) any sale
made pursuant to the provisions of this paragraph shall be deemed to have been
a public sale conducted in a commercially reasonable manner if held
contemporaneously with and upon the same notice as required for the sale of the
Mortgaged Property under power of sale as provided in paragraph (c) above in
this SECTION 5.1; (5) in the event of a foreclosure sale, whether made by
Trustee under the terms hereof, or under judgment of a court, the Collateral
and the other Mortgaged Property may, at the option of Agent, be sold as a
whole; (6) it shall not be necessary that Agent take possession of the
Collateral or any part thereof prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that the
Collateral or any part thereof be present at the location of such sale; (7)
with respect to application of proceeds of disposition of the Collateral under
SECTION 5.3 hereof, the costs and expenses incident to disposition shall
include the reasonable expenses of retaking, holding, preparing for sale or
lease, selling, leasing, and the like and the reasonable attorneys' fees and
legal expenses incurred by Agent and each other Holder; (8) any and all
statements of fact or other recitals made in any bill of sale or assignment or
other instrument evidencing any foreclosure sale hereunder as to nonpayment of
the
18 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 19
secured indebtedness or as to the occurrence of any default, or as to Agent
having declared all of such indebtedness to be due and payable, or as to notice
of time, place and terms of sale and of the properties to be sold having been
duly given, or as to any other act or thing having been duly done by Agent,
shall be taken as prima facie evidence of the truth of the facts so stated and
recited; and (9) Agent may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Agent,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Agent.
(e) LAWSUITS. Agent may proceed by a suit or suits in equity or
at law, whether for collection of the indebtedness secured hereby, the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction.
(f) ENTRY ON MORTGAGED PROPERTY. Agent is authorized, prior or
subsequent to the institution of any foreclosure proceedings, to the fullest
extent permitted by applicable law, to enter upon the Mortgaged Property, or
any part thereof, and to take possession of the Mortgaged Property and all
books and records relating thereto, and to exercise without interference from
Grantor any and all rights which Grantor has with respect to the management,
possession, operation, protection or preservation of the Mortgaged Property.
Agent shall not be deemed to have taken possession of the Mortgaged Property or
any part thereof except upon the exercise of its right to do so, and then only
to the extent evidenced by its demand and overt act specifically for such
purpose. All reasonable costs, expenses and liabilities of every character
incurred by Agent in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property shall constitute a demand obligation of
Grantor (which obligation Grantor hereby promises to pay) to Agent pursuant to
this Mortgage. If necessary to obtain the possession provided for above, Agent
may invoke any and all legal remedies to dispossess Grantor. In connection
with any action taken by Agent pursuant to this Section, Agent shall not be
liable for any loss sustained by Grantor resulting from any failure to let the
Mortgaged Property, or any part thereof, or from any act or omission of Agent
in managing the Mortgaged Property unless such loss is caused by the willful
misconduct and bad faith of Agent, nor shall Agent be obligated to perform or
discharge any obligation, duty or liability of Grantor arising under any lease
or other agreement relating to the Mortgaged Property or arising under any
Permitted Encumbrance or otherwise arising. Grantor hereby assents to,
ratifies and confirms any and all actions of Agent with respect to the
Mortgaged Property taken under this Section.
(g) RECEIVER. Agent shall as a matter of right be entitled to the
appointment of a receiver or receivers for all or any part of the Mortgaged
Property, whether such receivership be incident to a proposed sale (or sales)
of such property or otherwise, and without regard to the value of the Mortgaged
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Grantor does hereby irrevocably consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, agrees not to oppose any application therefor by Agent, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Agent to application of Rents as provided in this Mortgage.
Nothing herein is to be construed to deprive Agent of any other right, remedy
or privilege it may have under the law to have a receiver appointed. Any
reasonable amount of money advanced by Agent in connection with any such
receivership shall be a demand obligation (which obligation Grantor hereby
promises to pay) owing by Grantor to Agent pursuant to this Mortgage.
(h) TERMINATION OF COMMITMENT TO LEND. Agent and each other
Holder may terminate any commitment or obligation to lend or disburse funds
under any Loan Document.
19 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 20
(i) OTHER RIGHTS AND REMEDIES. Agent may exercise any and all
other rights and remedies which Agent may have under the Loan Documents, or at
law or in equity or otherwise.
Section 5.2. EFFECTIVE AS MORTGAGE. This instrument shall be
effective as a mortgage as well as a deed of trust and upon the occurrence of a
default may be foreclosed as to any of the Mortgaged Property in any manner
permitted by applicable law, and any foreclosure suit may be brought by Trustee
or by Agent; and to the extent, if any, required to cause this instrument to be
so effective as a mortgage as well as a deed of trust, Grantor hereby mortgages
the Mortgaged Property to Agent, as agent for itself and the other Banks. In
the event a foreclosure hereunder shall be commenced by Trustee, or his
substitute or successor, Agent may at any time before the sale of the Mortgaged
Property direct Trustee to abandon the sale, and may then institute suit for
the collection of the Notes and/or any other secured indebtedness, and for the
foreclosure of this Mortgage. It is agreed that if Agent should institute a
suit for the collection of the Notes or any other secured indebtedness and for
the foreclosure of this Mortgage, Agent may at any time before the entry of a
final judgment in said suit dismiss the same, and require Trustee, his
substitute or successor to sell the Mortgaged Property in accordance with the
provisions of this Mortgage.
Section 5.3. PROCEEDS OF FORECLOSURE. The proceeds of any sale held
by Trustee or Agent or any receiver or public officer in foreclosure of the
liens and security interests evidenced hereby shall be applied: FIRST, to the
payment of all necessary costs and expenses incident to such foreclosure sale,
including but not limited to all reasonable attorneys' fees and legal expenses,
all court costs and charges of every character, and to the payment of the other
secured indebtedness, pro rata, including specifically without limitation the
principal, accrued interest and attorneys' fees due and unpaid on the Notes and
the amounts due and unpaid and owed to Agent and each other Holder under this
Mortgage, the order and manner of application to the items in this clause to be
in Agent's sole discretion; and SECOND, the remainder, if any there shall be,
shall be paid to Grantor, or to Grantor's heirs, devisees, representatives,
successors or assigns, or such other persons (including the holder or
beneficiary of any inferior lien) as may be entitled thereto by law; provided,
however, that if Agent is uncertain which person or persons are so entitled,
Agent may interplead such remainder in any court of competent jurisdiction and
the amount of any reasonable attorneys' fees, court costs and expenses incurred
in such action shall be a part of the secured indebtedness and shall be
reimbursable (without limitation) from such remainder.
Section 5.4. AGENT AS PURCHASER. Agent shall have the right to
become the purchaser as agent for, and for the benefit of the Banks, at any
sale held by Trustee or substitute or successor or by any receiver or public
officer or at any public sale, and Agent shall have the right to credit upon
the amount of Agent's successful bid, to the extent necessary to satisfy such
bid, all or any part of the secured indebtedness in such manner and order as
Agent may elect.
Section 5.5. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence
of a default, Agent shall have the right to proceed with foreclosure judicial
or non-judicial) of the liens and security interests hereunder without
declaring the entire secured indebtedness due, and in such event any such
foreclosure sale may be made subject to the unmatured part of the secured
indebtedness; and any such sale shall not in any manner affect the unmatured
part of the secured indebtedness, but as to such unmatured part this Mortgage
shall remain in full force and effect just as though no sale had been made.
The proceeds of such sale shall be applied as provided in SECTION 5.3 hereof
except that the amount paid under clause FIRST thereof shall be only the
matured portion of the secured indebtedness and any proceeds of such sale in
excess of those provided for in clause FIRST (modified as provided above) shall
be applied to the prepayment (without penalty) of any other secured
indebtedness in such manner and order and to such extent as Agent deems
advisable, and the
20 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 21
remainder, if any, shall be applied as provided in clause second of SECTION 5.3
hereof. Several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the secured indebtedness.
Section 5.6. REMEDIES CUMULATIVE. All rights and remedies
provided for herein and in any other Loan Document are cumulative of each other
and of any and all other rights and remedies existing at law or in equity, and
Trustee and Agent shall, in addition to the rights and remedies provided herein
or in any other Loan Document, be entitled to avail themselves of all such
other rights and remedies as may now or hereafter exist at law or in equity for
the collection of the secured indebtedness and the enforcement of the covenants
herein and the foreclosure of the liens and security interests evidenced
hereby, and the resort to any right or remedy provided for hereunder or under
any such other Loan Document or provided for by law or in equity shall not
prevent the concurrent or subsequent employment of any other appropriate right
or rights or remedy or remedies.
Section 5.7. AGENT'S DISCRETION AS TO SECURITY. Agent may resort
to any security given by this Mortgage or to any other security now existing,
or hereafter given to secure the payment of the secured indebtedness, in whole
or in part, and in such portions and in such order as may seem best to Agent in
its sole and uncontrolled discretion, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 5.8. GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full
extent Grantor may do so, Grantor agrees that Grantor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension
or redemption, and Grantor, for Grantor, Grantor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by
applicable law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of intention to mature or declare due
the whole of the secured indebtedness, notice of election to mature or declare
due the whole of the secured indebtedness and all rights to a marshaling of
assets of Grantor, including the Mortgaged Property, or to a sale in inverse
order of alienation in the event of foreclosure of the liens and/or security
interests hereby created. Grantor shall not have or assert any right under any
statute or rule of law pertaining to the marshaling of assets, sale in inverse
order of alienation, the exemption of homestead, the administration of estates
of decedents, or other matters whatever to defeat, reduce or affect the right
of Agent under the terms of this Mortgage to a sale of the Mortgaged Property
for the collection of the secured indebtedness without any prior or different
resort for collection, or the right of Agent under the terms of this Mortgage
to the payment of the secured indebtedness out of the proceeds of sale of the
Mortgaged Property in preference to every other claimant whatever. Grantor
waives any right or remedy which Grantor may have or be able to assert pursuant
to Chapter 34 of the Texas Business and Commerce Code, or any other provision
of Texas law, pertaining to the rights and remedies of sureties. If any law
referred to in this Section and now in force, of which Grantor or Grantor's
heirs, devisees, representatives, successors or assigns or any other persons
claiming any interest in the Mortgaged Property might take advantage despite
this Section, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to preclude the application of this Section.
Section 5.9. DELIVERY OF POSSESSION AFTER FORECLOSURE. In the
event there is a foreclosure sale hereunder and at the time of such sale,
Grantor or Grantor's heirs, devisees, representatives, successors or assigns
are occupying or using the Mortgaged Property, or any part thereof, each and
all shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
property occupied, such rental to be due daily to the purchaser; and to the
extent permitted by applicable law, the
21 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 22
purchaser at such sale shall, notwithstanding any language herein apparently to
the contrary, have the sole option to demand immediate possession following the
sale or to permit the occupants to remain as tenants at will. In the event the
tenant fails to surrender possession of said property upon demand, the
purchaser shall be entitled to institute and maintain a summary action for
possession of the property (such as an action for forcible detainer) in any
court having jurisdiction.
ARTICLE 6
MISCELLANEOUS
Section 6.1. SCOPE OF MORTGAGE. This Mortgage is a deed of trust
and mortgage of both real and personal property, a security agreement, a
financing statement and a collateral assignment, and also covers proceeds and
fixtures.
Section 6.2. EFFECTIVE AS A FINANCING STATEMENT. This Mortgage
shall be effective as a financing statement filed as a fixture filing with
respect to all fixtures included within the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property (including said fixtures) is situated. This Mortgage
shall also be effective as a financing statement covering minerals or the like
(including oil and gas) and accounts subject to Subsection (e) of Section 9.103
of the Texas Business and Commerce Code, as amended, and similar provisions (if
any) of the Uniform Commercial Code as enacted in any other state where the
Mortgaged Property is situated which will be financed at the wellhead or
minehead of the wells or mines located on the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of
the Mortgaged Property is situated. This Mortgage shall also be effective as a
financing statement covering any other Mortgaged Property and may be filed in
any other appropriate filing or recording office. The mailing address of
Grantor is the address of Grantor set forth at the end of this Mortgage and the
address of Agent from which information concerning the security interests
hereunder may be obtained is the address of Agent set forth at the end of this
Mortgage. A carbon photographic or other reproduction of this Mortgage or of
any financing statement relating to this Mortgage shall be sufficient as a
financing statement for any of the purposes referred to in this Section.
Section 6.3. NOTICE TO ACCOUNT DEBTORS. In addition to the rights
granted elsewhere in this Mortgage, Agent may at any time notify the account
debtors or obligors of any accounts, chattel paper, negotiable instruments or
other evidences of indebtedness included in the Collateral to pay Agent
directly.
Section 6.4. WAIVER BY AGENT. Agent, at the direction of Required
Banks (as defined in the Credit Agreement), may at any time and from time to
time by a specific writing intended for the purpose: (a) waive compliance by
Grantor with any covenant herein made by Grantor to the extent and in the
manner specified in such writing; (b) consent to Grantor's doing any act which
hereunder Grantor is prohibited from doing, or to Grantor's failing to do any
act which hereunder Grantor is required to do, to the extent and in the manner
specified in such writing; (c) release any part of the Mortgaged Property or
any interest therein from the lien and security interest of this Mortgage,
without the joinder of Trustee; or (d) release any party liable, either
directly or indirectly, for the secured indebtedness or for any covenant herein
or in any other Loan Document, without impairing or releasing the liability of
any other party. No such act shall in any way affect the rights or powers of
Agent or Trustee hereunder except to the extent specifically agreed to by Agent
in such writing.
22 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 23
Section 6.5. NO IMPAIRMENT OF SECURITY. The lien, security
interest and other security rights of Agent and each other Holder hereunder or
under any other Loan Document shall not be impaired by any indulgence,
moratorium or release granted by Agent including, but not limited to, any
renewal, extension or modification which Holders may grant with respect to any
secured indebtedness, or any surrender, compromise, release, renewal,
extension, exchange or substitution which Agent may grant in respect of the
Mortgaged Property, or any part thereof or any interest therein, or any release
or indulgence granted to any endorser, guarantor or surety of any secured
indebtedness. The taking of additional security by Agent or any other Holder
shall not release or impair the lien, security interest or other security
rights of Agent and each other Holder hereunder or affect the liability of
Grantor or of any endorser, guarantor or surety, or improve the right of any
junior lienholder in the Mortgaged Property (without implying hereby Agent's
consent to any junior lien).
Section 6.6. ACTS NOT CONSTITUTING WAIVER BY AGENT. Agent, on
behalf of Required Banks (as defined in the Credit Agreement), may waive any
default without waiving any other prior or subsequent default. Agent may
remedy any default without waiving the default remedied. Neither failure by
Agent to exercise, nor delay by Agent in exercising, nor discontinuance of the
exercise of any right, power or remedy (including but not limited to the right
to accelerate the maturity of the secured indebtedness or any part thereof)
upon or after any default shall be construed as a waiver of such default or as
a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Agent of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time. No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Agent and
then such waiver or consent shall be effective only in the specific instance,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Grantor in any case shall of itself entitle Grantor to any
other or further notice or demand in similar or other circumstances.
Remittances in payment of any part of the secured indebtedness other than in
the required amount in immediately available U.S. funds shall not, regardless
of any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Agent in immediately available U.S. funds and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting
bank or banks. Acceptance by Agent of any payment in an amount less than the
amount then due on any secured indebtedness shall be deemed an acceptance on
account only and shall not in any way excuse the existence of a default
hereunder.
Section 6.7. GRANTOR'S SUCCESSORS. If the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Grantor, Agent may, without notice to Grantor, deal with such successor or
successors in interest with reference to this Mortgage and to the indebtedness
secured hereby in the same manner as with Grantor, without in any way vitiating
or discharging Grantor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Mortgaged Property, no forbearance on the part of Agent, and no extension
of the time for the payment of the indebtedness secured hereby given by Agent,
upon direction of Banks, shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Grantor hereunder for the payment
of the indebtedness or performance of the obligations secured hereby or the
liability of any other person hereunder for the payment of the indebtedness
secured hereby. Grantor agrees that it shall be bound by any modification of
this Mortgage or any of the other Loan Documents made by Agent and any
subsequent owner of the Mortgaged Property, with or without notice to such
Grantor, and no such modifications shall impair the obligations of such Grantor
under this Mortgage or any other Loan Document. Nothing in this Section or
23 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 24
elsewhere in this Mortgage shall be construed to imply Agent's consent to any
transfer of the Mortgaged Property.
Section 6.8. PLACE OF PAYMENT; FORUM. All secured indebtedness
which may be owing hereunder at any time by Grantor shall be payable at the
place designated in the Notes or the other Loan Documents (or if no such
designation is made, at the address of Agent indicated at the end of this
Mortgage). Grantor hereby irrevocably submits generally and unconditionally
for itself and in respect of its property to the non-exclusive jurisdiction of
any Texas state court, or any United States federal court, sitting in the
county in which the secured indebtedness is payable, and to the non- exclusive
jurisdiction of any state or United States federal court sitting in the state
in which any of the Mortgaged Property is located, over any suit, action or
proceeding arising out of or relating to this Mortgage or the secured
indebtedness. Grantor hereby agrees and consents that, in addition to any
methods of service of process provided for under applicable law, all service of
process in any such suit, action or proceeding in any Texas state court, or any
United States federal court, sitting in the county in which the secured
indebtedness is payable may be made by certified or registered mail, return
receipt requested, directed to Grantor at its address stated in this Mortgage,
or at a subsequent address of Grantor of which Agent received actual notice
from Grantor in accordance with this Mortgage, and service so made shall be
complete five (5) days after the same shall have been so mailed.
Section 6.9. SUBROGATION TO EXISTING LIENS; VENDOR'S LIEN. To the
extent that proceeds of the Notes are used to pay indebtedness secured by any
outstanding, lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Holders at Grantor's
request, and Holders shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, however remote, irrespective of
whether said liens, security interests, charges or encumbrances are released,
and all of the same are recorded as valid and subsisting and are renewed and
continued and merged herein to secure the secured indebtedness, but the terms
and provisions of this Mortgage shall govern and control the manner and terms
of enforcement of the liens, security interests, charges and encumbrances to
which Holders are subrogated hereunder. It is expressly understood that in
consideration of the payment of such indebtedness by Holders, Grantor hereby
waives and releases all demands and causes of action for offsets and payments
in connection with the said indebtedness. If all or any portion of the
proceeds of the loan evidenced by the Notes or of any other secured
indebtedness has been advanced for the purpose of paying the purchase price for
all or a part of the Mortgaged Property, no vendor's lien is waived; and Agent
and each other Holder shall have, and is hereby granted, a vendor's lien on the
Mortgaged Property as cumulative additional security for the secured
indebtedness. Agent may foreclose under this Mortgage or under the vendor's
lien without waiving the other or may foreclose under both.
Section 6.10. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If
any part of the secured indebtedness cannot be lawfully secured by this
Mortgage or if any part of the Mortgaged Property cannot be lawfully subject to
the lien and security interest hereof to the full extent of such indebtedness,
then an payments made shall be applied on said indebtedness first in discharge
of that portion thereof which is not secured by this Mortgage.
Section 6.11. COMPLIANCE WITH USURY LAWS. It is the intent of
Grantor, Agent and each other Holder and all other parties to the Loan
Documents to conform to and contract in strict compliance with applicable usury
law from time to time in effect. All agreements between each Holder and
Grantor (or any other party liable with respect to any indebtedness under the
Loan Documents) are hereby limited by the provisions of this Section which
shall override and control all such agreements, whether now existing or
24 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 25
hereafter arising. In no way, nor in any event or contingency (including but
not limited to prepayment, default, demand for payment, or acceleration of the
maturity of any obligation), shall the interest taken, reserved, contracted
for, charged, chargeable, or received under this Mortgage, the Notes or any
other Loan Document or otherwise, exceed the maximum non-usurious amount
permitted by applicable law (the "MAXIMUM AMOUNT"). If, from any possible
construction of any document, interest would otherwise be payable in excess of
the Maximum Amount, any such construction shall be subject to the provisions of
this Section and such document shall ipso facto be automatically reformed and
the interest payable shall be automatically reduced to the Maximum Amount,
without the necessity of execution of any amendment or new document. If any
Holder shall ever receive anything of value which is characterized as interest
under applicable law and which would apart from this provision be in excess of
the Maximum Amount, an amount equal to the amount which would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the secured indebtedness in the inverse order of its
maturity and not to the payment of interest, or refunded to Grantor or the
other payor thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal. The right to accelerate maturity of
the Notes or any other secured indebtedness does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Holders do not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid
to each Holder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such indebtedness so that the amount of interest on
account of such indebtedness does not exceed the Maximum Amount. As used in
this Section, the term "APPLICABLE LAW" shall mean the laws of the State of
Texas or the federal laws of the United States applicable to this transaction,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Section 6.12. SUBSTITUTE TRUSTEE. The Trustee may resign by an
instrument in writing addressed to Agent, or Trustee may be removed at any time
with or without cause by an instrument in writing executed by Agent. In case
of the death, resignation, removal, or disqualification of Trustee, or if for
any reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without
other formality than appointment and designation in writing, executed by Agent
and the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the indebtedness secured
hereby has been paid in full, or until the Mortgaged Property is fully and
finally sold hereunder. If Agent is a corporation or association and such
appointment is executed on its behalf by officers of such corporation or
association, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation or
association. Upon the making of any such appointment and designation, all of
the estate and title of Trustee in the Mortgaged Property shall vest in the
named successor or substitute Trustee and he or she shall thereupon succeed to,
and shall hold, possess and execute, all the rights, powers, privileges,
immunities and duties herein conferred upon Trustee. All references herein to
"Trustee" shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time
acting hereunder.
Section 6.13. NO LIABILITY OF TRUSTEE. The Trustee shall not be
liable for any error of judgment or act done by Trustee in good faith, or be
otherwise responsible or accountable under any circumstances whatsoever
(including Trustee's negligence), except for Trustee's gross negligence or
willful misconduct. The Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine. All
25 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 26
moneys received by Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required
by law), and Trustee shall be under no liability for interest on any moneys
received by him hereunder. Grantor hereby ratifies and confirms any and all
acts which the herein named Trustee or his successor or successors, substitute
or substitutes, in this trust, shall do lawfully by virtue hereof. Grantor
will reimburse Trustee for, and save him harmless against, any and all
liability not due to gross negligence or willful misconduct and expenses which
may be incurred by him in the performance of his duties. The foregoing
indemnity shall not terminate upon discharge of the secured indebtedness or
foreclosure, or release or other termination, of this Mortgage.
Section 6.14. RELEASE OF MORTGAGE. If all of the secured
indebtedness be paid as the same becomes due and payable and all of the
covenants, warranties, undertakings and agreements made in this Mortgage are
kept and performed, and all obligations, if any, of Agent and each other Holder
for further advances have been terminated, then, and in that event only, all
rights under this Mortgage shall terminate (except to the extent expressly
provided herein with respect to indemnifications, representations and
warranties and other rights which are to continue following the release hereof)
and the Mortgaged Property shall become wholly clear of the liens, security
interests, conveyances and assignments evidenced hereby, and such liens and
security interests shall be released by Agent in due form at Grantor's cost.
Without limitation, all provisions herein for indemnity of Agent and each other
Holder or Trustee shall survive discharge of the secured indebtedness and any
foreclosure, release or termination of this Mortgage.
Section 6.15. NOTICES. All notices, requests, consents, demands
and other communications required or which any party desires to give hereunder
or under any other Loan Document shall be in writing and, unless otherwise
specifically provided in such other Loan Document, shall be deemed sufficiently
given or furnished if delivered by personal delivery, by courier, or by
registered or certified United States mail, postage prepaid, addressed to the
party to whom directed at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party
whose address is to be changed) or by telegram, telex, or facsimile. Any such
notice or communication shall be deemed to have been given either at the time
of personal delivery or, in the case of courier or mail, as of the date of
first attempted delivery at the address and in the manner provided herein, or,
in the case of telegram, telex or facsimile, upon receipt; provided that,
service of a notice required by Texas Property Code Section 51.002, as amended,
shall be considered complete when the requirements of that statute are met.
Notwithstanding the forgoing, no notice of change of address shall be effective
except upon receipt. This Section shall not be construed in any way to affect
or impair any waiver of notice or demand provided in any Loan Document or to
require giving of notice or demand to or upon any person in any situation or
for any reason.
Section 6.16. INVALIDITY OF CERTAIN PROVISIONS. A determination
that any provision of this Mortgage is unenforceable or invalid shall not
affect the enforceability or validity of any other provision and the
determination that the application of any provision of this Mortgage to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other persons
or circumstances.
Section 6.17. GENDER; TITLES; CONSTRUCTION. Within this Mortgage,
words of any gender shall be held and construed to include any other gender,
and words in the singular number shall be held and construed to include the
plural, unless the context otherwise requires. Titles appearing at the
beginning of any subdivisions hereof are for convenience only, do not
constitute any part of such subdivisions, and shall be disregarded in
construing the language contained in such subdivisions. The use of the words
"herein," "hereof," "hereunder" and other similar compounds of the word "here"
shall refer to this entire Mortgage and
26 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 27
not to any particular Article, Section, paragraph or provision. The term
"person" and words importing persons as used in this Mortgage shall include
firms, associations, partnerships (including limited partnerships), joint
ventures, trusts, corporations and other legal entities, including public or
governmental bodies, agencies or instrumentalities, as well as natural persons.
Section 6.18. REPORTING COMPLIANCE. Grantor agrees to comply with
any and all reporting requirements applicable to the transaction evidenced by
the Notes and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including but not limited to The International Investment Survey Act
of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980 and the Tax Reform Act of
1984 and further agrees upon written request of Agent to furnish Agent with
evidence of such compliance.
Section 6.19. REGARDING AGENT. Except where otherwise expressly
provided herein, (a) in any instance hereunder where the approval, consent or
the exercise of judgment of Agent is required or requested, no approval or
consent of Agent shall be deemed to have been given except by a specific
writing intended for the purpose and executed by an authorized representative
of Agent, and (b) any payments made to Agent hereunder in respect of the
Mortgaged Property shall be made to Agent for the ratable benefit of all of the
Banks based upon the outstanding principal amount of the secured indebtedness
(except for reimbursements of Agent for sums expended by it hereunder, which
sums shall be retained by Agent for its own account).
Section 6.20. GRANTOR. Unless the context clearly indicates
otherwise, as used in this Mortgage, "GRANTOR" means the grantors named in
SECTION 1.1 hereof or any of them. The obligations of Grantor hereunder shall
be joint and several. If any Grantor, or any signatory who signs on behalf of
any Grantor, is a corporation, partnership or other legal entity, Grantor and
any such signatory, and the person or persons signing for it, represent and
warrant to Agent that this instrument is executed, acknowledged and delivered
by Grantor's duly authorized representatives. If Grantor is an individual, no
power of attorney granted by Grantor herein shall terminate on Grantor's
disability.
Section 6.21. EXECUTION; RECORDING. This Mortgage has been
executed in several counterparts, all of which are identical, and all of which
counterparts together shall constitute one and the same instrument. The date
or dates reflected in the acknowledgments hereto indicate the date or dates of
actual execution of this Mortgage, but such execution is as of the date shown
on the first page hereof, and for purposes of identification and reference the
date of this Mortgage shall be deemed to be the date reflected on the first
page hereof. Grantor will cause this Mortgage and all amendments and
supplements thereto and substitutions therefor and all financing statements and
continuation statements relating thereto to be recorded, filed, re-recorded and
re-filed in such manner and in such places as Trustee or Agent shall reasonably
request and will pay all such recording, filing, re-recording and re-filing
taxes, fees and other charges.
Section 6.22. SUCCESSORS AND ASSIGNS. The terms, provisions,
covenants and conditions hereof shall be binding upon Grantor, and the heirs,
devisees, representatives, successors and assigns of Grantor, and shall inure
to the benefit of Trustee, Agent and each other Holder and shall constitute
covenants running with the Land. All references in this Mortgage to Grantor
shall be deemed to include all such heirs, devisees, representatives,
successors and assigns of Grantor.
Section 6.23. MODIFICATION OR TERMINATION. The Loan Documents may
only be modified or terminated by a written instrument or instruments intended
for that purpose and executed by the party against
28 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 28
which enforcement of the modification or termination is asserted. Any alleged
modification or termination which is not so documented shall not be effective
as to any party.
Section 6.24. NO PARTNERSHIP, ETC. The relationship between
Holders and Grantor is solely that of lenders and borrower. Neither Agent nor
any other Holder has any fiduciary or other special relationship with Grantor.
Nothing contained in the Loan Documents is intended to create any partnership,
joint venture, association or special relationship between Grantor and any
Holder or in any way make Agent or any other Holder a co-principal with Grantor
with reference to the Mortgaged Property. All agreed contractual duties
between or among Agent, each other Holder, Grantor and Trustee are set forth
herein and in the other Loan Documents and any additional implied covenants or
duties are hereby disclaimed. Any inferences to the contrary of any of the
foregoing are hereby expressly negated.
Section 6.25. APPLICABLE LAW. This Mortgage, and its validity,
enforcement and interpretation, shall be governed by Texas law (without regard
to any conflict of laws principles) and applicable United States federal law.
Section 6.26. ENTIRE AGREEMENT. The Loan Documents constitute the
entire understanding and agreement between Grantor, Agent and each other Holder
with respect to the transactions arising in connection with the indebtedness
secured hereby and supersede all prior written or oral understandings and
agreements between Grantor, Agent and each other Holder with respect to the
matters addressed in the Loan Documents. Grantor hereby acknowledges that,
except as incorporated in writing in the Loan Documents, there are not, and
were not, and no persons are or were authorized by Agent or any other Holder to
make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the matters addressed in the Loan
Documents. To the extent any of the provisions contained herein conflict with
the terms set forth in the Credit Agreement, the provisions of the Credit
Agreement shall control.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this instrument is executed by Grantor as to the
date first written on page 1 hereof.
The address and federal tax identification number of Grantor are:
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attention: A.J. Lewis, III
Federal Tax No.: 76-0316492
GRANTOR:
-------
PACKAGED ICE, INC., a Texas corporation
By:___________________________________
James F. Stuart, Chief Executive Officer
28 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 29
The address of Agent is
The Frost National Bank, as Agent
P.O. Box 1600
San Antonio, Texas 78296
Attention: Richard D. Young, Senior Vice President
THE STATE OF TEXAS )
)
COUNTY OF BEXAR )
This instrument was acknowledged before me on ____________, 1997, by
JAMES F. STUART, Chief Executive Officer of PACKAGED ICE, INC., a Texas
corporation, on behalf of such corporation.
____________________________________
Notary Public, State of Texas
29 PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 30
EXHIBIT A
TO
DEED OF TRUST
PROPERTY
Grantor's leasehold estate in the following property located in Dallas County,
Texas, created under that certain Lease Agreement dated December 6, 1995, by
and between Security Associates 3601, Ltd., as landlord, and Grantor, as
tenant, covering the premises located at 3623 Conflans Rd., Irving, Dallas
County, Texas, said property being described on EXHIBIT A-1 attached hereto and
incorporated herein for all purposes.
PII TEXAS LEASEHOLD DEED OF TRUST (DALLAS)
<PAGE> 1
EXHIBIT 10.35
- --------------------------------------------------------------------------------
PACKAGED ICE, INC.
as Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
AND
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
--------------------
INDENTURE
Dated as of October 16, 1997
--------------------
$25,000,000
12% Series C Senior Notes
due April 15, 2004
12% Series D Senior Notes
due April 15, 2004
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08; 4.10; 11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02; 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02; 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05; 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(l)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(l)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
- ---------------------------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.04. Paying Agent to Hold Assets in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.07. Replacement Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.09. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.13. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.14. Book-Entry Provisions for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.15. Registration of Transfers and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.16. Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.02. Selection of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.08. Procedures for Purchase Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.03. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.05. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.06. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.07. Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.08. Compliance Certificate; Notice of Default; Tax Information . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.09. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.10. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.11. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.12. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.13. Limitation on Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.14. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . 42
SECTION 4.15. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.16. Offer to Repurchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.17. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.18. Limitation on Issuances and Sales of Capital Stock of Subsidiaries . . . . . . . . . . . . . . . . . 46
SECTION 4.19. Limitation on Status as Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.20 Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.21 Additional Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.22 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
-ii-
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<TABLE>
<S> <C> <C>
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.12 Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.09. Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.02. Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.03. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.04. Acknowledgment of Discharge by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.05. Application of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.06. Repayment to the Company or Subsidiary Guarantors; Unclaimed Money . . . . . . . . . . . . . . . . . 64
SECTION 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.03. Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.05. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.06. Trustee to Sign Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.02. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . . 69
SECTION 10.05. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.06. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.07. Execution of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.08. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.03. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.09. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SIGNATURES
</TABLE>
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<TABLE>
<S> <C> <C>
Exhibit A-l - Form of Series C Security
Exhibit A-2 - Form of Series D Security
Exhibit B - Form of Legend for Global Securities
Exhibit C - Form of Certificate Deliverable Upon Transfer or Exchange of Securities
Exhibit D - Transferee Certificate for Non-QIB Accredited Investors
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
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<PAGE> 8
THIS INDENTURE dated as of October 16, 1997, is among PACKAGED ICE,
INC., a Texas corporation (the "Company"), PACKAGED ICE LEASING, INC., a Nevada
corporation, SOUTHCO ICE, INC., a Texas corporation, MISSION PARTY ICE, INC., a
Texas corporation, SOUTHWEST TEXAS PACKAGED ICE, INC., a Texas corporation, and
SOUTHWESTERN ICE, INC., a Texas corporation (collectively, the "Subsidiary
Guarantors"), and U.S. TRUST COMPANY OF TEXAS, N.A., a national banking
association, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Series C
Securities and the Series D Securities (as such terms are hereinafter defined),
without preference of one such series over the other:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" of any Person means Indebtedness of another
Person and any of its Subsidiaries existing at the time such other Person
becomes a Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Subsidiaries or is assumed by such
Person or any Subsidiary of such Person in connection with the acquisition of
assets from such other Person and in each case not Incurred by such Person or
any Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation, and which
Indebtedness is without recourse to the Company or any of its Subsidiaries or
to any of their respective properties or assets other than the Person or such
Person's Subsidiaries or the assets to which such Indebtedness related prior to
the time such Person becomes a Subsidiary of the Company or the time of such
acquisition, merger or consolidation.
"Adjusted Net Assets" has the meaning provided in Section 10.05
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.12.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be merged with or into the
Company or any Subsidiary of the Company or (ii) the acquisition by the Company
or any Subsidiary of the Company of assets of any Person comprising an existing
business (whether existing as a separate entity), subsidiary, division or unit
of such Person.
<PAGE> 9
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its
Subsidiaries (including, without limitation, by means of a sale and leaseback
transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (a) any Capital Stock of any Subsidiary held by the
Company or any other Subsidiary, (b) all or substantially all of the properties
and assets of any division or line of business of the Company or any of its
Subsidiaries, (c) any other properties or assets of the Company or any of its
Subsidiaries other than transfers of cash, Cash Equivalents, accounts
receivable, or properties or assets in the ordinary course of business;
provided that the transfer of all or substantially all of the properties or
assets of the Company and its Subsidiaries, taken as a whole, will be governed
by the provisions of Section 5.01 and/or Section 4.16 and not by the provisions
of Section 4.17. For the purposes of this definition, the term "Asset Sale"
also shall not include any of the following: (i) sales of damaged, worn-out or
obsolete equipment or assets that, in the Company's reasonable judgment, are
either (A) no longer used or (B) no longer useful in the business of the
Company or its Subsidiaries; (ii) any lease of any property entered into the
ordinary course of business and with respect to which the Company or any
Subsidiary is the lessor, except any such lease that provides for the
acquisition of such property by the lessee during or at the end of the term
thereof for an amount that is less than the fair market value thereof at the
time the right to acquire such property is granted; (iii) a Restricted Payment
or Permitted Investment permitted under Section 4.03; and (iv) any transfers
that, but for this clause (iv), would be Asset Sales, if (A) the Company elects
to designate such transfers as not constituting Asset Sales and (B) after
giving effect to such transfers, the aggregate fair market value of the
properties or assets transferred in such transaction or any such series of
related transactions so designated by the Company does not exceed $1,000,000.
"Asset Proceeds Deficiency" has the meaning set forth in Section 4.17.
"Asset Proceeds Offer" has the meaning set forth in Section 4.17.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). As used in the preceding sentence, the "net
rental payments" under any lease for any such period shall mean the sum of
rental and other payments required to be paid with respect to such period by
the lessee thereunder, excluding any amounts required to be paid by such lessee
on account of maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges. In the case of any lease that is terminable by the
lessee upon payment of penalty, such net rental payment shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Available Proceeds Amount" has the meaning set forth in Section 4.17.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
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<PAGE> 10
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in The City of New York or Dallas,
Texas are required or authorized by law or other governmental action to be
closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of this definition, the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than 270 days from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-l from S&P or at least P-l from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
180 days from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; (vi) deposits available for withdrawal on demand with any commercial
bank not meeting the qualifications specified in clause (ii) above, provided
that all such deposits do not exceed $5,000,000 in the aggregate at any one
time; (vii) demand and time deposits and certificates of deposit with any
commercial bank organized in the United States not meeting the qualifications
specified in clause (ii) above, provided that such deposits and certificates
support bond, letter of credit and other similar types of obligations incurred
in the ordinary course
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<PAGE> 11
of business; and (viii) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole to any person (as such term is used in Section 13(d)(3) of the Exchange
Act) other than to the Company or a Subsidiary Guarantor; (ii) the Company
consolidates with or merges into another Person or any Person consolidates
with, or merges into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities or other property, other than any such
transaction where (a) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (b) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (iii) the adoption of a plan relating to
the liquidation or dissolution of the Company not involving a merger or
consolidation or a sale or other disposition of assets described in clause (i)
above; (iv) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any person (as defined
above), excluding Permitted Holders, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock
of the Company; provided that the sale of Voting Stock of the Company to a
Person or Persons acting as underwriters in connection with a firm commitment
underwriting shall not constitute a Change of Control; or (v) the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors (other than by action of the Permitted Holders). For
purposes of this definition, any transfer or an equity interest of an entity
that was formed for the purpose of acquiring Voting Stock of the Company will
be deemed to be a transfer of such portion of such Voting Stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Change of Control Offer" has the meaning provided in Section 4.16.
"Change of Control Payment" has the meaning provided in Section 4.16.
"Change of Control Payment Date" has the meaning provided in Section
4.16.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Series A/B Issue Date or issued after the Series A/B Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
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<PAGE> 12
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income plus (ii)
to the extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and
its Subsidiaries paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or nonrecurring gains
or losses or taxes attributable to sales or dispositions of assets outside the
ordinary course of business), Consolidated Interest Expense, amortization
expense and depreciation expense, and (B) other non-cash items (other than
non-cash interest) reducing Consolidated Net Income, other than any non-cash
item which requires the accrual of or a reserve for cash charges for any future
period and other than any non-cash charge constituting an extraordinary item of
loss, less other non-cash items increasing Consolidated Net Income, all as
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial information is available (the "Four Quarter
Period") ending on or prior to the date of the transaction or event giving rise
to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to (i) the Incurrence or repayment of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the Incurrence or repayment of Indebtedness in
the ordinary course of business for working capital purposes pursuant to
working capital facilities, at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Incurrence
or repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, and (ii) any Asset Sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such Person or
one of its Subsidiaries (including any Person who becomes a Subsidiary as a
result of any such Asset Acquisition) Incurring, assuming or otherwise being
liable for Acquired Indebtedness) at any time subsequent to the first day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the Incurrence, assumption or
liability for any such Indebtedness or Acquired Indebtedness and also including
any Consolidated EBITDA, based upon the four fiscal quarters of such Person for
which financial information is available immediately preceding such Asset
Acquisition, associated with such Asset Acquisition) occurred on the first day
of the Four Quarter Period; provided that the Consolidated EBITDA of any Person
acquired shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income." If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the preceding sentence shall give effect to the Incurrence of such guaranteed
Indebtedness as if such Person or any Subsidiary of such Person had directly
Incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date (including Indebtedness actually Incurred on the
Transaction Date) and which will continue to be so determined thereafter shall
be deemed to have
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<PAGE> 13
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Common Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the aggregate of the interest expense (without deduction of
interest income) of such Person and its Subsidiaries (excluding amortization of
deferred financing fees) for such period, on a consolidated basis, as
determined in accordance with GAAP, and including (a) all amortization of
original issue discount (other than any original issue discount on Indebtedness
attributable to proceeds of the sale of warrants issued in connection with the
Incurrence of such Indebtedness); (b) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period; (c) net cash costs under all
Interest Swap Obligations (including amortization of fees); (d) all capitalized
interest; and (e) the interest portion of any deferred payment obligations for
such period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
Sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income or loss
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a wholly-owned Subsidiary of the referent person
by such Person, (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Series A/B Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), and (h) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
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"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries for such period, on a consolidated
basis, as determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Series A/B Issue Date; (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board of Directors at the
time of such nomination or election (iii) was elected or nominated for election
pursuant to the Voting Agreement.
"Covenant Defeasance" has the meaning set forth in Section 8.01(c).
"Credit Facilities" means, with respect to the Company, one or more
debt facilities or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the final maturity date of the Securities.
"Events of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Existing Indebtedness" means up to $4.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries in
existence on the Series A/B Issue Date, until such amounts are repaid.
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The term "fair market value" or "fair value" means, with respect to
any asset or property, the price which could be negotiated in an arm's-length,
free market transaction, for cash, between an informed and willing seller and
an informed and willing and able buyer, neither of whom is under undue pressure
or compulsion to complete the transaction. Fair market value shall be
determined by the Board of Directors of the Company acting reasonably and in
good faith and shall be evidenced by a Board Resolution delivered to the
Trustee; provided, however, that if the aggregate non-cash consideration to be
received by the Company or any of its Subsidiaries from any Asset Sale could be
reasonably likely to exceed $2,500,000 the fair market value shall be
determined by an Independent Financial Advisor.
"Family Member" means, when used with reference to any natural Person,
such Person's spouse, siblings, parents, children, or other lineal descendants
(whether by adoption or consanguinity), and shall mean a trust, the primary
beneficiary of which is the Person's spouse, siblings, parents, children, or
other lineal descendants (whether by adoption or consanguinity).
"Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the reasonable and
good faith judgment of the Board of Directors of the Company, qualified to
perform the task for which such firm has been engaged.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Series A/B Issue
Date.
"Global Security" means a Security evidencing all or a part of the
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
"Holder" or "Security holder" means a Person in whose name a Security
is registered on the Registrar's books.
"Ice Business" means (i) the manufacture and sale (including, without
limitation, direct sales, wholesale sales and retail sales) of ice; (ii) the
manufacture and sale of ice and water by means of ice manufacturing or water
purification equipment (including ice makers, bins, baggers, merchandisers,
delivery devices and related equipment) installed on the premises of the
Company's customer(s) whether or not such equipment is owned by the Company,
the customers, or a third party; (iii) contract on-premises ice or water
service (including leasing of ice or water related equipment) for a customer's
internal use; (iv) providing cold storage and freezer related services in
conjunction with the traditional ice business; (v) the sale of products
incidental or related to the foregoing; and (v) all logical extensions of the
foregoing.
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"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such
Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that (A) any
Indebtedness assumed in connection with an acquisition of assets and any
Indebtedness of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) of the Company or
at the time such Person is merged or consolidated with the Company or any
subsidiary of the Company shall be deemed to be Incurred at the time of the
acquisition of such assets or by such Subsidiary at the time it becomes, or is
merged or consolidated with, a Subsidiary of the Company or by the Company at
the time of such merger or consolidation, as the case may be, and (B) any
amendment, modification or waiver of any document pursuant to which
Indebtedness was previously Incurred shall not be deemed to be an Incurrence of
Indebtedness unless such amendment, modification or waiver increases the
principal or premium thereof or interest rate thereon (including by way of
original issue discount). A guarantee by the Company or a Subsidiary Guarantor
of Indebtedness Incurred by the Company or a Subsidiary Guarantor, as
applicable, shall not be a separate incurrence of Indebtedness.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) all Indebtedness of others (including all dividends of other
Persons for the payment of which is) guaranteed, directly or indirectly, by
such Person or that is otherwise its legal liability or which such Person has
agreed to purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds but excluding endorsements of
negotiable instruments and documents in the ordinary course of business, (vii)
net liabilities of such Person under Interest Swap Obligations, (viii) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
any asset or property (including, without limitation, leasehold interests and
any other tangible or intangible property) of such Person, whether or not such
Indebtedness is assumed by such Person or is not otherwise such Person's legal
liability; provided that if the Obligations so secured have not been assumed by
such Person or are otherwise not such Person's legal liability, the amount of
such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien, and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends if any. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the
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contingency giving rise to the obligation, of any contingent obligations at
such date; provided that the amount outstanding at any time of any non-interest
bearing Indebtedness or other Indebtedness issued with original issue discount
is the full amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP, but such Indebtedness shall only be deemed to be
Incurred as of the date of original issuance thereof.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person means
such a Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in the Company
or any of its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning thereof.
"Initial Purchaser" means Jefferies & Company, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the fair market value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise) (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business); (ii) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person; (iii) guarantee or assumption of any Indebtedness or any other
obligation of any other Person (except for an assumption of Indebtedness for
which the assuming Person receives consideration at the time of such assumption
in the form of property or assets with a fair market value at least equal to
the principal amount of the Indebtedness assumed, extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business,
workers' compensation, utility, lease and similar deposits and prepaid expenses
made in the ordinary course of business, and endorsements of negotiable
instruments and documents in the ordinary course of business); and (iv) all
other items
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that would be classified as investments on a balance sheet of such Person
prepared in accordance with GAAP. The amount of any Investment shall not be
adjusted for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment. If the Company or any Subsidiary of
the Company sells or otherwise disposes of any Common Stock of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, the Company no longer owns, directly or indirectly,
greater than 50% of the outstanding Common Stock of such Subsidiary, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Common Stock of such
Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Series C Securities were
first issued hereunder.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction other than to reflect
ownership by a third party of property leased to the referent Person or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Maturity Date" means April 15, 2004.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, brokerage, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements)
and (c) appropriate amounts to be provided by the Company or any Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Net Equity Proceeds" means (a) in the case of any sale by the Company
of Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary issued after the Series A/B Issue
Date for or into shares of Qualified Capital Stock of the Company, the amount
of such Indebtedness (or, if such Indebtedness was issued at an amount
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<PAGE> 19
less than the stated principal amount thereof, the accrued amount thereof as
determined in accordance with GAAP) as reflected in the consolidated financial
statements of the Company prepared in accordance with GAAP as of the most
recent date next preceding the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder of such
Indebtedness to the Company or to any wholly-owned Subsidiary of the Company
upon such exchange, exercise, conversion or surrender and less any and all
payments made to the holders of such Indebtedness, and all other expenses
incurred by the Company in connection therewith), in each case (a) and (b) to
the extent consummated after the Series A/B Issue Date.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offered Price" has the meaning set forth in Section 4.17.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Chief Accounting Officer, the Treasurer or
Assistant Treasurer, the Controller, the Secretary or Assistant Secretary of
such Person.
"Officers' Certificate" means a certificate signed by two Officers of
the Company.
"Opinion of Counsel" means a written opinion from legal counsel which
and who are reasonably acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment to the Securities.
"Pari Passu Offer" has the meaning set forth in Section 4.17.
"Paying Agent" shall have the meaning set forth in Section 2.03.
"Payment Amount" has the meaning set forth in Section 4.17.
The term "payment default" has the meaning set forth in Section 6.01.
"Payment Restriction" has the meaning set forth in Section 4.14.
"Permitted Holders" means the following Persons: Norwest Equity
Partners V, a Minnesota Limited Partnership, Fleming Companies, Inc., The Food
Fund II Limited Partnership, A. J. Lewis III, Steven P. Rosenberg, and James F.
Stuart, and any of their respective Affiliates and Family Members, each of the
foregoing individually being a "Permitted Holder."
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Securities and the Series A/B
Securities;
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(ii) Indebtedness under any Existing Indebtedness;
(iii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Subsidiary thereof
in the ordinary course of business, including guarantees or
obligations of the Company or any Subsidiary thereof with respect to
letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money
borrowed);
(iv) Permitted Refinancing Indebtedness;
(v) The Subsidiary Guarantees of the Securities and the
Series A/B Subsidiary Guarantees;
(vi) Interest Swap Obligations of the Company; provided,
however, that such Interest Swap Obligations are entered into to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness Incurred in accordance with this Indenture to
the extent the notional principal amount of such Interest Swap
Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(vii) Indebtedness of a direct or indirect Subsidiary of
the Company to the Company or to a direct or indirect Subsidiary of
the Company for so long as such Indebtedness is held by the Company or
a direct or indirect Subsidiary of the Company in each case subject to
no Lien held by a Person other than the Company or a direct or
indirect Subsidiary of the Company; provided that if as of any date
any Person other than the Company or a direct or indirect Subsidiary
of the Company owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed the date of
the Incurrence of Indebtedness not constituting Permitted Indebtedness
by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a direct or indirect
Subsidiary of the Company for so long as such Indebtedness is held by
a direct or indirect Subsidiary of the Company in each case subject to
no Lien; provided, that (a) any Indebtedness of the Company to any
direct or indirect Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's
Obligations under this Indenture and the Securities, and (b) if as of
any date any Person other than a direct or indirect Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien
in respect of such Indebtedness, such date shall be deemed the date of
the Incurrence of Indebtedness not constituting Permitted Indebtedness
by the issuer of such Indebtedness; and
(ix) additional Indebtedness not to exceed an aggregate
principal amount of $15,000,000 at any one time outstanding and any
guarantee thereof.
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"Permitted Investments" means (a) Investments in cash and Cash
Equivalents; (b) Investments by the Company or by any Subsidiary of the Company
in any Person that is or will become immediately after such Investment a direct
or indirect Subsidiary of the Company; (c) any Investments in the Company by
any Subsidiary of the Company; provided that any Indebtedness evidencing such
Investment is unsecured; (d) Investments made by the Company or by its
Subsidiaries as a result of an Asset Sale made in compliance with Section 4.17;
(e) Interest Swap Obligations to the extent the same constitute Permitted
Indebtedness; (f) Investments in an amount not to exceed $2,000,000 at any one
time outstanding; (g) Investments held by any Person on the date such Person
becomes a Subsidiary to the extent such Investments are not incurred in
anticipation of or in connection with such acquisition; and (h) Investments in
stock, obligations or securities received in settlement of debts owing to the
Company or any Subsidiary as a result of bankruptcy or insolvency proceedings
or upon the foreclosure, perfection or enforcement of any Lien in favor of the
Company or any Subsidiary, in each case as to debt owing to the Company or any
Subsidiary that arose in the ordinary course of business of the Company or any
such Subsidiary, provided that any stocks, obligations or securities received
in settlement of debts that arose in the ordinary course of business (and
received other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30 days of
receipt, converted into cash or Cash Equivalents shall be treated as having
been cash or Cash Equivalents at the time received.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens existing as of the Series A/B Issue Date;
(ii) Liens securing the Securities, the Subsidiary Guarantees or
any Indebtedness under the Credit Facilities;
(iii) Liens in favor of the Company;
(iv) Liens for taxes, assessments and governmental charges or
claims either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(v) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
delinquent for more than 30 days or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made in respect thereof;
(vi) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds, bids,
government contracts and leases, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money);
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<PAGE> 22
(vii) judgment Liens not giving rise to an Event of Default so long
as any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall have not expired;
(viii) any interest or title of a lessor under any Capital Lease
Obligation or operating lease;
(ix) Liens securing Purchase Money Indebtedness incurred in
compliance with Section 4.04; provided, however, that (i) the related Purchase
Money Indebtedness shall not be secured by any property or assets of the
Company or any Subsidiary other than the property or assets so acquired and any
proceeds therefrom and (ii) the Lien securing any such Indebtedness shall be
created within 90 days of such acquisition;
(x) Liens securing obligations under or in respect of Interest
Swap Obligations;
(xi) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;
(xii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds thereof;
(xiii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off; and
(xiv) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company and Liens on property or assets
of a Subsidiary existing at the time it became a Subsidiary, provided that such
Liens were in existence prior to the contemplation of the acquisition and do
not extend to any assets other than the property of such Person or the acquired
property (and the proceeds thereof), as applicable.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries incurred pursuant to
clause (i), (ii) or (v) of the definition of "Permitted Indebtedness"; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so exchanged, refinanced,
renewed, replaced, defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being exchanged, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities or the
Subsidiary Guarantees, such Permitted
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Refinancing Indebtedness is subordinated in right of payment to, the Securities
or the Subsidiary Guarantees, as the case may be, on terms at least as
favorable to the Holders of Securities as those contained in the documentation
governing the Indebtedness being exchanged, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary that is the obligor on the Indebtedness being
exchanged, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Securities" has the meaning set forth in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Securities) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Placement Legend" means the legend initially set forth on the
Series C Securities in the form set forth on Exhibit A-l.
"Public Equity Offering" means an underwritten offer and sale of
Qualified Capital Stock of the Company pursuant to a registration statement
that has been declared effective by the SEC pursuant to the Securities Act
(other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under any employee benefit plan of the Company).
"Purchase Agreement" means the purchase agreement dated as of October
10, 1997 by and among the Company, the Subsidiary Guarantors named therein and
the Initial Purchaser.
"Purchase Date" means the Change of Control Payment Date or purchase
date with respect to an Asset Proceeds Offer, as applicable.
"Purchase Money Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Subsidiary incurred in connection with the
acquisition by the Company or such Subsidiary, subsequent to the Series A/B
Issue Date, of any property or assets.
"Purchase Offer" means either a Change of Control Offer or an Asset
Proceeds Offer, as applicable.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities.
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<PAGE> 24
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to the terms of
this Indenture and Paragraph 5 in the forms of Security annexed hereto as
Exhibit A- 1 and A-2.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to the terms of
this Indenture and Paragraph 5 in the forms of Security annexed hereto as
Exhibit A- 1 and A-2.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, renew, refund, repay, prepay, redeem, defease or retire, or to issue
a security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Registered Exchange Offer" means the offer to exchange the Series D
Securities for all of the outstanding Series C Securities in accordance with
the Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company, the Subsidiary Guarantors named therein and
the Initial Purchaser, relating to the Securities and dated as of the Issue
Date, as the same may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Resale Restriction Termination Date" has the meaning provided in
Section 2.15.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Group (or any successor group) of the
Trustee, including without limitation any Vice President, any Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers, who shall, in any case, be responsible for the
administration of this document or have familiarity with it, and also means,
with respect to particular corporate trust matters, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act and includes, without limitation, any Private Exchange
Note (as defined in the Registration Rights Agreement); provided that the
Trustee shall be entitled to request and conclusively rely upon an Opinion of
Counsel with respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
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"Securities" means the Series C Securities and Series D Securities as
amended or supplemented from time to time in accordance with the terms hereof
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Series A/B Indenture" means the Indenture dated as of April 17, 1997
among the Company, the Subsidiary Guarantors parties thereto and U.S. Trust
Company of Texas, N.A., as Trustee, providing for the issuance of the Series
A/B Securities in the aggregate principal amount of $50,000,000, as such may be
amended and supplemented from time to time.
"Series A/B Issue Date" means the date on which the Series A/B
Securities were originally issued under the Series A/B Indenture.
"Series A/B Securities" means the Company's 12% Senior Notes due April
15, 2004 issued pursuant to the Series A/B Indenture, as such may be amended or
supplemented from time to time.
"Series A/B Subsidiary Guarantees" means those subsidiary guarantees
of the Series A/B Securities issued pursuant to the Series A/B Indenture.
"Series C Securities" means the 12% Series C Senior Notes due April
15, 2004, being issued and sold pursuant to the Purchase Agreement and this
Indenture.
"Series D Securities" means the 12% Series D Senior Notes due April
15, 2004 (the terms of which are identical to the Series C Securities except
that the Series D Securities shall be registered under the Securities Act, and
shall not contain the restrictive legend on the face of the form of the Series
C Securities), to be issued in exchange for the Series C Securities pursuant to
the Registered Exchange Offer and this Indenture.
"Specified Affiliate Transactions" means certain transactions among
the Company and Subsidiaries and certain Affiliates which were entered into
prior to the Series A/B Issue Date as set forth in Schedule I to this
Indenture.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Securities or the Subsidiary Guarantees, as the case may be.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall be deemed not
to be a Subsidiary of the Company for purposes of this Indenture.
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"Subsidiary Guarantee" means any guarantee of the Securities by a
Subsidiary Guarantor in accordance with the provisions described under Article
Ten.
"Subsidiary Guarantor" means (i) each of Packaged Ice Leasing, Inc.,
Southco Ice, Inc., Mission Party Ice, Inc., Southwest Texas Packaged Ice, Inc.
and Southwestern Ice, Inc. and (ii) each of the Company's Subsidiaries that in
the future executes a supplemental indenture in which such Subsidiary agrees to
be bound by the terms of this Indenture as a Subsidiary Guarantor; provided
that any Person constituting a Subsidiary Guarantor as described above shall
cease to constitute a Guarantor when its respective Subsidiary Guarantee is
released in accordance with the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
"Trust Officer" means any officer within the corporate trust
administration department (or any successor group of the Trustee), including
any vice president, assistant vice president, assistant secretary or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular corporate trust matter,
any other officer to whom such trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" has the meaning provided in Section
8.01.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors as provided below) and (2) any Subsidiary
or Subsidiaries of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any lien on any property
of, any other Subsidiary of the Company which is not a Subsidiary of the
Subsidiary of the Company to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary of the Company to be so
designated has total consolidated assets of $100,000 or less at the time of
designation or (y) immediately after giving pro forma effect to such
designation, the Company could incur $1.00 of additional Indebtedness pursuant
to Section 4.04(b). Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
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"Voting Agreement" means that certain amended and restated voting
agreement dated September 20, 1995, as amended, by and among the shareholders
of the Company named therein and the Company.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities which normally have the
right to vote in the election of directors, other than director's qualifying
shares, are owned by such Person or any wholly-owned Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Security holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, any
Subsidiary Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
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SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series C Securities and Series D Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits
A-l and A-2, respectively. The Securities may have notations, legends or
endorsements (including notations relating to the Guarantee) required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement (including
notations relating to the Subsidiary Guarantee) on them. Each Security shall be
dated the date of its authentication.
The terms and provisions contained in the Securities and the
Subsidiary Guarantee shall constitute, and are hereby expressly made, a part of
this Indenture. The Series C Securities and the Series D Securities shall be
considered collectively to be a single class for all purposes of this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase.
Series C Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A-l ("Global
Securities"), deposited with the Trustee, as custodian for the Depository, and
shall bear the legend set forth on Exhibit B. Series D Securities (other than
any constituting Private Exchange Notes) shall be issued initially in the form
of one or more permanent Global Securities in registered form, substantially in
the form set forth in Exhibit A-2, deposited with the Trustee, as custodian for
the Depositary, and shall bear the legend set forth on Exhibit B. The aggregate
principal amount of any Global Security may from time to time be increased or
decreased
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by adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
Series C Securities offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph and any Series D Securities constituting Private
Exchange Notes shall be issued in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A-l and Exhibit
A-2, respectively (the "Physical Securities").
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall also be affixed to or imprinted or
reproduced on the Securities.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
Subsidiary Guarantor shall execute the Subsidiary Guarantee in the manner set
forth in Section 10.07.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series C Securities for original
issue in the aggregate principal amount of $25,000,000 and (ii) Series D
Securities from time to time for issue only in exchange for a like principal
amount of Series C Securities, in each case upon receipt of a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated, the series and type
of Securities and the date on which the Securities are to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
$25,000,000, except as provided in Section 2.07. Upon receipt of a written
order of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
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SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in The City of New
York, where (a) Securities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands in respect
of the Securities and this Indenture may be served. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company,
upon notice to the Trustee, may have one or more co-Registrars and one or more
additional Paying Agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional Paying Agent. The Company initially appoints the
Trustee as Registrar and Paying Agent until such time as the Trustee has
resigned or a successor has been appointed. Except as set forth in Section
2.13, neither the Company nor any Affiliate of the Company may act as Paying
Agent.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by such Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by the Company to the Paying Agent,
the Paying Agent shall have no further liability for such assets. If the
Company or any of its Affiliates acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the Holders all money held by
it as Paying Agent. During the continuance of any Event of Default, the Trustee
shall serve as the sole Paying Agent of the Securities.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.14 and 2.15, when Securities
are presented to the Registrar or a co- Registrar with a request to register
the transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of the same series and other authorized
denominations, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are
met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument
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of transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-Registrar's written request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
other governmental charge payable upon exchanges or transfers pursuant to
Section 2.10, 3.06, 4.16, or 9.05). The Registrar or co-Registrar shall not be
required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three, except the unredeemed portion of any Security being redeemed
in part (iii) during a period beginning 15 days before the mailing of a notice
of an offer to repurchase pursuant to Section 4.16 or 4.17 or (iv) between a
Record Date and the next succeeding Interest Payment Date.
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that, subject to Section 2.15(d), transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee, upon the Company's written
request, shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee and any Agent from any loss which any of them may suffer if a Security
is replaced. The Company and the Trustee may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security, including
reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
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If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities that the Trustee
actually knows are so owned shall be disregarded. Securities so owned which
have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to the Securities and that the pledgee is not the Company, a
Subsidiary Guarantor or any other obligor upon the Securities or any Affiliate
of any of them.
The Trustee may require an Officers' Certificate listing Securities
owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall, upon the Company's written request, authenticate
temporary Securities upon receipt of a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall specify the amount
of temporary Securities to be authenticated and the date on which the temporary
Securities are to be authenticated. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate upon receipt of a
written order of the Company pursuant to Section 2.02 definitive Securities in
exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If the Company or any Subsidiary Guarantor shall acquire any
of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and
until the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
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SECTION 2.12. CUSIP Number.
The Company in issuing each series of the Securities will use a
"CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any such CUSIP
number used by the Company in connection with the Securities and any change in
such CUSIP number.
SECTION 2.13. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment Date
and Maturity Date, the Company shall have deposited with the Paying Agent U.S.
Legal Tender sufficient to make cash payments due on such Interest Payment Date
or Maturity Date, as the case may be, and so as to permit the Paying Agent to
remit payment in immediately available funds to the Holders on such Interest
Payment Date or Maturity Date, as the case may be. Alternatively, the Company
may make payments on the Securities by wire transfer, in same day funds, or, in
the case of Physical Securities, by check delivered to the Holders thereof at
their registered addresses. To the extent the Company makes such payments
directly to the Holders, the Company shall simultaneously notify the Trustee
thereof in writing.
SECTION 2.14. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Global Securities may be transferred as a whole, and interests
of beneficial owners in Global Securities may be transferred or exchanged for
Physical Securities, only in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, Physical Securities
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Securities if (i) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for any Global Security and
a successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depository to issue Physical
Securities.
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(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b), the Global Securities
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (c) of this Section shall, except as otherwise provided by
Section 2.15, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Exhibit A-l.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.15. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities;
or
(ii) to exchange such Physical Securities for an equal
number of Physical Securities of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Section 2.15 for such transactions are met;
provided, however, that the Physical Securities presented or surrendered for
registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Physical Securities the offer and sale
of which have not been registered under the
Securities Act and are presented for transfer or
exchange prior to (x) the date which is two years
after the later of the date of original issue and the
last date on which the Company or any affiliate of
the Company was the owner of such Security, or any
predecessor thereto and (y) such later date, if any,
as may be required by any subsequent change in
applicable law (the "Resale Restriction Termination
Date"), such Physical Securities shall be
accompanied, in the sole discretion of the Company,
by the following additional information and
documents, as applicable:
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(A) if such Physical Security is being delivered
to the Registrar by a Holder for registration
in the name of such Holder, without transfer,
a certification from such Holder to that
effect (in substantially the form of Exhibit
C hereto); or
(B) if such Physical Security is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance
with Rule 144 under the Securities Act, a
certification to that effect (in
substantially the form of Exhibit C hereto);
or
(C) if such Physical Security is being
transferred to an institutional "accredited
investor" within the meaning of subparagraph
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501
under the Securities Act, delivery of a
Certificate of Transfer in the form of
Exhibit D hereto and an opinion of counsel
and/or other information satisfactory to the
Company to the effect that such transfer is
in compliance with the Securities Act; or
(D) if such Physical Security is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act, a certification to that
effect (in substantially the form of Exhibit
C hereto) and an opinion of counsel
reasonably acceptable to the Company to the
effect that such transfer is in compliance
with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Physical Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Registrar, together with:
(A) certification, substantially in the form of
Exhibit C hereto, that such Security is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act; and
(B) written instructions directing the Registrar
to make, or to direct the Depositary to make,
an endorsement on the Global Security to
reflect an increase in the aggregate amount
of the Securities represented by the Global
Security,
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<PAGE> 36
then the Registrar shall cancel such Physical Security and cause, or direct the
Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Registrar, the number of
Securities represented by the Global Security to be increased accordingly. If
no Global Security is then outstanding, the Company shall issue and the
Registrar shall authenticate a new Global Security in the appropriate amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial
interest for a Physical Security. Upon receipt by
the Registrar of written instructions or such other
form of instructions as is customary for the
Depositary from the Depositary or its nominee on
behalf of any Person having a beneficial interest in
a Global Security and upon receipt by the Registrar
of a written order or such other form of instructions
as is customary for the Depositary or the Person
designated by the Depositary as having such a
beneficial interest containing registration
instructions and, in the case of any such transfer or
exchange prior to the Resale Restriction Termination
Date, the following additional information and
documents:
(A) if such beneficial interest is being
transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification from such Person to that effect
(in substantially the form of Exhibit C
hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance
with Rule 144 under the Securities Act, a
certification to that effect from the
transferee or transferor (in substantially
the form of Exhibit C hereto); or
(C) if such beneficial interest is being
transferred to an institutional "accredited
investor" within the meaning of subparagraph
(a)(l), (a)(2), (a)(3) or (a)(7) of Rule 501
under the Securities Act, delivery of a
Certificate of Transfer in the form of
Exhibit D hereto and an opinion of counsel
and/or other information satisfactory to the
Company to the effect that such transfer is
in compliance with the Securities Act; or
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(D) if such beneficial interest is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act, a certification to that
effect (in substantially the form of Exhibit
C hereto) and an opinion of counsel
reasonably acceptable to the Company to the
effect that such transfer is in compliance
with the Securities Act,
then the Registrar will cause, in accordance with the
standing instructions and procedures existing between
the Depositary and the Registrar, the aggregate
amount of the Global Security to be reduced and,
following such reduction, the Company will execute
and, upon receipt of an authentication order in the
form of an Officers' Certificate, the Registrar will
authenticate and deliver to the transferee a Physical
Security.
(ii) Physical Securities issued in exchange for a
beneficial interest in a Global Security pursuant to
this Section 2.15(d) shall be registered in such
names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct
the Registrar in writing. The Registrar shall deliver
such Physical Securities to the Persons in whose
names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.15), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized to
deliver Securities without the Private Placement Legend only if, (i) the
circumstances contemplated by paragraph (a)(ii)(II) of this Section 2.15 exist,
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under
the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of, and each beneficial interest in, such a
Security acknowledges the restrictions on transfer of such Security set forth
in this Indenture and in the Private Placement Legend and agrees that it will
transfer such Security only as provided in this Indenture.
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The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.16. Designation.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority for
the purposes of any future Indebtedness of the Company which the Company makes
subordinate to any senior indebtedness or such other term denoting seniority.
SECTION 2.17 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment. The Trustee may fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the payment
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 3.07
hereof, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Company shall give notice of
redemption to the Paying Agent and Trustee at least 30 days but not more than
60 days before the Redemption Date (unless a shorter notice shall be agreed to
by the Trustee in writing), together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed at any time,
selection of such Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Securities are listed or, if such Securities are not then
listed on a national securities exchange, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
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The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Trustee, at the Company's request made at least 45 days before the
Redemption Date (unless a shorter notice shall be agreed to by the Trustee in
writing) shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at the addresses of
such Holders as they appear in the register maintained by the Register pursuant
to Section 2.03. The Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price plus
accrued interest, if any;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Paying Agent of
the Securities redeemed;
(6) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, after the Redemption Date, and upon surrender of such Security,
a new Security or Securities in aggregate principal amount equal to
the unredeemed portion thereof will be issued
(7) if fewer than all the Securities are to be redeemed,
the identification of the particular Securities (or portion thereof)
to be redeemed, as well as the aggregate principal amount of
Securities to be redeemed and the aggregate principal amount of
Securities to be outstanding after such partial redemption; and
(8) the subparagraph of the Securities pursuant to which
the Securities are to be redeemed.
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SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be
paid at the Redemption Price (which shall include accrued interest thereon to
the Redemption Date), but installments of interest, the maturity of which is on
or prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant Record Dates. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of notice to
any other Holder.
SECTION 3.05. Deposit of Redemption Price.
On or before 11:00 a.m. New York Time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose upon
the written request of the Company, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee, upon the Company's written request,
shall authenticate for the Holder a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07 Optional Redemption.
(a) The Securities shall be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after April 15, 2001
at the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on April 15 of
the year set forth below, plus, in each case, accrued and unpaid interest
thereon to the Redemption Date.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2001 . . . . . . . . . . . . . . . . . . 107.00%
2002 . . . . . . . . . . . . . . . . . . 103.50%
2003 and thereafter . . . . . . . . . . 100.00%
</TABLE>
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<PAGE> 41
(b) Notwithstanding the foregoing, at any time on or prior to
April 15, 2000, the Company may redeem up to an aggregate of $8,750,000
principal amount of Securities at a Redemption Price of 112% of the principal
amount thereof, plus accrued and unpaid interest thereon, to the Redemption
Date, with the net proceeds of any Public Equity Offering; provided that at
least $16,250,000 in aggregate principal amount of Securities remain
outstanding immediately after the occurrence of such redemption; and, provided,
further, that such redemption occurs within 90 days of the date of the closing
of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. Procedures for Purchase Offers.
Notice of a Purchase Offer pursuant to this Section 3.08 shall be
mailed or caused to be mailed, by first class mail, by the Company not less
than 30 nor more than 60 days before the Purchase Date to all Holders at their
last registered addresses, with a copy to the Trustee. The notice shall contain
all instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Purchase Offer and shall state the following terms:
(1) the section of the Indenture pursuant to which the Purchase
Offer is being made and that all Securities properly tendered
will be accepted for payment; provided, however,that if the
aggregate principal amount of Securities tendered in
connection with an Asset Proceeds Offer plus accrued interest
at the expiration of such offer exceeds the Payment Amount,
the Company shall select the Securities to be purchased on a
pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in
denominations of $1,000 or multiples thereof shall be
purchased);
(2) the purchase price (including the amount of accrued interest)
and the Purchase Date and that the Purchase Offer will remain
open for at least 20 Business Days and until the close of
business on the Business Day prior to the Purchase Date;
(3) that any Security not properly tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Purchase
Offer shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased pursuant to
a Purchase Offer will be required to surrender the Security,
with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Security completed, to the Paying Agent at
the address specified in the notice prior to the close of
business on the third Business Day prior to the Purchase Date;
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(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than one Business Day
prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Securities the Holder delivered
for purchase and a statement that such Holder is withdrawing
his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided
that each Security purchased and each new Security issued
shall be in an original principal amount of $1,000 or integral
multiples thereof.
On or before 11:00 a.m. New York Time on the Purchase Date, the
Company shall (i) accept for payment Securities or portions thereof tendered
pursuant to the Purchase Offer which are to be purchased in accordance with
item (1) above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Securities to
be purchased and (iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail or otherwise
deliver to the Holders of Securities so accepted payment in an amount equal to
the purchase price plus accrued interest, if any. For purposes of any Purchase
Offer, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Purchase Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to a Purchase Offer. To the extent the provisions of any
such rule conflict with the provisions of this Indenture relating to a Purchase
Offer, the Company shall comply with the provisions of such rule and be deemed
not to have breached its obligations relating to such Purchase Offer by virtue
thereof.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in New York, New York in the manner provided in the Securities and this
Indenture. An installment of principal of or interest on the Securities shall
be considered paid on the date it is due if the Trustee or Paying Agent holds
on that date U.S. Legal Tender designated for and sufficient to pay the
installment.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
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SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in The City of New York, the office or
agency required under Section 2.03. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.02. The Company
hereby initially designates the office of United States Trust Company, an
affiliate of the Trustee, as its office or agency in The City of New York.
SECTION 4.03. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, (a) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, or any warrants,
rights or options to acquire shares of any class of such Capital Stock, other
than through the exchange therefor solely of Qualified Capital Stock of the
Company or warrants, rights or options to acquire Qualified Capital Stock of
the Company, (b) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Indebtedness of the Company or (c) make any
Investment (other than Permitted Investments) in any Person (each of the
foregoing prohibited actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default has occurred and is continuing or would result therefrom,
or (ii) the Company is not able to Incur at least $1.00 of additional
Indebtedness in accordance with paragraph (b) of Section 4.04 (as if such
Restricted Payment had been made as of the last day of the Four Quarter
Period), or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Series A/B Issue Date
exceeds or would exceed the sum of: (u) 50% of the Consolidated Net Income (or
if Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company during the period (treating such period as a single accounting period)
from the beginning of the first fiscal quarter commencing after the Series A/B
Issue Date to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment; (v) 100% of the aggregate Net Equity Proceeds received by
the Company from any Person from the issuance and sale subsequent to the Series
A/B Issue Date of Qualified Capital Stock of the Company other than any
Qualified Capital Stock sold to a Subsidiary of the Company; (w) the aggregate
net cash proceeds received after the Series A/B Issue Date by the Company
(other than from any of its Subsidiaries) upon the exercise of any options,
warrants or rights to purchase shares of Qualified Capital Stock of the
Company; (x) the aggregate net cash proceeds received after the Series A/B
Issue Date by the Company from the issuance or sale (other than to any of its
Subsidiaries) of debt securities or shares of Disqualified Capital Stock that
have been converted into or exchanged for Qualified Capital Stock of the
Company, together with the aggregate cash received by the Company at the time
of such conversion or exchange; (y) an amount equal to the net reduction in
Investments, subsequent to the date of the Series A/B Indenture, in any Person
resulting from payments of interest on debt, dividends, repayments of loans or
advances, return of capital, or other transfers of property (but only to the
extent such distributions are not included in the calculation of Consolidated
Net Income), in each case, to the Company or any
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Subsidiary from any Person, not to exceed in the case of any Person, the amount
of Investments previously made by the Company or any Subsidiary in such Person
and which was treated as a Restricted Payment; and (z) $100,000.
Notwithstanding the foregoing, these provisions do not prohibit: (1)
the acquisition of Capital Stock of the Company or warrants, rights or options
to acquire Capital Stock of the Company either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company; (2) the acquisition of any Subordinated Indebtedness of the
Company either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company or (B) Permitted Refinancing
Indebtedness; or (3) loans by the Company to employees in the ordinary course
of business up to an aggregate amount of $100,000 at any one time outstanding;
provided, however, that in the case of clauses (1), (2) and (3) of this
paragraph, no Default or Event of Default shall have occurred and be continuing
at the time of such payment or as a result thereof. In determining the
aggregate amount of Restricted Payments made subsequent to the Series A/B Issue
Date, amounts expended pursuant to clauses (1)(ii), (2)(i) and (2)(ii)(A)
shall, in each case, be included in such calculation.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment complies with this Indenture
and setting forth in reasonable detail the basis upon which the required
calculations were computed, which calculations may be based upon the Company's
latest available internal quarterly financial statements.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would be permitted by the
provisions of this Section 4.03 and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash prior to such designation) in
the Restricted Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (iii) of the first paragraph of this
Section 4.03. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation.
For purposes of this Section 4.03, if a particular Restricted Payment
involves a non-cash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be an amount equal to the cash portion of
such Restricted Payment, if any, plus an amount equal to the fair market value
of the non-cash portion of such Restricted Payment.
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SECTION 4.04. Limitation on Indebtedness.
(a) The Company shall not, and shall not cause or permit any of
its Subsidiaries to, directly or indirectly, Incur any Indebtedness, including,
without limitation, any Acquired Indebtedness (other than Permitted
Indebtedness).
(b) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case, if (i) no Default or Event of Default shall have
occurred and be continuing on the date of the proposed Incurrence thereof or
would result as a consequence of such proposed Incurrence and (ii) immediately
after giving effect to such proposed Incurrence, the Consolidated Fixed Charge
Coverage Ratio of the Company is at least equal to 2.0 to 1.0 if such proposed
Incurrence is on or prior to March 31, 1999; and at least equal to 2.50 to 1.0
if such proposed Incurrence is thereafter.
(c) Neither the Company nor any Subsidiary Guarantor will,
directly or indirectly, in any event Incur any Indebtedness which by its terms
(or by the terms of any agreement governing such Indebtedness) is subordinated
to any other Indebtedness of the Company or such Subsidiary Guarantor, as the
case may be, unless such Indebtedness is also by its terms (or by the terms of
any agreement governing such Indebtedness) made expressly subordinate to the
Securities or the Subsidiary Guarantee of such Subsidiary Guarantor, as the
case may be, to the same extent and in the same manner as such Indebtedness is
subordinated pursuant to subordination provisions that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
(d) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur no more than $37,500,000 of secured Indebtedness.
SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of its Subsidiaries and the rights (charter and statutory)
and material franchises of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right or
franchise, or the corporate, partnership or other existence of any Subsidiary,
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and each of its Subsidiaries, taken as a whole, and that the loss thereof is
not, and will not be, disadvantageous in any material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges levied or imposed upon it or any of its Subsidiaries
or upon the income, profits or property of it or any of its Subsidiaries and
(ii) all lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however,
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that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which appropriate provision has been made.
SECTION 4.07. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or
leased by it or any of its Subsidiaries used or useful to the conduct of its
business or the business of any of its Subsidiaries to be improved or
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in its
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.07 shall prevent the Company or any of
its Subsidiaries from discontinuing the use, operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors or of the board of
directors of any Subsidiary of the Company concerned, or of an officer (or
other agent employed by the Company or of any of its Subsidiaries) of the
Company or any of its Subsidiaries having managerial responsibility for any
such property, desirable in the conduct of the business of the Company or any
Subsidiary of the Company, and if such discontinuance or disposal is not
adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause its Subsidiaries
to maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and co-
insurance provisions, as are customarily carried by similar businesses of
similar size.
SECTION 4.08. Compliance Certificate; Notice of Default; Tax Information.
(a) The Company shall deliver to the Trustee, within 120 days
after the close of each fiscal year an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries has been made
under the supervision of the signing officers with a view to determining
whether the Company has kept, observed, performed and fulfilled its obligations
under this Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge the Company during such
preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such
year and at the date of such certificate there is no Default or Event of
Default has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
Upon the qualifications of this Indenture under the TIA, such Officer's
Certificate shall comply with TIA Section 314(a)(4).
(b) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the annual financial statements delivered pursuant to Section 4.10
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that
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the Company has violated any provisions of Article 4 or 5 of this Indenture
insofar as they relate to accounting matters or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall deliver to the Trustee, promptly upon any
Officer becoming aware of any Default or Event of Default in the performance of
any covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its
status with particularity.
(d) The Company shall calculate and deliver to the Trustee all
original issue discount information to be reported by the Trustee to Holders as
required by law.
SECTION 4.09. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
SECTION 4.10. SEC Reports.
(a) The Company will file with the SEC all information, documents
and reports required to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company will file
with the Trustee within 15 days after it files them with the SEC, copies of the
annual reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe), without exhibits, which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a).
(b) Regardless of whether the Company is required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause its consolidated financial statements, comparable to that which would
have been required to appear in annual or quarterly reports, to be delivered to
the Trustee and the Holders. The Company will also make such reports available
to prospective purchasers of the Securities, securities analysts and
broker-dealers upon their request.
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(c) For so long as any of the Securities remain outstanding the
Company will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Company has consummated the Registered Exchange Offer or until such
time as the holders thereof have disposed of such Securities pursuant to an
effective registration statement filed by the Company.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture, and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.12. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not cause or permit any of
its Subsidiaries to, conduct any business or enter into any transaction or
series of transactions with or for the benefit of any of their Affiliates (each
an "Affiliate Transaction") but excluding Specified Affiliate Transactions,
except in good faith and on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than those that could have been obtained
in a comparable transaction on an arm's-length basis from a Person not an
Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other property with a fair market
value in excess of $250,000 shall be approved by the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $3,000,000, the Company or such Subsidiary shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
Notwithstanding the foregoing, the restrictions set forth in this Section 4.12
shall not apply to (i) transactions between the Company and any Subsidiary or
between Subsidiaries, (ii) any employee compensation arrangement of the Company
or any Subsidiary which has been approved by a majority of the Company's
disinterested directors and found in good faith by such directors to be in the
reasonable best interest of the Company or such Subsidiary, as the case may be,
or (iii) customary directors' fees, indemnification and similar arrangements.
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SECTION 4.13. Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in the conduct of any business other than the Ice Business on a
basis consistent with the conduct of such business as it was conducted on the
Series A/B Issue Date.
SECTION 4.14. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or
(c) transfer any of its property or assets to the Company or to any Subsidiary
of the Company (each such encumbrance or restriction in clause (a), (b), or (c)
a "Payment Restriction"), except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) this Indenture and the Series
A/B Indenture; (3) customary non-assignment provisions of any lease or license
agreements or similar agreements entered into the ordinary course of business
of any Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness Incurred in accordance with paragraph (b) of Section 4.04;
provided that such encumbrance or restriction is not, and will not be,
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, becoming a Subsidiary of
the Company; (5) agreements existing on the Series A/B Issue Date to the extent
and in the manner such agreements are in effect on the Series A/B Issue Date;
(6) any restriction or encumbrance contained in contracts for the sale of
assets to be consummated in accordance with this Indenture solely in respect of
the assets to be sold pursuant to such contract; (7) any restrictions on the
sale or other disposition or encumbrance of any property securing Indebtedness
as a result of a Permitted Lien on such property; (8) any agreement relating to
an acquisition of property, so long as the encumbrances or restrictions in any
such agreement relate solely to the property so acquired and are not or were
not created in anticipation of or in connection with the acquisition thereof;
(9) the Credit Facilities; or (10) any encumbrance or restriction contained in
Permitted Indebtedness or Permitted Refinancing Indebtedness Incurred to
Refinance the Indebtedness Incurred pursuant to an agreement referred to in
clauses (2), (4), (5) or (9) above; provided, that the provisions relating to
such encumbrance or restriction contained in any such Permitted Refinancing
Indebtedness are no less favorable to the Company or to the Holders in any
material respect in the reasonable and good faith judgment of the Board of
Directors of the Company than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (2), (4), (5) or
(9).
SECTION 4.15. Limitation on Liens.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, affirm or
suffer to exist or become effective any Lien of any kind except for Permitted
Liens, upon any of their respective property or assets, whether owned on or
acquired after the Series A/B Issue Date, or any income, profits or proceeds
therefrom, to secure (a) any Indebtedness of the Company or such Subsidiary (if
it is not also a Subsidiary Guarantor), unless prior to, or contemporaneously
therewith, the Securities are equally and ratably secured, or (b) any
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Indebtedness of any Subsidiary Guarantor, unless prior to, or contemporaneously
therewith, the Subsidiary Guarantees are equally and ratably secured; provided,
however, that if such Indebtedness is expressly subordinated to the Securities
or the Subsidiary Guarantees, the Lien securing such Indebtedness will be
subordinated and junior to the Lien securing the Securities or the Subsidiary
Guarantees, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Securities or the Subsidiary Guarantees.
The foregoing covenant will not apply to any Lien securing Acquired
Indebtedness, provided that any such Lien extends only to the property or
assets that were subject to such Lien prior to the related acquisition by the
Company or such Subsidiary and was not created, incurred or assumed in
contemplation of such transaction. The incurrence of additional secured
Indebtedness by the Company and its Subsidiaries is subject to further
limitations on the incurrence of Indebtedness as described under Section 4.04.
SECTION 4.16. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities on a Business Day (the "Change of Control Payment Date") not more
than 60 nor less than 30 days following such Change of Control, pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Trustee, at the written
direction of the Company, shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and the
Company's offer to repurchase Securities pursuant to the procedures required by
Section 3.08 and 4.16 and described in such notice. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Securities
as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent an amount equal to the Change of Control Payment in respect of
all Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted, together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail or
otherwise deliver to each Holder of Securities so tendered the Change of
Control Payment for such Securities, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Security equal in principal amount to any unpurchased portion of the
Securities surrendered, if any; provided that each such new Security shall be
in a principal amount of $1,000 or an integral multiple thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(c) The Change of Control provisions described above shall be
applicable whether or not any other provisions of this Indenture are
applicable.
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(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control
Offer made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
SECTION 4.17. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in an Asset Sale unless (i) the Company or the Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors of the Company set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Properties issued or sold or otherwise disposed of
and (ii) at least 85% of the consideration therefor received by the Company or
such Subsidiary is in the form of cash or Cash Equivalents; provided that the
amount of (x) any liabilities (as shown on the Company's or such Subsidiary's
most recent balance sheet) of the Company or any Subsidiary (other than
contingent liabilities and liabilities that are Subordinated Indebtedness or
otherwise by their terms subordinated to the Securities or the Subsidiary
Guarantees) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Subsidiary from
further liability and (y) any notes or other obligations received by the
Company or any such Subsidiary from such transferee that are converted by the
Company or such Subsidiary into cash within 180 days of closing such Asset Sale
(to the extent of the cash received), shall be deemed to be cash for purposes
of this provision.
Within 180 days after the receipt of any Net Cash Proceeds from any
Asset Sale, the Company may (i) apply all or any of the Net Cash Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Subsidiary, provided, in each case, that the related loan
commitment of any revolving credit facility or other borrowing (if any) is
thereby permanently reduced by the amount of such Indebtedness so repaid, or
(ii) invest all or any part of the Net Cash Proceeds thereof in properties and
other capital assets that replace the properties or other capital assets that
were the subject of such Asset Sale or in other properties or other capital
assets that will be used in the Ice Business. Pending the final application of
any such Net Cash Proceeds, the Company may temporarily reduce borrowings under
any revolving credit facility or otherwise invest such Net Cash Proceeds in any
manner that is not prohibited by this Indenture. Any Net Cash Proceeds from an
Asset Sale that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Available Proceeds Amount."
When the aggregate Available Proceeds Amount exceeds $2,500,000, the Company
shall make an offer to purchase, from all Holders of the Securities and any
then outstanding Pari Passu Indebtedness required to be repurchased or repaid
on a permanent basis in connection with an Asset Sale, an aggregate principal
amount of Securities and any such Pari Passu Indebtedness equal to such
Available Proceeds Amount as follows:
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(i) (A) The Company shall make an offer to purchase (an
"Asset Proceeds Offer") from all Holders of the Securities in
accordance with the procedures set forth in this Indenture the maximum
principal amount (expressed as a multiple of $1,000) of Securities
that may be purchased out of an amount (the "Payment Amount") equal to
the product of such Available Proceeds Amount multiplied by a
fraction, the numerator of which is the outstanding principal amount
of the Securities and the denominator of which is the sum of the
outstanding principal amount of the Securities and such Pari Passu
Indebtedness, if any (subject to proration in the event such amount is
less than the aggregate Offered Price (as defined in clause (ii)
below) of all Securities tendered), and (B) to the extent required by
any such Pari Passu Indebtedness and provided there is a permanent
reduction in the principal amount of such Pari Passu Indebtedness, the
Company shall make an offer to purchase such Pari Passu Indebtedness
(a "Pari Passu Offer") in an amount (the "Pari Passu Indebtedness
Amount") equal to the excess of the Available Proceeds Amount over the
Payment Amount.
(ii) The offer price for the Securities shall be payable
in cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to an Asset Proceeds Offer, plus accrued
and unpaid interest, if any, to the date such Asset Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures
set forth in this Indenture. To the extent that the aggregate Offered
Price of the Securities tendered pursuant to an Asset Proceeds Offer
is less than the Payment Amount relating thereto or the aggregate
amount of the Pari Passu Indebtedness that is purchased or repaid
pursuant to the Pari Passu Offer is less than the Pari Passu
Indebtedness Amount (such shortfall constituting an "Asset Proceeds
Deficiency"), the Company may use such Asset Proceeds Deficiency, or a
portion thereof, for general corporate purposes, subject to the
limitations of Section 4.03.
(iii) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, Securities to be purchased will be selected on a pro rata
basis. Upon completion of such Net Proceeds Offer and Pari Passu
Offer, the amount of Available Proceeds Amount shall be reset to zero.
The Company shall not permit any Subsidiary to enter into or suffer to
exist any agreement (excluding Permitted Liens) that would place any
restriction of any kind (other than pursuant to law or regulation) on the
ability of the Company to make an Asset Proceeds Offer following any Asset
Sale. The Company will comply with Rule 14e-1 under the Exchange Act, and any
other securities laws and regulations thereunder, if applicable, in the event
that an Asset Sale occurs and the Company is required to purchase Securities as
described above.
Any amounts remaining after the purchase of Securities pursuant to an
Asset Sale Offer shall be returned by the Trustee to the Company.
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SECTION 4.18. Limitation on Issuances and Sales of Capital Stock of
Subsidiaries.
The Company shall not cause or permit any of its Subsidiaries to issue
or sell any Capital Stock (other than to the Company or to a wholly-owned
Subsidiary of the Company) or permit any Person (other than the Company or a
wholly-owned Subsidiary of the Company) to own or hold any Capital Stock of
any Subsidiary of the Company or any Lien or security interest therein;
provided, however, that this Section 4.18 shall not prohibit the disposition
(by sale, merger or otherwise) of all of the Capital Stock of a Subsidiary
provided any Net Cash Proceeds therefrom are applied in accordance with Section
4.17.
SECTION 4.19. Limitation on Status as Investment Company.
The Company shall not, nor shall it permit any Subsidiary Guarantor
to, register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or otherwise become subject to
regulation under the Investment Company Act of 1940.
SECTION 4.20 Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company or
any Subsidiary, as applicable, may enter into a sale and leaseback transaction
if (i) the Company could have (a) incurred Indebtedness in an amount equal to
the Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
clause (b) of Section 4.04 and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under Section 4.15, (ii) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described under Section 4.17.
SECTION 4.21 Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries transfers or causes to be
transferred, in one transaction or a series of related transactions, any
property to any Subsidiary that is not a Subsidiary Guarantor, or if the
Company or any of its Subsidiaries shall organize, acquire or otherwise invest
in another Subsidiary having total assets with a book value in excess of
$50,000, then such transferee or acquired or other Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Subsidiary shall fully and
unconditionally guarantee all of the Company's obligations under the Securities
and the Indenture on the terms set forth in the Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been
duly authorized, executed and delivered by such Subsidiary and constitutes a
legal, valid, binding and enforceable obligation of such Subsidiary.
Thereafter, such Subsidiary shall be a Subsidiary Guarantor for all purposes of
the Indenture.
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SECTION 4.22 Limitation on Dividends.
The Company will not declare or pay any dividend or make any
distribution (other than dividends or distributions payable solely in Qualified
Capital Stock of the Company) on shares of the Company's Capital Stock to
holders of such Capital Stock.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the Company's
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment
of the principal of, and premium, if any, and interest on all of the Securities
and the performance of every covenant of the Securities, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and, if
applicable, the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph
(b) of Section 4.04 hereof; provided that in determining the Consolidated Fixed
Charge Coverage Ratio of the Company or such Surviving Entity, as the case may
be, such ratio shall be calculated as if the transaction (including the
Incurrence of any Indebtedness or Acquired Indebtedness) took place on the
first day of the Four Quarter Period; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be Incurred
and any Lien granted in connection with or in respect of the transaction) no
Default and no Event of Default shall have occurred or be continuing; and (iv)
the Company or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent in this
Indenture relating to such transaction have been satisfied.
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(b) Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under this Indenture and the
Securities.
(c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Subsidiary Guarantee is to be released in accordance with the terms of
the Guarantee and this Indenture in connection with any transaction complying
with the provisions of Section 4.17) will not, and the Company will not cause
or permit any Subsidiary Guarantor to, consolidate with or merge with or into
any Person or sell, assign, transfer, care, convey or otherwise dispose of all
or substantially all of its assets, other than the Company or any other
Subsidiary Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor), or to which
such disposition shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) such entity assumes by supplemental indenture all of the
obligations of the Subsidiary Guarantor on the Subsidiary Guarantee; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (a)(ii)
of this Section 5.01. Any merger or consolidation of a Subsidiary Guarantor
with and into the Company (with the Company being the surviving entity) or
another Subsidiary Guarantor need only comply with clause (a)(iv) of this
Section 5.01.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security
when the same becomes due and payable and such failure continues for a
period of 30 days; or
(2) the Company fails to pay the principal of or premium
on any Security, when such principal or premium becomes due and
payable, whether at maturity, upon redemption or otherwise (including
the failure to make a payment to purchase securities properly tendered
pursuant to a Change of Control Offer or an Asset Proceeds Offer); or
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(3) the Company defaults in the observance or performance
of any other covenant or agreement contained in this Indenture or any
Security Document which default continues for a period of 30 days
after the Company receives written notice specifying the default from
the Trustee or from Holders of at least 25% in principal amount of
outstanding Securities (except in the case of a default with respect
to Section 5.01 hereof, which will constitute an Event of Default with
notice but without passage of time); or
(4) the Company defaults under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or of any
Subsidiary of the Company (or the payment of which is guaranteed by
the Company or any Subsidiary of the Company) which default (a) is
caused by a failure to pay principal of, interest or premium, if any,
on such Indebtedness after any applicable grace period provided in
such Indebtedness on the date of such default (a "payment default"),
or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the
maturity of which has been so accelerated, aggregates $1,000,000; or
(5) one or more judgments in an aggregate amount in
excess of $1,000,000 (which are not covered by third-party insurance
as to which a financially sound insurer has not disclaimed coverage)
being rendered against the Company or any of its Subsidiaries and such
judgments remain undischarged, or unstayed or unsatisfied for a period
of 60 days after such judgment or judgments become final and
non-appealable; or
(6) the Company or any of its Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become due,
(B) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (C) consents to the entry of a judgment,
decree or order for relief against it in an involuntary case or
proceeding under any Bankruptcy Law, (D) consents to the appointment
of a Custodian of it or for substantially all of its property, (E)
consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it, (F) makes a general assignment for
the benefit of its creditors, or (G) takes any corporate action to
authorize or effect any of the foregoing;
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Subsidiaries in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of
the Company or any of its Subsidiaries, (B) appoint a Custodian of the
Company or any of its Subsidiaries or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs,
and such judgment, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
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(8) any of the Subsidiary Guarantees ceases to be in full
force and effect, or any of the Subsidiary Guarantees is declared to
be null and void and unenforceable or any of the Subsidiary Guarantees
is found to be invalid or any of the Subsidiary Guarantors denies its
liability under its Subsidiary Guarantee (other than by reason of
release of a Subsidiary Guarantor in accordance with the terms of this
Indenture).
The Trustee shall, within 90 days after the occurrence of any Default
actually known to it, give to the Holders notice of such Default; provided
that, except in the case of a Default in the payment of principal of or
interest on any of the Securities, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers, of
the Trustee in good faith determines that the withholding of such notice is in
the interest of the Holders.
Notwithstanding the foregoing, if an Event of Default specified in
Section 6.01(4) shall have occurred and be continuing, such Event of Default
and any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or
if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration).
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (6) or (7) above with respect to the Company) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the then outstanding Securities may declare the
unpaid principal of, premium, if any, and accrued and unpaid interest on, all
the Securities then outstanding to be due and payable, by a notice in writing
to the Company (and to the Trustee, if given by Holders) and upon such
declaration such principal amount, premium, if any, and accrued and unpaid
interest will become immediately due and payable. If an Event of Default with
respect to the Company specified in clauses (6) or (7) above occurs, all unpaid
principal of, and premium, if any, and accrued and unpaid interest on, the
Securities then outstanding will ipso facto become due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the Securities then outstanding by notice
to the Trustee may rescind an acceleration and its consequences if (i) all
existing Events of Default, other than the non-payment of the principal and
premium, if any, and interest of the Securities which has become due solely by
such declaration of acceleration, have been cured or waived and (ii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Security holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 2.09, 6.02, 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on
any Security as specified in clauses (1) and (2) of Section 6.01. The Company
shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of not less than a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that conflicts with any
law or this Indenture that the Trustee determines may be unduly prejudicial to
the rights of another Security holder, or that may involve the Trustee in
personal liability; provided that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture or any Security Document, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Security holder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal
amount of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee security or indemnity reasonably satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
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(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Security holder may not use this Indenture to prejudice the rights
of another Security holder or to obtain a preference or priority over such
other Security holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal and accrued interest and fees remaining unpaid, together with
interest on overdue principal, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Security holders allowed in any judicial proceedings relating to the Company or
the Subsidiary Guarantors, its creditors or its property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Security holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Security holders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Security holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Security holder in any such proceeding.
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SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Company or the Subsidiary Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Security holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
SECTION 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
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circumstances in the conduct of his or her own affairs. The Trustee will be
under no obligation to exercise any of its rights or powers under this
Indenture at the request of any of the holders of Securities, unless they shall
have offered and, if requested, provided to the Trustee security and indemnity
satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are
specifically set forth herein and no others and no implied covenants
or obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions and such other documents delivered to it and conforming to
the requirements of this Indenture. However, the Trustee shall examine
the certificates and opinions to determine whether or not they
conform, on their face, to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive security or indemnity
reasonably satisfactory to it in its sole discretion against such risk,
liability, loss, fee or expense which might be incurred by it in compliance
with such request or direction.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Subsidiary Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely on any document
believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate and an Opinion of Counsel, which
shall conform to the provisions of Section 11.05. The Trustee shall
not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
agent (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers.
(e) The Trustee may consult with counsel and the advice
or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have offered
and, if requested, provided to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(g) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company
or any Subsidiary Guarantor shall be sufficient if signed by an
Officer of the Company or such Subsidiary Guarantor.
(h) Except with respect to Section 4.01 and 4.08 hereof,
the Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article 4 hereof. In addition, the Trustee
shall not be deemed to have knowledge of any Default or Event of
Default except (i) any event of Default occurring pursuant to Sections
6.01(1) and 6.01(2) hereof or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained
actual knowledge.
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SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities or the
Subsidiary Guarantees, it shall not be accountable for the Company's use of the
proceeds from the Securities, it shall not be responsible for the use or
application of any money by a Paying Agent other than the Trustee and it shall
not be responsible for any statement of the Company in this Indenture or any
document issued in connection with the sale of Securities or any statement in
the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture or the validity or perfection, if any, of Liens granted under
this Indenture. The Trustee shall not be responsible for independently
ascertaining or maintaining such validity or perfection, if any, and shall be
fully protected in relying upon certificates and opinions delivered to it in
accordance with the terms of this Indenture.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Security holder, as their names and addresses appear on the Security holder
list described in Section 2.05, notice of the uncured Default or Event of
Default within 90 days after the Trustee receives such notice. Except in the
case of a Default or an Event of Default in payment of principal of, or
interest on, any Security, including the failure to make any payment due on (i)
the Change of Control Payment Date pursuant to a Change of Control Offer or
(ii) the Purchase Date pursuant to a Purchase Offer, the Trustee may withhold
the notice if and so long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible Officers, of the Trustee
in good faith determines that withholding the notice is in the interest of the
Security holders.
SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each April 15 beginning with April 15, 1998, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Security holder a brief report dated as of such April 15 that complies
with TIA Section 313(a). The Trustee also shall comply with TIA Sections
313(b), 313(c) and 313(d).
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A copy of each report at the time of its mailing to Security holders
shall be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder (which shall be agreed to from time to
time by the Company and the Trustee). The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall promptly reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee and each predecessor trustee
for, and hold it harmless against, any loss, liability, claim, damage or
expense incurred by the Trustee without negligence or willful misconduct on its
part arising out of or in connection with the administration of this trust and
its duties under this Indenture, including the reasonable expenses and
attorneys' fees of defending itself against any claim of liability arising
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense (and may employ its own counsel) at the
Company's expense. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee as a result of the
violation of this Indenture by the Trustee if such violation arose from the
Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (6) or (7) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight and any rejection or termination under
any Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
in writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount
of the Securities may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to
the Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to its rights under Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Security holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Security holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
Person, the resulting, surviving or transferee corporation without any further
act shall, if such resulting, surviving or transferee Person is otherwise
eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(5). The Trustee and/or its
ultimate parent entity shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall have a combined capital and surplus of at least
$150,000 as set forth in its most recent published annual report of condition.
The Trustee shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee, in its capacity as Trustee hereunder shall comply with
TIA Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and the Subsidiary Guarantors
shall be deemed to have been released and discharged from their respective
obligations with respect to the outstanding Securities and the Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all their respective obligations under such Securities, the Subsidiary
Guarantees and this Indenture, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Securities to receive solely from the trust fund described in
paragraph (d)
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below and as more fully set forth in such paragraph, payments in respect of the
principal of and interest on such Securities when such payments are due and
(ii) obligations listed in Section 8.03, subject to compliance with this
Section 8.01. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company and the Subsidiary Guarantors
shall be released and discharged from their respective obligations under any
covenant contained in Article 5 and in Sections 4.03 through 4.22 with respect
to the outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company and any Subsidiary Guarantor may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01(3), nor shall any event referred to in Section 6.01(4) or
(5) thereafter constitute a Default or an Event of Default thereunder but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited or
caused to be deposited, in trust, with the Trustee, for the benefit of
the Holders, U.S. Legal Tender or direct non-callable obligations of,
or non- callable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full
faith and credit of the United States of America is pledged ("U.S.
Government Obligations") maturing as to principal and interest in such
amounts and at such times as are sufficient, without consideration of
the reinvestment of such interest and after payment of all Federal,
state and local taxes or other charges or assessments in respect
thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay the
principal of, premium, if any, and interest on all the outstanding
Securities on the dates on which any such payments are due and payable
in accordance with the terms of this Indenture and of the Securities
(whether at stated maturity or on the applicable redemption date);
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
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(3) The Trustee shall have received Officers'
Certificates stating that no Default or Event of Default or event
which with notice or lapse of time or both would become a Default or
an Event of Default with respect to the Securities shall have occurred
and be continuing on the date of such deposit or, insofar as Section
6.01(6) or (7) is concerned, at any time during the period ending on
the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period);
(4) The Trustee shall have received Officers'
Certificates stating that such deposit will not result in a Default
under this Indenture or a breach or violation of, or constitute a
default under, any other material instrument or agreement to which the
Company or any of its Subsidiaries is a party or by which it or its
property is bound;
(5) (i) In the event the Company elects paragraph (b)
hereof, the Company shall deliver to the Trustee an Opinion of Counsel
in the United States, in form and substance reasonably satisfactory to
the Trustee to the effect that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the Series A/B Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall state that Holders of
the Securities will not recognize income gain or loss for Federal
income tax purposes as a result of such deposit and the defeasance
contemplated hereby and will be subject to Federal income taxes in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred, or (ii) in the event the
Company elects paragraph (c) hereof, the Company shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and
substance reasonably satisfactory to the Trustee, to the effect that
Holders of the Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to Federal income
tax in the same amounts and in the same manner and at the same times
as would have been the case if such deposit and defeasance had not
occurred;
(6) The deposit shall not result in the Company, the
Trustee or the trust becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940;
(7) The Company shall have delivered to the Trustee an
Officer's Certificate, in form and substance reasonably satisfactory
to the Trustee, stating that the deposit under clause (1) was not made
by the Company or any Subsidiary with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company
or any Subsidiary or others;
(8) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that, (A) the trust funds will not be
subject to any rights of holders of Indebtedness, including, without
limitation, those rights arising under this Indenture, and (B) the
91st day following the deposit after the trust funds will not be
subject to any applicable Bankruptcy Law; provided, however, that if a
court were to rule under any such law in any case or proceeding that
the
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trust funds remained property of the Company, no opinion needs to be
given as to the effect of such lawson the trust funds except the
following: (A) assuming such trust funds remained in the Trustee's
possession prior to such court ruling to the extent not paid to
Holders of Securities, the Trustee will hold, for the benefit of the
Holders of Securities, a valid and enforceable security interest in
such trust funds that is not avoidable in bankruptcy or otherwise,
subject only to principles of equitable subordination, (B) the Holders
of Securities will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used, and (C) no
property, rights in property or other interests granted to the Trustee
or the Holders of Securities in exchange for or with respect to any of
such funds will be subject to any prior rights of any other person,
subject only to prior Liens granted under Section 364 of Title 11 of
the U.S. Bankruptcy Code (or any section of any other Bankruptcy Law
having the same effect), but still subject to the foregoing clause
(B); and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the defeasance
contemplated by this Section 8.01 have been complied with.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 8.02. Satisfaction and Discharge.
This Indenture shall upon the request of the Company cease to be of
further effect (except as provided in Section 8.03) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(a) either
(i) all Securities theretofore authenticated and
delivered (other than (A) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
2.07 and (B) Securities for whose payment money has been deposited in
trust with the Trustee or any Paying Agent and thereafter paid to the
Company or discharged from such trust) have been delivered to the
Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the
Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their maturity
within one year, or
(C) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company,
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and the Company, in the case of clause (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for such purpose money or U.S. Government
Obligations in an amount sufficient (as certified by an independent
public accountant designated by the Company) to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or the stated maturity or Redemption
Date, as the case may be;
(b) the Company has paid or caused to paid all other sums
then due and payable hereunder by the Company;
(c) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit and after giving effect to such deposit; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.08. 2.10, 2.12, 3.01, 3.02, 3.03, 3.04, 3.05, 3.06,
3.07(a), 4.02, 6.07, Article Seven, Sections 8.04, 8.05, 8.06 and 8.07 shall
survive until the Securities are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.07, 8.04, 8.05,
8.06 and 8.07 shall survive. Nothing contained in this Article Eight shall
abrogate any of the obligations or duties of the Trustee under this Indenture.
SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company and (iii) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section 8.01 or 8.02. The Trustee shall apply the
deposited U.S. Legal Tender or the U.S. Government Obligations, together with
earnings thereon, either directly or through the Paying Agent, in accordance
with this Indenture to the payment of principal of and interest on the
Securities. The U.S. Legal Tender or
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U.S. Government Obligations so held in trust and deposited with the Trustee in
compliance with Section 8.01 or 8.02 shall not be part of the trust estate
under this Indenture, but shall constitute a separate trust fund for the
benefit of all Holders entitled thereto.
SECTION 8.06. Repayment to the Company or Subsidiary Guarantors; Unclaimed
Money.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to
such Subsidiary Guarantor, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Section 8.01, held
by it at any time. The Trustee and the Paying Agent shall pay to the Company or
any Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or
the Paying Agent, as the case may be, of an Officers' Certificate, any money
held by it for the payment of principal, premium, if any, or interest that
remains unclaimed for one year after payment to the Holders is required;
provided, however, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of the Company cause to
be published once in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of
such money then remaining will be repaid to the Company. After payment to the
Company of any Subsidiary Guarantor, as the case may be, Security holders
entitled to money must look solely to the Company for payment as general
creditors unless an applicable abandoned property law designates another
person, and all liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then and only then the Company's and each Subsidiary Guarantor's, if any,
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S.
Government Obligations in accordance with this Indenture provided, however,
that if the Company or the Subsidiary Guarantors, as the case may be, have made
any payment of principal of, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Company or the Subsidiary
Guarantors, as the case may be, shall be, subrogated to the rights of the
holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company and each Subsidiary Guarantor, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture
or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article
V hereof of another Person to the Company and the assumption by any
such successor of the covenants of the Company herein and in the
Securities;
(3) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(4) to make any other change that does not materially
adversely affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the TIA; or
(6) to add or release any Subsidiary Guarantor pursuant
to the terms of this Indenture; or
(7) to evidence and provide for the acceptance or
appointment hereunder by a successor Trustee with respect to the
Securities.
provided that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company and each Subsidiary Guarantor,
when authorized by a Board Resolution, and the Trustee, together, with the
written consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Securities, may amend or supplement this
Indenture, or the Securities, without notice to any other Securityholders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Securities may waive compliance by the
Company with any provision of this Indenture, or the Securities without notice
to any other Securityholder. Without the consent of each Securityholder
affected hereby, however, no amendment, supplement or waiver, including a
waiver pursuant to Section 6.04, may:
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(1) reduce the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture, the Securities or the Subsidiary
Guarantees;
(2) reduce the rate or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or change
the date on which any Securities may be subject to redemption or
repurchase or reduce the redemption price or repurchase price
therefor;
(5) make any change in provisions of this Indenture
protecting the right of each Holder to receive payment of principal of
and interest on such Security on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of the Securities to waive Defaults or
Events of Default;
(6) make any changes in Section 6.04, 6.07 or this
Section 9.02;
(7) make the principal of, or the interest on any
Security payable in money other than as provided for in this
Indenture, the Securities and the Guarantees as in effect on the date
hereof;
(8) affect the ranking of the Securities or the
Guarantees, in each case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company
to make or consummate a Change of Control Offer, a Purchase Offer or
waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers; or
(10) release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guarantee or the Indenture otherwise
than in accordance with the terms of the Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
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SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to revoke any consent previously given, whether or not such
persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 120 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new security shall
not affect the validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying
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upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture and constituted the
legal, valid and binding obligations of the Company enforceable in accordance
with its terms. Such Opinion of Counsel shall be at the expense of the Company,
and the Trustee shall have a lien under Section 7.07 for any such expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees (such guarantee to be referred to herein as the
"Subsidiary Guarantee") to each Holder of a Security authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns, the
Securities or the Obligations of the Company hereunder or thereunder, that: (i)
the principal of and interest on the Securities will be promptly paid in full
when due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities and all other
Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Securities or of any such other obligations, the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
10.03. Each Subsidiary Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, and action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that this
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Securities, this Indenture and in this
Subsidiary Guarantee. If any Security holder or the Trustee is required by any
court or otherwise to return to the Company, any Subsidiary Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Subsidiary Guarantor, any amount paid by the Company or any
Subsidiary Guarantor to the Trustee or such Security holder, the Subsidiary
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor further agrees that, as between
each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of the Subsidiary
Guarantees, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such obligations (whether or not due and payable) shall
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forthwith become due and payable by each Subsidiary Guarantor for the purpose
of the Subsidiary Guarantees. A Subsidiary Guarantee shall not become valid or
obligatory for any purpose with respect to a Security unless the certificate of
authentication on such Security shall have been signed by or on behalf of the
Trustee.
SECTION 10.02. Severability.
In case any provision of the Subsidiary Guarantees shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee shall
be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to Section 10.05, result
in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee
not constituting such fraudulent transfer or conveyance under federal or state
law.
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into the Company or another Subsidiary Guarantor or shall prevent any
sale of assets or conveyance of the property of a Subsidiary Guarantor as an
entirety or substantially as an entirety, to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Subsidiary Guarantee given by such Subsidiary Guarantor shall no longer have
any force or effect.
(b) Except as set forth in Article Four, Article Five hereof and
Section 10.04(c), nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into other Persons other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) or shall
prevent any sale of assets, or conveyance of the property, of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to Persons other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor); provided, however, that, (i) immediately after such
transaction, and giving effect thereto such transaction does not (a) violate
any covenants set forth herein or (b) result in a Default or Event of Default
under this Indenture that is continuing, and (ii) upon any such consolidation,
merger, sale or conveyance, the Subsidiary Guarantee set forth in this Article
Ten, and the due and punctual performance and observance of all of the
covenants and
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conditions of this Indenture to be performed by such Subsidiary Guarantor,
shall be expressly assumed (in the event that the Subsidiary Guarantor is not
the surviving Person in the merger), by supplemental indenture satisfactory in
form to the Trustee, executed and delivered to the Trustee, by the Person
formed by such consolidation, or into which the Subsidiary Guarantor shall have
merged, or by the Person that shall have acquired such assets or property. In
the case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture executed and
delivered to the Trustee and satisfactory in form to the Trustee of the due and
punctual performance of all of the covenants and conditions of this Indenture
to be performed by the Subsidiary Guarantor, such successor Person shall
succeed to and be substituted for the Subsidiary Guarantor with the same effect
as if it had been named herein as a Subsidiary Guarantor; provided, however,
that solely for purposes of computing amounts described in subclause (iii) of
the first paragraph of Section 4.03 any such successor Person shall only be
deemed to have succeeded to and be substituted for any Subsidiary Guarantor
with respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.
(c) Upon the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor (or all or
substantially all its assets) to an entity which is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with the terms
of this Indenture (including, without limitation, Sections 4.17, 4.20 and
4.21), such Subsidiary Guarantor shall be deemed released from all obligations
under this Article Ten without any further action required on the part of the
Trustee or any Holder; provided, however, that any such termination shall occur
only to the extent that all obligations of such Subsidiary Guarantor under all
of its guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
The Trustee shall deliver an appropriate instrument or instruments
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.04. Any Subsidiary Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities as
provided in this Article Twelve.
SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from all other Subsidiary Guarantors in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor
(including the Funding Guarantor) for all payments, damages and expenses
incurred by that Funding Guarantor in discharging the Company's obligations
with respect to the Securities or any other Subsidiary Guarantor's obligations
with respect to the Subsidiary Guarantee. "Adjusted Net Assets" of such
Subsidiary Guarantor at any date shall mean the lesser of the amount by which
(x) the fair value of the property of such Subsidiary Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date (other than liabilities of such Subsidiary
Guarantor under Indebtedness Subordinated to such Subsidiary Guarantor's
Subsidiary Guarantee)), but excluding
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liabilities under the Subsidiary Guarantee, of such Subsidiary Guarantor at
such date and (y) the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary of
such Subsidiary Guarantor in respect of the obligations of such Subsidiary
under the Subsidiary Guarantee), excluding debt in respect of the Subsidiary
Guarantee of such Subsidiary Guarantor, as they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
Until all Subsidiary Guarantee Obligations are paid in full each
Subsidiary Guarantor hereby irrevocably waives any claims or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under the Subsidiary Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding
sentence and the Securities shall not have been paid in full, such amount shall
have been deemed to have been paid to such Subsidiary Guarantor for the benefit
of, and held in trust for the benefit of, the Holders of the Securities, and
shall, forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Securities, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Subsidiary Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 10.06 is knowingly made in contemplation of such
benefits.
SECTION 10.07. Execution of Subsidiary Guarantee.
To evidence their guarantee to the Security holders set forth in this
Article Ten, the Subsidiary Guarantors hereby agree to execute the Subsidiary
Guarantee in substantially the form included in Exhibit A-l and A-2, which
shall be endorsed on each Security ordered to be authenticated and delivered by
the Trustee. Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee set forth in this Article Ten shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Subsidiary Guarantee. Each such Subsidiary Guarantee shall be signed on behalf
of each Subsidiary Guarantor by an Officer (who shall, in each case, have been
duly authorized by all requisite corporate actions) prior to the authentication
of the Security on which it is endorsed, and the delivery of such Security by
the Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Subsidiary Guarantee on behalf of such Subsidiary Guarantor.
Such signature upon the Subsidiary Guarantee may be by manual or facsimile
signature of such Officer and may be imprinted or otherwise reproduced on the
Subsidiary Guarantee, and in case any such Officer who shall have signed the
Subsidiary Guarantee shall cease to be such officer before the Security on
which such Subsidiary Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Security
nevertheless may be authenticated and delivered or disposed of as
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though the person who signed the Subsidiary Guarantee had not ceased to be such
Officer of the Subsidiary Guarantor.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
Each Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive each
such Subsidiary Guarantor from performing its Subsidiary Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) each such Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Sections 310 to 318, inclusively of the
TIA, the imposed duties shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Company or any Subsidiary Guarantor:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Attention: President
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Alan Schoenbaum
Facsimile: (210) 224-2035
Telephone: (210) 270-0800
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<PAGE> 80
if to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, 27th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
Facsimile: (214) 754-1303
Telephone: (214) 754-1255
Each of the Company, the Subsidiary Guarantors and the Trustee by
written notice to each other such person may designate additional or different
addresses for notices to such person. Any notice or communication to the
Company and the Trustee, shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Security holder shall be
mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Security holder or any
defect in it shall not affect its sufficiency with respect to other Security
holders. If a notice or communication is mailed in the manner provided above,
it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Security holders may communicate pursuant to TIA Section 312(b) with
other Security holders with respect to their rights under this Indenture, the
Securities or the Subsidiary Guarantees. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at
the request of the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.
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<PAGE> 81
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to such other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE SECURITIES AND THE SUBSIDIARY GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. Each
of the parties hereto agrees to submit to the non-exclusive jurisdiction of the
competent courts of the State of New York sitting in The City of New York in
any action or proceeding arising out of or relating to this Indenture or the
Securities.
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<PAGE> 82
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder, partner or incorporator,
as such, of the Company or any Subsidiary Guarantor whether past, present or
future shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Securities, this Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Security holder by accepting a Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 11.11. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Securities and the Subsidiary Guarantees, as the case may be,
shall bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
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<PAGE> 83
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee
By: /s/ BILL BARGER
-----------------------------------
Name: Bill Barger
Title: Vice President
THE SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
SOUTHCO ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
MISSION PARTY ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWEST TEXAS PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWESTERN ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------------
Name: A. J. Lewis III
Title: President
-76-
<PAGE> 84
SCHEDULE 1
SPECIFIED AFFILIATE TRANSACTIONS
The following are Specified Affiliate Transactions:
A. Requirements contract with Southwest Texas Equipment Distributors,
Inc. to purchase ice machines and related equipment.
B. Lease agreements for real property and improvements with A. J. Lewis
III, Liza B. Lewis and Robert G. Miller and their heirs, successors
and assigns.
C. Merger agreements and related transactions as follows:
1. Packaged Ice Mission, Inc. acquisition of Mission Party Ice,
Inc.;
2. Packaged Ice STPI, Inc. acquisition of Southwest Texas
Packaged Ice, Inc.; and
3. Packaged Ice Southwestern, Inc. acquisition of Southwestern
Ice, Inc.
<PAGE> 85
[FORM OF SERIES C SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1993, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" ( AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (a)(l), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER)
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $107.50 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS OCTOBER 16, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
<PAGE> 86
CUSIP No. ___________
PACKAGED ICE, INC.
12% Series C Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to or
registered assigns, the principal sum of Dollars, on April 15, 2004.
Interest Payment Dates: April 15 and October 15 commencing April 15,
1998
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
-------------------------------
Name:
Title:
Attest:
- -----------------------------------
Secretary
-2-
<PAGE> 87
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS,N.A.
as Trustee
By
-----------------------------
Authorized Signatory
-3-
<PAGE> 88
PACKAGED ICE, INC.
12% Series C Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above, which rate is subject to increase of up to 1.50% per annum in
certain circumstances described in the Registration Rights Agreement dated
October 16, 1997 between the Company, the Initial Purchaser and the Subsidiary
Guarantors. The Company will pay interest semi-annually on April 15 and October
15 of each year (the "Interest Payment Date"), commencing April 15, 1998.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from October 16, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date, except as provided
in Section 2.17 of the Indenture with respect to defaulted interest. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer in same day funds, or, in the case of Physical
Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of
October 16, 1997, among the Company, the Subsidiary Guarantors and the Trustee,
as such Indenture may be amended or supplemented from time to time (the
"Indenture"). Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for
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<PAGE> 89
a statement of them. The Securities are general unsecured obligations of the
Company limited in aggregate principal amount to $25,000,000. Payment on each
Security is guaranteed on a senior basis, jointly and severally, by the
Subsidiary Guarantors pursuant to Article Ten of the Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.00%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.50%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $8.75 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $16.25
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, the Indenture requires that certain proceeds be used, subject to
the limitations contained therein, to make an offer to all Holders of
Securities (an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to
purchase certain amounts of Securities in accordance with the procedures set
forth in the Indenture.
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<PAGE> 90
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
-6-
<PAGE> 91
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
-7-
<PAGE> 92
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The wavier and
release are part of the consideration for the issuance of the securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
-8-
<PAGE> 93
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set
forth in Article Ten of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
MISSION PARTY ICE, INC.
SOUTHWEST TEXAS PACKAGED ICE, INC.
SOUTHWESTERN ICE, INC.
By:
----------------------------
Name:
Title:
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<PAGE> 94
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) October 16, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Security and
the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the Indenture shall have
been satisfied.
Dated: Signed:
--------------------- ------------------------------------------
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
-10-
<PAGE> 95
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
--------------------- ----------------------------------------------
NOTICE: To be executed by an executive officer
-11-
<PAGE> 96
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the
amount: $
-----------------------
(multiple of $1,000)
Date: Your Signature:
---------------- --------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
-12-
<PAGE> 97
EXHIBIT A-2
[FORM OF SERIES D SECURITY]
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $107.50 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS OCTOBER 16, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
PACKAGED ICE, INC. CUSIP No. ___________
12% Series D Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
April 15, 2004.
Interest Payment Dates: April 15 and October 15 commencing April 15,
1998
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
------------------------------
Name:
Attest: Title:
- -------------------------
Secretary
<PAGE> 98
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By
-----------------------------------
Authorized Signatory
-2-
<PAGE> 99
PACKAGED ICE, INC.
12% Series D Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually on April 15 and
October 15 of each year (the "Interest Payment Date"), commencing April 15,
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from October 16, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer in same day funds, or, in the case of Physical
Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of
October 16, 1997, among the Company, the Subsidiary Guarantors and the Trustee,
as such Indenture may be amended or supplemented from time to time (the
"Indenture"). Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $25,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Subsidiary
Guarantors pursuant to Article Ten of the Indenture.
-3-
<PAGE> 100
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.00%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.50%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $8.75 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $16.25
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, the Indenture requires that certain proceeds be used, subject to
the limitations contained therein, to make an offer to all Holders of
Securities (an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to
purchase certain amounts of Securities in accordance with the procedures set
forth in the Indenture.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
-4-
<PAGE> 101
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
-5-
<PAGE> 102
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the securities.
-6-
<PAGE> 103
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
-7-
<PAGE> 104
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set
forth in Article Ten of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
MISSION PARTY ICE, INC.
SOUTHWEST TEXAS PACKAGED ICE, INC.
SOUTHWESTERN ICE, INC.
By:
-----------------------------
Name:
Title:
-8-
<PAGE> 105
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------------- ------------------------------------------
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
-9-
<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the
amount: $
Date: Your Signature:
---------- -----------------------------------------------
(Sign exactly as your name appears on the other
side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
-10-
<PAGE> 107
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 108
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12% Senior Notes due April 15, 2004, (the "Securities") of Packaged
Ice, Inc.
This Certificate relates to _____ Securities held in* _____ book-entry
or* _____ certificated form by _____ (the "Transferor" ) .
The Transferor:*
[ ] has requested that the Registrar by written order to deliver
in exchange for its beneficial interest in the Global Security held by the
Depositary a Security or Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange
or register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.15 of such
Indenture, and that the transfer of this Securities does not require
registration under the Securities Act of 1933, as amended (the "Act")
because[*]:
[ ] Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.15(a)(II)(A) or Section
2.15(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in reliance on
Rule 144A or in accordance with Regulation S under the Act.
[ ] Such Security is being transferred in accordance with Rule 144
under the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act,
other than Rule 144A or Rule 144 or Regulation S under the Act. An opinion of
counsel to the effect that such transfer does not require registration under
the Act accompanies this Certificate.
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------
Date:
-------------------------
*Check applicable box.
<PAGE> 109
EXHIBIT D
Transferee Letter of Representation
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Ladies and Gentlemen:
In connection with our proposed purchase of 12% Senior Notes due April
15, 2004, (the "Securities") of Packaged Ice, Inc. (the "Company") we confirm
that:
1. We understand that the Securities have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Securities
to offer, sell or otherwise transfer such Securities prior to the date
which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was
the owner of such Securities, or any predecessor thereto (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant
to a registration statement which has been declared effective under
the Securities Act, (c) so long as the Securities are eligible for
resale pursuant to Rule 144A, under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A
(a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under
the Securities Act that is purchasing for his own account or for the
account of such an institutional "accredited investor," or (f)
pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing
cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times
within our or their control and to compliance with any applicable
state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Securities is proposed to be made
pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the registrar
under the Indenture pursuant to which the Securities were issued (the
"Registrar") which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the
meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act.
The Registrar and the Company reserve the right prior to any offer,
sale or other transfer prior to the Resale Restriction Termination
Date of the Securities pursuant to clause (e) or (f) above to require
the delivery of a written opinion of counsel, certifications, and or
other information satisfactory to the Company and the Registrar.
<PAGE> 110
2. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) purchasing for our own account or for the account of
such an institutional "accredited investor," and we are acquiring the
Securities for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act and we have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for
which we are acting are each able to bear the economic risk of our or
its investment for an indefinite period.
3. We are acquiring the Securities purchased by us for
our own account or for one or more accounts as to each of which we
exercise sole investment discretion.
4. You and your counsel are entitled to rely upon this
letter and you are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered
hereby.
Very truly yours,
----------------------------
(Name of Purchaser)
By:
-------------------------
Date:
----------------------
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
-----------------------
Address:
--------------------
Taxpayer ID Number:
---------
-2-
<PAGE> 1
EXHIBIT 10.36
REGISTRATION RIGHTS AGREEMENT
Dated as of October 16, 1997
by and among
PACKAGED ICE, INC.
THE SUBSIDIARY GUARANTORS
named herein
and
JEFFERIES & COMPANY, INC.,
as Initial Purchaser
--------------------------
$25,000,000
12% SERIES C SENIOR NOTES DUE APRIL 15, 2004
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(j) Notes Held by the Issuers or Their Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of October 16, 1997, by and among Packaged Ice, Inc., a Texas
corporation (the "Company"), each of the subsidiaries of the Company listed on
the signature pages hereto (collectively, the "Subsidiary Guarantors"), and
Jefferies & Company, Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of October 10, 1997, by and among the Company, the
Subsidiary Guarantors and the Initial Purchaser (the "Purchase Agreement")
which provides for, among other things, the issuance and sale to the Initial
Purchaser of 25,000 units (the "Units") consisting of an aggregate of
$25,000,000 aggregate principal amount of the Company's 12% Series C Senior
Notes due April 15, 2004 (the "Notes"), and 25,000 warrants to purchase an
aggregate of 255,943 shares of common stock, par value $ .01 per share, of the
Company. In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Company and the Subsidiary Guarantors have agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchaser and their direct and indirect transferees and assigns. The execution
and delivery of this Agreement is a condition to the Initial Purchaser's
obligation to purchase the Units under the Purchase Agreement. The Company and
the Subsidiary Guarantors are collectively referred to herein as the "Issuers."
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, or a day on
which banking institutions in New York, New York are required to be closed.
Company: See the first introductory paragraph to this Agreement.
Effectiveness Date: The 120th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
<PAGE> 4
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Holder: Any registered holder of Registrable Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of October 16, 1997, by and among
the Company, the Subsidiary Guarantors and U.S. Trust Company of Texas, N.A.,
as trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the Units were sold to the Initial
Purchaser pursuant to the Purchase Agreement.
Issuers: See the second introductory paragraph to this Agreement.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b).
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<PAGE> 5
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance thereof and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at
all times subsequent thereto, until, in the case of any such Note, Exchange
Note or Private Exchange Note, as the case may be, the earliest to occur of (i)
a Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(iv) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note, Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Registration Statement, (ii) such Note, Exchange
Note or Private Exchange Note, as the case may be, is sold in compliance with
Rule 144, (iii) in the case of any Note, such Note has been exchanged pursuant
to the Exchange Offer for an Exchange Note or Exchange Notes which may be
resold without restriction under state and federal securities laws, or (iv)
such Note, Exchange Note or Private Exchange Note, as the case may be, ceases
to be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Issuers
filed with the SEC under the Securities Act, including, but not limited to, the
Exchange Registration Statement, that covers any of the Registrable Notes
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
-3-
<PAGE> 6
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantors: See the first introductory paragraph to this
Agreement.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers agrees to file with the SEC no later than
the Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Notes (other than Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, which are identical in all material respects to the
Notes (the "Exchange Notes") (and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in
either case, has been qualified under the TIA), except that the Exchange Notes
shall have been registered pursuant to an effective Registration Statement
under the Securities Act and shall contain no restrictive legend thereon. The
Exchange Offer shall be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and shall comply with all
applicable tender offer rules and regulations under the Exchange Act. Each of
the Issuers agrees to use its best efforts to (x) cause the Exchange
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30
calendar days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 45th day following the date on which the
Exchange Registration Statement is declared effective. If after such Exchange
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by
any stop order, injunction or other order or
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<PAGE> 7
requirement of the SEC or any other governmental agency or court, such Exchange
Registration Statement shall be deemed not to have become effective for
purposes of this Agreement. Each Holder who participates in the Exchange Offer
will be required to represent that any Exchange Notes received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act, and that
such Holder is not an affiliate of any of the Issuers within the meaning of the
Securities Act. Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the
Issuers shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and other than in respect of any Exchange Notes as
to which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this
Agreement.
(b) The Issuers shall include within the Prospectus contained in
the Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also allow, to the
extent permitted by applicable policies and regulations of the SEC, the use of
the Prospectus by all Persons subject to the prospectus delivery requirements
of the Securities Act, including, to the extent so permitted, all Participating
Broker-Dealers, and include a statement describing the manner in which
Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Notes (the "Applicable Period").
If, upon consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Company upon the request of such Initial
Purchaser shall, simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, that are identical in all material respects to the
Exchange Notes except for the existence of restrictions on transfer thereof
under the Securities Act and securities laws of the several states of the U.S.
(the "Private Exchange Notes") (and which are issued pursuant to the same
indenture as the Exchange Notes); provided, however, the Issuers shall not be
required to effect such exchange if, in the written opinion of counsel for the
Issuers (a copy of which shall be delivered to the Initial Purchaser and any
Holder affected thereby), such exchange
-5-
<PAGE> 8
cannot be effected without registration under the Securities Act. The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the date of
the original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes
at any time prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Registrable Notes validly
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange, as the case may be;
(2) deliver to the Trustee for cancellation all
Registrable Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver
promptly to each Holder tendering such Registrable Notes, Exchange
Notes or Private Exchange Notes, as the case may be, equal in
principal amount to the Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall be subject to the
following conditions: (i) the Exchange Offer or the Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation
of the staff of the SEC, (ii) no action or proceeding is instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Issuers to proceed with the Exchange Offer or the
Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Issuers and (iii) all
-6-
<PAGE> 9
governmental approvals have been obtained, which approvals the Issuers deem
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and that
the Exchange Notes, the Private Exchange Notes and the Notes, if any, will vote
and consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Notes, if any, will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 180 days of the Issue Date, (iii) any holder of Private
Exchange Notes so requests in writing to the Issuers within 120 days after the
consummation of the Exchange Offer or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state
and federal securities laws (other than due solely to the status of such Holder
as an affiliate of any of the Issuers within the meaning of the Securities Act)
and so notifies the Company within 60 days after such Holder first becomes
aware of such restrictions and providing a reasonable basis for its
conclusions, in the case of each of clauses (i)-(iv), then the Issuers shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and shall file a Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Shelf Registration. The Issuers shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall
not have yet filed the Exchange Registration Statement, each of the Issuers
shall use its best efforts to file with the SEC the Initial Shelf Registration
on or prior to the Filing Date and shall use its best efforts to cause such
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date. Otherwise, each of the Issuers shall use
its best efforts to file with the SEC the Initial Shelf Registration within 30
days of the delivery of the Shelf Notice and shall use its best efforts to
cause such Shelf Registration to be declared effective under the Securities Act
as promptly as practicable thereafter. The Initial Shelf Registration shall be
on Form S-l or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Notes to be
included in any Shelf Registration (as defined below). The Issuers shall use
their best efforts to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is 36 months from the
effective date of such Initial Shelf Registration (subject to extension
pursuant to the last paragraph of Section 5 hereof) (the "Effectiveness
Period"), or such shorter period ending when (i) all Registrable Notes covered
by the Initial Shelf Registration have been sold in the manner
-7-
<PAGE> 10
set forth and as contemplated in the Initial Shelf Registration or (ii) a
Subsequent Shelf Registration (as defined below) covering all of the
Registrable Notes has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period (other than because of
the sale of all of the securities registered thereunder), each of the Issuers
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend such Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or
file an additional "shelf" Registration Statement pursuant to Rule 415 covering
all of the Registrable Notes (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, each of the Issuers shall use its best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registrations was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Shelf Registration or by any underwriter of
such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchaser agree that the Holders
of Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuers, jointly and severally, agree to pay, as liquidated damages,
additional interest on the Notes ("Additional Interest") under the
circumstances and to the extent set forth below (each of which shall be given
independent effect):
(i) if the Exchange Registration Statement has not been
filed on or prior to the Filing Date, then commencing on the day after
the Filing Date, Additional Interest shall accrue on the Notes over
and above the stated interest at a rate of 0.50% per annum for the
first 90 days immediately following the Filing Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period;
(ii) if the Exchange Registration Statement is not
declared effective on or prior to the Effectiveness Date, then
commencing on the day after the Effectiveness Date, Additional
Interest shall accrue on the Notes over and above the stated interest
at a rate of 0.50% per annum for the first 90 days immediately
following the day after the Effectiveness Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; and
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<PAGE> 11
(iii) if (A) the Issuers have not exchanged Exchange Notes
for all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 60th day after the date on which the
Exchange Registration Statement is declared effective or (B) the
Initial Shelf Registration, if required to be filed hereunder, is not
declared effective on or prior to the 120th day after the Issue Date
or (C) if applicable, a Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time during
the Effectiveness Period, then Additional Interest shall accrue on the
Notes over and above the stated interest at a rate of 0.50% per annum
for the first 90 days commencing on the (x) 60th day after the date on
which the Exchange Registration Statement is declared effective, in
the case of (A) or (B) above, or (y) the day such Shelf Registration
ceases to be effective in the case of (C) above, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not
exceed at any one time in the aggregate 1.5% per annum; and provided further,
that (1) upon the filing of the Exchange Registration Statement (in the case of
(i) above), (2) upon the effectiveness of the Exchange Registration Statement
(in the case of (ii) above), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), upon the effectiveness of the
Initial Shelf Registration (in the case of (iii)(B) above) or upon the
effectiveness of a Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable semi-annually by wire transfer of immediately available funds
or by federal funds check on each regular interest payment date specified in
the Indenture (to the Holders of record on the regular record date therefor
(specified in the Indenture) immediately preceding such dates), commencing with
the first such regular interest payment date occurring after any such
Additional Interest commences to accrue, subject to Section 2.17 of the
Indenture with respect to defaulted interest. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder, the
Issuers shall:
(a) Prepare and file with the SEC prior to the Filing
Date, the Exchange Registration Statement or if the Exchange
Registration Statement is not filed because of the circumstances
contemplated by Section 2(c)(i), a Shelf Registration as prescribed by
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<PAGE> 12
Section 2 or 3, and use their best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein; provided that, if (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Prospectus contained in an Exchange
Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall, if requested, furnish to and
afford the Holders of the Registrable Notes to be registered pursuant
to such Shelf Registration or each such Participating Broker-Dealer,
as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies
of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five
business days prior to such filing). The Issuers shall not file any
such Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to
keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions
of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any
such Prospectus. The Company shall be deemed not to have used its
best efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result
in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being
able to sell such Registrable Notes or such Exchange Notes during that
period unless such action is required by applicable law or unless the
Company complies with this Agreement, including, without limitation,
the provisions of paragraph 5(k) hereof and the last paragraph of this
Section 5.
(c) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period from whom the
Company has received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to a
Registration
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<PAGE> 13
Statement or any post-effective amendment, when the same has become
effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy
of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the
use of any Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) hereof cease to be true and correct, (iv)
of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in, or amendments or supplements to, such
Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and (vi) of any of the Issuers'
reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, use their best
efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing
or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or
the Exchange Notes to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order is issued, to use
their best efforts to obtain the withdrawal of any such order at the
earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section
3 and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i)
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information or revisions to information
therein relating to such underwriters or selling Holders as the
managing underwriters, if any, or such Holders or their counsel
reasonably request to be included or made therein and (ii) make all
required filings of such prospectus
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<PAGE> 14
supplement or such post-effective amendment as soon as practicable
after the Issuers have received notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment.
(f) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each
selling Holder of Registrable Notes and to each such Participating
Broker-Dealer who so requests and to counsel and each managing
underwriter, if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, deliver to each
selling Holder of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, their respective counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus
and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, each
Issuer hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the
case may be, and the underwriters or agents, if any, and dealers (if
any), in connection with the offering and sale of the Registrable
Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, to use their best efforts
to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes or
Exchange Notes, as the case may be, for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing; provided that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h);
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
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<PAGE> 15
Registrable Notes covered by the applicable Registration Statement;
provided that none of the Issuers shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so
subject.
(i) If a Shelf Registration is filed pursuant to Section
3, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Notes to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Notes to be in
such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use their best efforts to cause the Registrable Notes
covered by any Registration Statement to be registered with or
approved by such governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Registrable Notes,
except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case each of the Issuers will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi)
hereof, as promptly as practicable prepare and (subject to Section
5(a) hereof) file with the SEC, at the joint and several expense of
each of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any
such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes
covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement or the managing underwriter or underwriters, if
any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with printed certificates for the Registrable Notes
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<PAGE> 16
in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with an underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes and take all such other actions
as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or
the disposition of such Registrable Notes and, in such connection, (i)
make such representations, warranties to, and covenants with, the
underwriters, with respect to the business of the Issuers and their
respective subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested; (ii)
obtain the opinion of counsel to the Issuers and updates thereof in
form and substance reasonably satisfactory to the managing underwriter
or underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt securities similar to the Notes and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of any of the Issuers or of any business acquired by any of
the Issuers for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed
to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings of debt securities
similar to the Notes and such other matters as reasonably requested by
the managing underwriter or underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in
Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to
be indemnified pursuant to said Section. The above shall be done at
each closing under such underwriting agreement, or as and to the
extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available
for inspection by any selling Holder of such Registrable Notes being
sold, or each such Participating Broker-Dealer, as the case may be,
any underwriter participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent retained by
any such selling Holder or each such Participating Broker-Dealer, as
the case may be, or underwriter (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all
financial and other records and pertinent corporate documents of the
Issuers and their respective subsidiaries (collectively, the
"Records") as shall be reasonably necessary to
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<PAGE> 17
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Issuers and
their respective subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration
Statement. Such Records shall be kept confidential by each Inspector
and shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material
misstatement or omission in such Registration Statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. Each selling Holder of
such Registrable Notes and each such Participating Broker-Dealer will
be required to agree that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the
Issuers unless and until such is made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it
will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Issuers and allow
the Issuers to undertake appropriate action to prevent disclosure of
the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable
Notes or the Exchange Notes, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the
case may be, to be qualified under the TIA not later than the
effective date of the Exchange Offer or the first Registration
Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Notes are sold to underwriters
in a firm commitment or best efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company after the effective
date of a Registration Statement, which statements shall cover said
12-month periods.
(r) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or the Private Exchange Notes, as the case may be, and
the related indenture constitute legally valid and binding obligations
of each of the Issuers, enforceable against each of the Issuers in
accordance with their respective terms subject to customary exceptions
and qualifications.
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<PAGE> 18
(s) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Issuers (or to such other Person as directed by the Issuers) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Issuers shall mark, or caused to be marked, on such
Registrable Notes that such Registrable Notes are being canceled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the NASD.
(u) Use their best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable
Notes covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude
from such registration the Registrable Notes of any seller who fails to furnish
such information within a reasonable time after receiving such request. Each
seller as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such
seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Registration
Statement and such Participating Broker Dealer will forthwith discontinue
disposition of such Exchange Notes pursuant to any Prospectus and, in each
case, forthwith discontinue dissemination of such Prospectus until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k), or until it is
advised in writing (the "Advice") by the Issuers that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto and, if so directed by the Issuers, such Holder or
Participating Broker-Dealer, as the case may be, will deliver to the Issuers
all copies, other than permanent file copies, then in such Holder's or
Participating Broker-Dealer's possession, of the Prospectus covering such
Registrable Securities current at the time of the receipt of such notice. In
the event the Issuers shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
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<PAGE> 19
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers,
jointly and severally, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses,
including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the
Registrable Notes included in any Registration Statement or by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) reasonable messenger, telephone and delivery expenses incurred in
connection with the Exchange Registration Statement and any Shelf Registration,
(iv) fees and disbursements of counsel for the Issuers and reasonable fees and
disbursements of special counsel for the sellers of Registrable Notes (subject
to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Issuers desire
such insurance, (viii) fees and expenses of all other Persons retained by the
Issuers, (ix) internal expenses of the Issuers (including, without limitation,
all salaries and expenses of officers and employees of the Issuers performing
legal or accounting duties), (x) the expense of any annual audit, (xi) the fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange and (xii) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the
Issuers, jointly and severally, shall reimburse the Holders of the Registrable
Notes being registered in such registration for the fees and disbursements, not
to exceed $25,000, of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Registrable Notes to be included in such Shelf Registration and
other out-of-pocket expenses of Holders of Registrable Notes incurred in
connection with the registration and sale of Registrable Notes.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the officers and directors of each such Person, and each Person, if
any, who
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<PAGE> 20
controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other reasonable expenses
actually incurred in connection with any suit, action or proceeding or any
claim asserted) caused by, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (as amended or supplemented if the Issuers shall have
furnished any amendments or supplements thereto) or caused by, arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Issuers shall have furnished any amendments or supplements thereto) or caused
by, arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Issuers in writing by or on behalf of such
Participant expressly for use therein; provided, however, that the Company will
not be liable if such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus and corrected
in the Prospectus or any amendment or supplement thereto and the Prospectus
does not contain any other untrue statement or omission or alleged untrue
statement or omission of a material fact that was the subject matter of the
related proceeding and any such loss, liability, claim, damage or expense
suffered or incurred by the Participants resulted from any action, claim or
suit by any Person who purchased Registrable Notes or Exchange Notes which are
the subject thereof from such Participant and it is established in the related
proceeding that such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and each Person who controls any of the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Issuers to each Participant, but
only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes giving rise to such
obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such Person (the "Indemnified Person") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to
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<PAGE> 21
represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred by such counsel related to such proceeding;
provided, however, that the failure to so notify the Indemnifying Person shall
not relieve it of any obligation or liability which it may have hereunder or
otherwise (unless and only to the extent that such failure directly results in
the loss or compromise of any material rights or defenses by the Indemnifying
Person and the Indemnifying Person was not otherwise aware of such action or
claim). In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that, unless there is a
conflict among Indemnified Persons, the Indemnifying Person shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly after receipt of the invoice therefor as
they are incurred. Any such separate firm for the Participants and such
control Persons of Participants shall be designated in writing by Participants
who sold a majority in interest of Registrable Notes sold by all such
Participants and any such separate firm for the Issuers, their directors, their
officers and such control Persons of the Issuers shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent, but if settled
with such consent or if there is a final non-appealable judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of
such settlement; provided, however, that the Indemnifying Person shall not be
liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
release of such indemnified Person, in form and substance satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable (other than by reason of the
exceptions specifically provided therein) to, or insufficient
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<PAGE> 22
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to
reflect (i) the relative benefits received by the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other from
the offering of the Registrable Notes or Exchange Notes, as the case may be or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person
or Persons on the other in connection with the statements or omissions (or
alleged statements or omissions) that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuers on the one
hand or by the Participants or such other Indemnified Person, as the case may
be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
and any other equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses actually incurred by such Indemnified Person
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time it is not required to file such reports, it will, upon the request of any
Holder of Registrable Notes, make publicly available other information so long
as necessary to permit sales pursuant to Rule 144 and Rule 144A. Each of the
Issuers further covenants, for so
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<PAGE> 23
long as any Registrable Notes remain outstanding, to make available to any
Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. None of the Issuers has entered,
as of the date hereof, and none of the Issuers shall enter, after the date of
this Agreement, into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. None of the
Issuers has entered and none of the Issuers will enter into any agreement with
respect to any of its securities which will grant to any Person piggy-back
rights with respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. Neither the Company
nor the Subsidiary Guarantors shall, directly or indirectly, take any action
with respect to the Registrable Notes as a class that would adversely affect
the ability of the Holders of Registrable Notes to include such Registrable
Notes in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, otherwise than with the prior
written consent of (A) the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes and (B) in
circumstances that would adversely affect Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may
not be amended, modified or supplemented without the prior written consent of
each Holder and each Participating Broker-Dealer (including any Person who was
a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes,
as the case may be, disposed of pursuant to any Registration Statement).
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being tendered
pursuant to the Exchange Offer or sold
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<PAGE> 24
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being tendered or being sold by such Holders
pursuant to such Registration Statement.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Notes or any
Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth
on the records of the registrar under the Indenture, with a copy in
like manner to the Initial Purchase s as follows:
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Facsimile No.: (310) 575-5165
Attention: Corporate Finance Department
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile No.: (713) 758-2346
Attention: Michael P. Finch
2. if to the Initial Purchaser, at the address specified
in Section 10(d)(1);
3. if to an Issuer, as follows:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
Attention: President
with copies to:
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<PAGE> 25
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
Attention: Alan Schoenbaum
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed, one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto and the Holders; provided, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of a
Holder unless such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.
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<PAGE> 26
(j) Notes Held by the Issuers or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes
is required hereunder, Registrable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Issuers on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof
and thereof are merged herein and replaced hereby.
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<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
PACKAGED ICE LEASING, INC.
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHCO ICE, INC.
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
MISSION PARTY ICE, INC.
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWEST TEXAS PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWESTERN ICE, INC.
(Formerly: PACKAGED ICE SOUTHWESTERN, INC.)
By: /s/ A. J. LEWIS III
----------------------------------------
Name: A. J. Lewis III
Title: President
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<PAGE> 28
JEFFERIES & COMPANY, INC.
By: /s/ DAVID J. LOSITO
----------------------------------------
Name: David J. Losito
Title: Managing Director
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<PAGE> 1
EXHIBIT 10.37
PACKAGED ICE, INC.
25,000 Units
Consisting of
$25,000,000
12% Senior Notes due April 15, 2004
and
25,000 Common Stock Purchase Warrants
PURCHASE AGREEMENT
October 10, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Packaged Ice, Inc., a Texas corporation (the "Company"), and the
Subsidiary Guarantors (as defined below) hereby confirm their agreement with
you (the "Initial Purchaser"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
25,000 Units (as defined below) consisting of an aggregate of $25,000,000
aggregate principal amount of its 12% Series C Senior Notes due April 15, 2004
(the "Senior Notes") and 25,000 warrants (the "Warrants") to purchase initially
an aggregate of 255,943 shares of the Company's Common Stock, par value $0.01
per share (the "Common Stock"). The Senior Notes are to be issued under an
indenture (the "Indenture") to be dated as of October 16, 1997 by and among the
Company, the Subsidiary Guarantors and U.S. Trust Company of Texas, N.A., as
Trustee (the "Trustee"). The Senior Notes will be unconditionally guaranteed
(the "Guarantees") on a joint and several basis by Packaged Ice Leasing, Inc.,
a Nevada corporation, Southco Ice, Inc., a Texas corporation, Packaged Ice
Mission, Inc. a Texas corporation, Packaged Ice STPI, Inc., a Texas
corporation, and Packaged Ice Southwestern, Inc., a Texas corporation
(collectively, the "Subsidiary Guarantors"). The Warrants are to be issued
under a Warrant Agreement to be dated as of October 16, 1997 (the "Warrant
Agreement") of the Company for the benefit of the holders from time to time of
the Certificates evidencing the Warrants. The shares of Common Stock issuable
upon exercise of the Warrants are herein referred to as the "Warrant Shares."
The Senior Notes and the Warrants will initially be represented by 25,000 units
("Units"), each Unit consisting of $1,000 principal amount of Senior Notes and
one Warrant to purchase 10.2377 Warrant Shares at an initial exercise price of
$0.01 per Warrant Share. The Senior Notes, the Guarantees, the Warrants and
the Units are collectively referred to herein as the "Securities."
<PAGE> 2
The Securities will be offered and sold to the Initial Purchaser
without Registration under the Securities Act of 1933, as amended (the "Act"),
in reliance on an exemption pursuant to Section 4(2) under the Act.
In connection with the sale of the Securities, the Company has
prepared an offering circular dated October 10, 1997 (the "Circular"), setting
forth or including a description of the terms of the Securities, the terms of
the offering of the Securities, and a description of the business of the
Company and the Subsidiary Guarantors. Any references herein to the Circular
shall be deemed to include all amendments and supplements thereto.
The Initial Purchaser and its direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company and the
Subsidiary Guarantors shall agree, among other things, (i) to file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Senior Notes or the
Exchange Notes (as defined in the Registration Rights Agreement) under the Act
and (ii) to execute and deliver the Securityholders' and Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
"Securityholders' Agreement" and, together with the Registration Rights
Agreement, the "Rights Agreements").
2. Representations and Warranties. The Company and the
Subsidiary Guarantors, jointly and severally, represent and warrant to and
agree with the Initial Purchaser that:
(a) The Circular with respect to the Securities has been prepared
by the Company for use by the Initial Purchaser in connection with resales of
the Securities. No order or decree preventing the use of the Circular, or any
order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company and the Subsidiary Guarantors, is contemplated.
(b) The Circular as of its date and as of the Closing Date (as
defined in Section 3 below) did not or will not at any time contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(b) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Company or the Subsidiary Guarantors in writing by the Initial
Purchaser expressly for use in the Circular.
(c) The Company has the authorized capitalization set forth in the
Circular; all of the outstanding shares of capital stock of the Company and the
Subsidiary Guarantors have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; except as set forth in
the Circular, all of the outstanding shares of capital stock of each of the
Subsidiary Guarantors are, and as of the Closing Date will be, owned, directly
or indirectly, by the Company, free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability (other than those
imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions and except for pledged
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<PAGE> 3
shares of Southco Ice, Inc.) or voting; except as set forth in the Circular,
there are no outstanding (i) options, warrants or other rights to purchase from
the Company or the Subsidiary Guarantors, (ii) agreements or other obligations
of the Company or any Subsidiary Guarantors to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, in the case of
each clause (i)-(iii) shares of capital stock of the Company or any Subsidiary
Guarantor. The Company does not have any Subsidiaries (as defined in the
Indenture) except for the Subsidiary Guarantors; except for the capital stock
of the Subsidiary Guarantors and as otherwise disclosed in the Circular, the
Company does not own, directly or indirectly, any shares of capital stock or
any other equity or long-term debt securities or have any equity interest in
any firm, partnership, joint venture or other entity.
(d) Each of the Company and the Subsidiary Guarantors has been
duly incorporated, is validly existing and is in good standing as a corporation
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own its properties and conduct its business as
now conducted, and as described in the Circular; each of the Company and the
Subsidiary Guarantors is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the general affairs, management,
business, condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiary Guarantors, taken as a whole (any
such event, a "Material Adverse Effect").
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Senior Notes,
the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Senior Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by the
Company and, when executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Indenture and, in the case of the Senior
Notes, when delivered to and paid for by the Initial Purchaser in accordance
with the terms of this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
(f) Each of the Subsidiary Guarantors has all requisite corporate
power and authority to execute, deliver and perform each of its obligations
under the Guarantees. The Guarantees to be endorsed on each of the Senior
Notes, the Exchange Notes and the Private Exchange Notes have been duly and
validly authorized by each of the Subsidiary Guarantors and, when the Senior
Notes, the Exchange Notes and the Private Exchange Notes are executed by the
Company and authenticated by the Trustee in accordance with the provisions of
the Indenture and, in the case of the Senior Notes, delivered to and paid for
by the Initial Purchaser in accordance with the terms of this Agreement, will
constitute a valid and legally binding obligation of each of the Subsidiary
Guarantors, entitled to the benefits of the Indenture and enforceable against
the Subsidiary Guarantors in accordance with their terms, except that the
enforcement thereof may be subject to
-3-
<PAGE> 4
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(g) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Indenture. The Indenture meets the requirements
for qualification under the Trust Indenture Act of 1939, as amended (the
"TIA"). The Indenture has been duly and validly authorized by the Company and
each of the Subsidiary Guarantors and, when executed and delivered by the
Company and each of the Subsidiary Guarantors a party thereto (assuming the due
authorization, execution and delivery by the Trustee if the Trustee is required
to execute any such document), each will constitute a valid and legally binding
agreement of the Company and each of the Subsidiary Guarantors, enforceable
against the Company and each of the Subsidiary Guarantors in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(h) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Rights Agreements to which they are a party. Each
of the Rights Agreements has been duly and validly authorized by the Company
and each of the Subsidiary Guarantors and, when executed and delivered by the
Company and each of the Subsidiary Guarantors a party thereto (assuming the due
authorization, execution and delivery by the Initial Purchaser), will
constitute a valid and legally binding agreement of the Company and each such
Subsidiary Guarantor, enforceable against the Company and each such Subsidiary
Guarantor in accordance with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(i) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrant
Agreement. The Warrant Agreement has been duly and validly authorized by the
Company and, when executed and delivered by the Company, will constitute a
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors; rights generally
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrants. The
Warrants have been duly and validly authorized by the Company and, when
executed by the Company and countersigned by the Warrant Agent in accordance
with the provisions of the Warrant Agreement and when delivered to and paid for
by the Initial Purchaser in accordance with the terms of this Agreement, will
have been duly
-4-
<PAGE> 5
executed, issued and delivered and will constitute valid and legally binding
obligations of the Company, entitled to the benefits of the Warrant Agreement
and enforceable against the Company in accordance with their terms, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(k) The Warrant Shares have been duly and validly authorized for
issuance by the Company and when issued in accordance with the terms and
conditions contained in the Warrant Agreement upon exercise of the Warrants,
the Warrant Shares will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any preemptive or similar rights.
The Warrant Shares have been duly reserved for issuance in accordance with the
terms of the Warrants and the Warrant Agreement.
(l) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary Guarantors.
No consent, approval, authorization or order of any court or governmental
agency or body, or third party is required for the performance of this
Agreement by the Company or the Subsidiary Guarantors or the consummation by
the Company or the Subsidiary Guarantors of the transactions contemplated
hereby, except such as have been obtained. The execution, delivery and
performance by the Company and each of the Subsidiary Guarantors of this
Agreement and the consummation by the Company and each of the Subsidiary
Guarantors of the transactions contemplated hereby, and the fulfillment of the
terms hereof, will not conflict with or constitute or result in a breach of or
a default under (or an event which with notice or passage of time or both would
constitute as a default under) or violation of any of (i) the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which the Company or any of the Subsidiary
Guarantors is a party or to which any of them or their respective properties or
assets is subject (other than the credit agreement dated September 15, 1997
with The Frost National Bank and Zions First National Bank (collectively, the
"Banks"), as amended, and the promissory note issued by the Company thereunder
and the collateral documents ancillary thereto), (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the Company or
any of the Subsidiary Guarantors, or (iii) (assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8 hereof)
any statute, judgment, decree, order, rule or regulation applicable to the
Company or any of the Subsidiary Guarantors or any of their respective
properties or assets.
(m) None of the Company or the Subsidiary Guarantors is (i) in
violation of its articles or certificate of incorporation or bylaws, (ii) in
breach or violation of any statute, judgment, decree, order, rule or regulation
applicable to any of them or any of their respective properties or assets,
except for any such breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) except as disclosed in the
Circular, in breach of or default under (nor has any event occurred which, with
notice or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement
-5-
<PAGE> 6
or instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject, except for any such breach,
default, violation or event which would not, individually or in the aggregate,
have a Material Adverse Effect.
(n) The audited consolidated financial statements of the Company
and its subsidiaries included in the Circular present fairly in all material
respects the consolidated financial position, the consolidated results of their
operations and their cash flows at the dates and for the periods to which they
relate and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated therein.
The summary and selected consolidated historical financial data in the
Circular present fairly in all material respects the financial information
shown therein and have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except as otherwise stated
therein. Deloitte & Touche L.L.P. and Arthur Andersen LLP (the "Independent
Accountants") are independent public accounting firms within the meaning of the
Act and the rules and regulations promulgated thereunder.
(o) The pro forma financial statements under the headings
"Unaudited Pro Forma Combined Condensed Financial Statements" and "Selected
Historical and Unaudited Pro Forma Combined Financial Data" (including the
notes thereto) and the other pro forma financial information (but excluding all
projected or forecasted financial information) included in the Circular (i)
comply as to form in all material respects with the applicable requirements of
Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the bases described
therein; the assumptions used in the preparation of the pro forma financial
data and other pro forma financial information included in the Circular are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
(p) Except as described in the Circular, there is not pending or,
to the best knowledge of the Company or any Subsidiary Guarantors, threatened,
any action, suit, proceeding, inquiry or investigation to which the Company or
any of the Subsidiary Guarantors is a party, or to which the property or assets
of the Company or any of the Subsidiary Guarantors are subject, before or
brought by any court or governmental agency or body which, if determined
adversely to the Company or the Subsidiary Guarantors, would result,
individually or in the aggregate, in any material adverse change in the general
affairs, management, business, condition (financial or otherwise), prospects or
results of operations of the Company and the Subsidiary Guarantors, taken as a
whole (any such event, a "Material Adverse Change"), or which seeks to
restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Securities to be sold hereunder or the consummation of
the other transactions described in the Circular.
(q) Each of the Company and the Subsidiary Guarantors owns or
possesses adequate licenses or other rights to use all trademarks, service
marks, trade names and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Circular, and since December
31, 1995, none of the company or the Subsidiary Guarantors has received any
notice of conflict with (or knows of any such conflict with) asserted rights of
others with respect to any
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<PAGE> 7
trademarks, service marks, trade names or know-how which, if such assertion of
conflict were sustained, would, individually or in the aggregate, have a
Material Adverse Effect.
(r) Each of the Company and the Subsidiary Guarantors possesses
all licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently required or
necessary to own or lease, as the case may be, and to operate its respective
properties and to carry on its respective businesses as now or proposed to be
conducted as set forth in the Circular, except where the failure to obtain such
licenses, permits, certificates, consents, orders, approvals and other
authorizations, or to make all declarations and filings, would not,
individually or in the aggregate, have a Material Adverse Effect, and none of
the Company or any of the Subsidiary Guarantors has received any notice of any
proceeding relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except as
described in the Circular and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse Effect.
(s) Since the respective dates as of which information is given in
the Circular, except as described therein, (i) none of the Company or any of
the Subsidiary Guarantors has incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business and (ii)
none of the Company or any of the Subsidiary Guarantors has purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock (other than with
respect to any such Subsidiary Guarantor, the purchase of, or dividend or
distribution on, capital stock owned by the Company).
(t) Each of the Company and the Subsidiary Guarantors have filed
all necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not, individually or in
the aggregate, have a Material Adverse Effect, and has paid all taxes shown as
due thereon; and other than tax deficiencies which the Company or any
Subsidiary Guarantor is contesting in good faith and for which the Company or
such Subsidiary Guarantor has provided adequate reserves, there is no tax
deficiency that has been asserted against the Company or any of the Subsidiary
Guarantors that would have, individually or in the aggregate, a Material
Adverse Effect.
(u) [intentionally omitted]
(v) None of the Company, the Subsidiary Guarantors or any agent
acting on their behalf has taken or will take any action that might cause this
Agreement or the same of the Securities to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(w) Each of the Company and the Subsidiary Guarantors has good and
defensible title to all real property and good title to all personal property
described in the Circular as being owned by it and good and defensible title to
a leasehold estate in the real and personal property described in the Circular
as being leased by it free and clear of all liens, charges, encumbrances or
restrictions,
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<PAGE> 8
except as described in the Circular or to the extent the failure to have such
title or the existence of such liens, charges, encumbrances or restrictions
would not, individually or in the aggregate, have a Material Adverse Effect.
(x) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary Guarantor or any of their respective
properties or assets which would be required to be describe in a prospectus
pursuant to the Act that are not described in the Circular, nor are there any
material contracts or other documents which would be required to be described
in the Circular that are not so described.
(y) To the best knowledge of the Company, except as described in
the Circular, each of the Company and the Subsidiary Guarantors is in
compliance in all respects with all laws, rules or regulations relating to
pollution or protection of public or employee health or the environment
("Environmental Law") and with the terms and conditions of any permit, license
or approval required thereunder in connection with the ownership, operation or
use of its business, property and assets except where the failure to be in such
compliance would not, individually or in the aggregate, have a Material Adverse
Effect; except as disclosed in the Circular, none of the Company or the
Subsidiary Guarantors is subject to any known liability, absolute or
contingent, under any Environmental Law except for any such liability which
would not, individually or in the aggregate, have a Material Adverse Effect;
except as disclosed in the Circular, there is no civil, criminal or
administrative action, suit, demand, hearing, notice of violation or
deficiency, investigation, proceeding or notice of potential responsibility or
demand letter or request for information pending or, to their knowledge,
threatened against the Company or any of the Subsidiary Guarantors under any
Environmental Law which, if determined adversely to the Company or any such
Subsidiary would, individually or in the aggregate, result in a Material
Adverse Effect.
(z) Each of the Company or its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its business and the
value of its properties.
(aa) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiary Guarantors which is
pending or, to the best knowledge of the Company or any Subsidiary Guarantor,
threatened.
(bb) None of the Company or the Subsidiary Guarantors has any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any Subsidiary Guarantor
makes or ever has made a contribution and in which any employee of the Company
or any Subsidiary Guarantor is or has ever been a participant. With respect to
such plans, the Company and each Subsidiary Guarantor is in compliance in all
material respects with all applicable provisions of ERISA.
-8-
<PAGE> 9
(cc) After giving effect to the offering and sale of the
Securities, neither the Company nor any of the Subsidiary Guarantors will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(dd) The Senior Notes, the Exchange Notes, the Warrants, the
Warrant Shares, the Common Stock, the Units, the Indenture, the Warrant
Agreement and the Rights Agreements will, and this Agreement does, conform in
all material respects to the descriptions thereof in the Circular.
(ee) Except as disclosed in the Circular, no holder of securities
of the Company or any Subsidiary Guarantor will be entitled to have such
securities registered under the registration statements required to be filed by
the Company pursuant to the Rights Agreements other than as expressly permitted
thereby.
(ff) Immediately after the consummation of the transactions
contemplated by this Agreement, the Company believes that the fair value and
current fair saleable value of the assets of each of the Company and the
Subsidiary Guarantors (each on a consolidated basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; neither the Company
nor any of the Subsidiary Guarantors (each on a consolidated basis) is, nor
will either the Company or any of the Subsidiary Guarantors (each on a
consolidated basis) be, after giving effect to the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, (a) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
(gg) Neither the Company nor any person acting on its behalf has
offered or sold the Securities by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the Act or, with respect to
Securities sold outside the United States to non-U.S. persons (as defined in
Rule 902 under the Securities Act), by means of any directed selling efforts
within the meaning of Rule 902 under the Act and the Company, any affiliate of
the Company and any person acting on its or their behalf (other than the
Initial Purchaser) has complied with and will implement the "offering
restriction" within the meaning of such Rule 902.
(hh) Within the six months preceding the date hereof, neither the
Company nor any other person acting on behalf of the Company (other than the
Initial Purchaser) has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Initial Purchaser hereunder and the Series
A/B Notes and Series A Warrants (as defined in the Circular) issued and sold to
the Initial Purchaser on or about April 17, 1997; and the Company will take
reasonable precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in Rule 902
under the Act) of any Securities or any substantially similar security issued
by the Company, within six months subsequent to the date on which the
distribution of the Securities has been completed (as notified to the Company
by Jefferies & Company, Inc.), is made under restrictions and other
circumstances reasonably designed not to affect the status of the offer and
sale of the Securities in the United States and to U.S. persons contemplated by
this Agreement as transactions exempt from the registration provisions of the
Act;
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<PAGE> 10
(ii) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 8 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchaser in
the manner contemplated by this Agreement to register any of the Securities
under the Act or to qualify the Indenture under the TIA.
(jj) No securities of the Company or any Subsidiary Guarantor are
of the same class (within the meaning of Rule 144A under the Act) as the
Securities and listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer
quotation system.
(kk) None of the Company or the Subsidiary Guarantors have taken,
nor will any of them take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
Any certificate signed by any officer of the Company or any
Subsidiary Guarantor and delivered to the Initial Purchaser or to counsel for
the Initial Purchaser shall be deemed a joint and several representation and
warranty by the Company and each of the Subsidiary Guarantors to the Initial
Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Company and the
Subsidiary Guarantors agree to issue and sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Company and the Subsidiary
Guarantors 25,000 Units at a purchase price of $960 per Unit. One or more
certificates in definitive form for the Securities that the Initial Purchaser
has agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as Jefferies & Company, Inc. requests upon
notice to the Company at least 24 hours prior to the Closing Date, shall be
delivered by or on behalf of the Company and the Subsidiary Guarantors to the
Initial Purchaser, against payment by or on behalf of the Initial Purchaser of
the purchase price therefor by wire transfer (same day funds) to such account
or accounts as the Company shall specify prior to the Closing Date. Such
delivery of and payment for the Securities shall be made at the offices of
Vinson & Elkins, L.L.P., 1001 Fannin Street, Houston, Texas, at 10:00 a.m., New
York time, on October 16, 1997, or at such other place, time or date as the
Initial Purchaser, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein
referred to as the "Closing Date." The Company has requested that the Closing
Date be scheduled to occur three business days after the date of this Agreement
in order to provide sufficient time to satisfy the conditions for closing set
forth in Section 7 below. With respect to Securities to be delivered in
definitive certificated form, the Company and the Subsidiary Guarantors will
make certificates for such Securities available for checking and packaging by
the Initial Purchaser at the offices of Jefferies & Company, Inc. in New York,
New York, or at such other place as Jefferies & Company, Inc. may designate, at
least 24 hours prior to the Closing Date. Securities to be represented by one
or more definitive global Securities in book-entry form will be deposited on
the Closing Date, by or on behalf of the Company, with The Depository Trust
Company ("DTC") or its designated custodian.
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<PAGE> 11
4. Offering by the Initial Purchaser. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Circular, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Company and the Subsidiary Guarantors. Each
of the Company and the Subsidiary Guarantors jointly and severally covenants
and agrees with the Initial Purchaser that:
(a) The Company and the Subsidiary Guarantors will not amend or
supplement the Circular or any amendment or supplement thereto of which the
Initial Purchaser shall not previously have been advised and furnished a copy
for a reasonable period of time prior to the proposed amendment or supplement
and as to which the Initial Purchaser shall not have given their consent. The
Company and the Subsidiary Guarantors will promptly, upon the reasonable
request of the Initial Purchaser or counsel for the Initial Purchaser, make any
amendments or supplements to the Circular that may be necessary or advisable in
connection with the resale of the Securities by the Initial Purchaser.
(b) The Company and the Subsidiary Guarantors will cooperate with
the Initial Purchaser in arranging for the qualification of the Securities for
offering and sale under the securities or "Blue Sky" laws of such jurisdictions
as the Initial Purchaser may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the
Securities; provided, however, that in connection therewith, neither of the
Company nor any Subsidiary Guarantors shall be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the initial resale
by the Initial Purchaser of the Securities to persons other than affiliates of
the Initial Purchaser (as determined by the Initial Purchaser), any event
occurs as a result of which the Circular as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Circular to
comply with applicable law, the Company and the Subsidiary Guarantors will
promptly notify the Initial Purchaser thereof and will prepare, at the expense
of the Company and the Subsidiary Guarantors, an amendment or supplement to the
Circular that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Circular or any amendment or supplement thereto as the Initial Purchaser may
reasonable request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Circular.
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<PAGE> 12
(f) For and during the period ending on the date no Securities are
outstanding, the Company will furnish to the Initial Purchaser copies of all
reports and other communications (financial or otherwise) furnished by the
Company or the Subsidiary Guarantors to the Trustee, Warrant Agent or the
holders of the Securities and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company or the Subsidiary
Guarantors with the Commission or any national securities exchange on which any
class of securities of the Company or the Subsidiary Guarantors may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, if at all, a copy of any
unaudited interim financial statements of the Company for any period subsequent
to the period covered by the most recent financial statements appearing in the
Circular.
(h) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Securities in a manner which would require the registration under the Act
of the Securities.
(i) The Company and the Subsidiary Guarantors will not solicit any
offer to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Company and the Subsidiary Guarantors will make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4) under
the Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(k) Each of the Company and the Subsidiary Guarantors will use its
best efforts to (i) permit the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the NASD relating to
trading in the Private Offerings, Resales and Trading through Automated
Linkages market (the "PORTAL Market") and (ii) permit the Securities to be
eligible for clearance and settlement through DTC.
(l) The Company and the Subsidiary Guarantors agree that prior to
any registration of the Securities pursuant to the Registration Rights
Agreement, or at such earlier time as may be required, the Indenture shall be
qualified under the TIA and will cause to be entered into any necessary
supplemental indentures in connection therewith.
6. Expenses. The Company and the Subsidiary Guarantors agree,
jointly and severally, to pay all costs and expenses incident to the
performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Circular and any amendment or supplement thereto, (ii) all
arrangements relating to the delivery to the Initial Purchaser of copies of the
foregoing
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<PAGE> 13
documents (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation,
issuance and delivery to the Initial Purchaser of the Securities, (v) the
qualification of the Securities under state securities and "Blue Sky" laws,
including filing fees and fees and disbursements of counsel for the Initial
Purchaser relating thereto, (vi) the fees and expenses of counsel to the
Initial Purchaser in connection with the transactions contemplated hereby,
(vii) expenses in connection with any meetings with prospective investors in
the Securities, (viii) fees and expenses of the Trustee, the Warrant Agent and
the transfer agent for the Common Stock including fees and expenses of their
respective counsel, (viii) all expenses and listing fees incurred in connection
with the application for quotation of the Securities on the PORTAL Market and
(ix) any fees charged by investment rating agencies for the rating of the
Securities. The Company and the Subsidiary Guarantors agree that they will pay
in full on the Closing Date the fees and expenses referred to in clause (vi) by
delivery to counsel for the Initial Purchaser on such date a check payable to
such counsel in the requisite amount. The Company and the Subsidiary
Guarantors shall not be liable to the Initial Purchaser for loss of
contemplated profits from the transactions covered by this Agreement.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the Securities
shall, in its sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Company and the Subsidiary Guarantors, in form and substance satisfactory to
counsel for the Initial Purchaser, to the effect that:
(i) Each of the Company and the Subsidiary Guarantors is
duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Circular.
Each of the Company and the Subsidiary Guarantors is duly qualified as
a foreign corporation and in good standing in each jurisdiction where
the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be
so qualified would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) As of the date thereof, the Company has the
authorized, issued and outstanding capitalization set forth in the
Circular; all of the outstanding shares of capital stock of the
Subsidiary Guarantors are owned, directly or indirectly, by the
Company, and, to the knowledge of such counsel and except as set forth
in the Circular, free and clear of all liens, encumbrances, equities
and claims or restrictions on transferability or voting.
(iii) Except as set forth in the Circular, to the knowledge
of such counsel (A) no options, warrants or other rights to purchase
from the Company or any Subsidiary Guarantors shares of capital stock
in the Company or any Subsidiary Guarantors are outstanding, (B) no
agreements or other obligations of the Company or any Subsidiary
Guarantors to issue, or other rights to cause the Company or any
Subsidiary Guarantors to convert, any obligation into, or exchange any
securities for, shares of capital stock in the Company or any
Subsidiary
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<PAGE> 14
Guarantors are outstanding and (C) no holder of securities of the
Company or any Subsidiary Guarantors is entitled to have such
securities registered under a registration statement filed by the
Company or any Subsidiary Guarantors under the Act with respect to the
Securities or the Warrant Shares.
(iv) The Senior Notes have been duly and validly
authorized and executed by the Company and when delivered by the
Company (assuming the due authorization, execution, and delivery of
the Indenture by the Trustee and the due authentication of the Senior
Notes by the Trustee in accordance with the Indenture) and paid for by
the Initial Purchaser in accordance with the terms of this Agreement,
will constitute the valid and legally binding obligations of the
Company enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(v) Each of the Subsidiary Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Guarantees. The Guarantees endorsed on each
Senior Note have been duly and validly authorized and executed by each
of the Subsidiary Guarantors and, when the Senior Notes are
authenticated by the Trustee in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will constitute the valid
and legally binding obligations of each of the Subsidiary Guarantors,
enforceable against each of the Subsidiary Guarantors in accordance
with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought.
(vi) Each of the Company and each of the Subsidiary
Guarantors has all requisite corporate power and authority to execute,
deliver and perform its respective obligations under the Indenture;
the Indenture is in sufficient form for qualification under the TIA;
the Indenture has been duly and validly authorized, executed and
delivered by the Company and each of the Subsidiary Guarantors and
(assuming the due authorization, execution and delivery thereof by the
Trustee), constitutes the valid and legally binding agreement of the
Company and each of the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vii) Each of the Company and each of the Subsidiary
Guarantors has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Registration Rights
Agreements; the Registration Rights Agreements have been duly and
validly authorized, executed and delivered by the Company and each of
the Subsidiary Guarantors (assuming the due authorization, execution
and delivery thereof by the Initial
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<PAGE> 15
Purchaser), constitute the valid and legally binding agreement of the
Company and each such Subsidiary Guarantors, enforceable against the
Company and each such Subsidiary Guarantors in accordance with their
terms, except that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought and (B)
any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Warrant Agreement. The Warrant Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the
valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(ix) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Warrants. The Warrants have been duly and validly authorized and
executed by the Company and when countersigned by the Warrant Agent in
accordance with the provisions of the Warrant Agreement and delivered
to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, will have been duly issued and delivered and will
constitute the valid and legally binding obligations of the Company,
entitled to the benefits of the Warrant Agreement, and enforceable
against the Company in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(x) When issued in accordance with the terms and
conditions contained in the Warrant Agreement, upon exercise of the
Warrants, the Warrant Shares will be duly authorized, validly issued,
fully paid and non-assessable and will not be subject to any
preemptive or similar rights. The Warrant Shares have been duly
reserved for issuance in accordance with the terms of the Warrants and
the Warrant Agreement.
(xi) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby; the execution, delivery and
performance of this Agreement by the Company and the Subsidiary
Guarantors and the consummation by the Company and the Subsidiary
Guarantors of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of
the Company and each of the Subsidiary Guarantors. This Agreement has
been duly executed and delivered by the Company and the Subsidiary
Guarantors.
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<PAGE> 16
(xii) The Indenture, the Senior Notes, the Guarantees, the
Warrants, the Warrant Shares, the Common Stock, the Registration
Rights Agreements and the Warrant Agreement conform in all material
respects to the descriptions thereof contained in the Circular.
(xiii) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which any of the
Company or any of its Subsidiaries is a party or to which the property
or assets of the Company or any Subsidiary is subject which, if
determined adversely to the Company or the Subsidiary, would result,
individually or in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold
hereunder or the consummation of the other transactions described in
the Circular under the caption "Use of Proceeds."
(xiv) The execution and delivery of the Exchange Notes and
the Private Exchange Notes by the Company have been duly authorized by
all necessary corporate action of the Company, and when the Exchange
Notes and Private Exchange Notes have been duly executed and delivered
by the Company in accordance with the terms of the Registration Rights
Agreement and the Indenture, and assuming due authentication by the
Trustee, the Exchange Notes and the Private Exchange Notes will
constitute the legal, valid, binding and enforceable obligations of
the Company, entitled to the benefits of the Indenture, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(xv) The Guarantees to be endorsed on each of the Exchange
Notes and the Private Exchange Notes by the Subsidiary Guarantors have
been duly authorized by all necessary corporate action of the
Subsidiary Guarantors, and when the Exchange Notes and the Private
Exchange Notes have been duly executed and delivered by the Company
and the Subsidiary Guarantors in accordance with the terms of the
Registration Rights Agreement and the Indenture, and assuming due
authentication by the Trustee, the Guarantees will constitute the
legal, valid, binding and enforceable obligations of the Subsidiary
Guarantors, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(xvi) The execution and delivery of this Agreement, the
Indenture, the Warrant Agreement and the Registration Rights
Agreements and the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
sale of the Securities to the Initial Purchaser) will not conflict
with or constitute or result in a breach or violation of or a default
under (or an event which with notice or passage of time or both would
constitute a default under) or violation of any of (i) the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument known to such counsel
(including in any event any of the foregoing which have been filed by
the Company
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<PAGE> 17
with the Commission) to which the Company or any of the Subsidiary
Guarantors is a party or to which any of them or their respective
properties or assets is subject, except for any such conflict, breach,
violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws of the Company or any of the Subsidiary
Guarantors, or (iii) (assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation known to such counsel to
be applicable to the Company or any of the Subsidiary Guarantors or
any of their respective properties or assets, except for any such
conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xvii) To the knowledge of such counsel, no consent,
approval, authorization or order of any governmental authority is
required for the issuance and sale by the Company and the Subsidiary
Guarantors of the Securities to the Initial Purchaser or the other
transactions contemplated hereby.
(xviii) No registration under the Act of the Securities is
required in connection with the sale of the Securities to the Initial
Purchaser as contemplated by this Agreement and the Circular or in
connection with the initial resale of the Securities by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) that the purchasers who buy such Securities in the
initial resale thereof are qualified institutional buyers as defined
in Rule 144A promulgated under the Act ("QIBs" or "Qualified
Institutional Buyers"), accredited investors as defined in Rule
501(a)(1), (2), (3) or (7) promulgated under the Act ("Accredited
Investors"), or foreign purchasers (as defined in Section 8), (ii) the
accuracy of the Initial Purchaser's representations in Section 8 and
those of the Company and the Subsidiary Guarantors contained in this
Agreement regarding the absence of a general solicitation in
connection with the sale of such Securities to the Initial Purchaser
and the initial resale thereof and (iii) the due performance by the
Initial Purchaser of the agreements set forth in Section 8 hereof.
(xix) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(xx) Neither the Company nor any of the Subsidiary
Guarantors is an "investment company" or "promoter" or "principal
underwriter" for an "investment company" as such terms are defined in
the Investment Company Act of 1946, as amended, and the rules and
regulations thereunder.
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<PAGE> 18
At the time the foregoing opinion is delivered, Akin, Gump, Strauss,
Hauer & Feld, L.L.P. shall additionally state that it has participated in
conferences with officers and other representatives of the Company and the
Subsidiary Guarantors, representatives of the independent public accountants
for the Company, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Circular and
related matters were discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Circular (except to
the extent specified in subsection 7(a)(ii) and (xii)), no facts have come to
its attention which lead it to believe that the Circular, on the date thereof
or at the Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading (it being understood that such firm need
express no opinion with respect to the financial statements and related notes
thereto and the other financial or statistical data included in the Circular).
The opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. described in this
subsection (a) shall be rendered to the Initial Purchaser at the request of the
Company and the Subsidiary Guarantors and shall so state therein.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Vinson &
Elkins L.L.P., counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement ans such other related matters as the
Initial Purchaser may require. In rendering such opinion, Vinson & Elkins
L.L.P. shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchaser shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the
effect set forth in Exhibit C hereto.
(d) The representations and warranties of each of the Company and
the Subsidiary Guarantors contained in this Agreement shall be true and correct
in all material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date; the statements of the
Company's and the Subsidiary Guarantors' officers made pursuant to any
certificate delivered in accordance with the provisions hereof shall be true
and correct in all material respects on and as of the date made and on and as
of the Closing Date; the Company and the Subsidiary Guarantors shall have
complied in all material respects with all agreements and satisfied hereunder
at or prior to the Closing Date; and, except as described in the Circular
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such
Circular, there shall have been no Material Adverse Change or any development
that, singly or in the aggregate, is reasonably likely to cause a Material
Adverse Change.
(e) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
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<PAGE> 19
(f) Subsequent to the date of the most recent financial statements
in the Circular (exclusive of any amendment or supplement thereto after the
date hereof), other than as described in such Circular, none of the Company or
the Subsidiary Guarantors shall have incurred any liabilities or obligations,
direct or contingent (other than in the ordinary course of business), that are
material to the Company or the Subsidiary Guarantors, taken as a whole, or
entered into any transactions not in the ordinary course of business that are
material to the business, condition (financial or other) or results of
operations or prospects of the Company or the Subsidiary Guarantors, taken as a
whole, and there shall not have been any adverse change in the capital stock or
long-term indebtedness of the Company or the Subsidiary Guarantors that is
material to the business, condition (financial or other) or results of
operations or prospects of the Company and the Subsidiary Guarantors, taken as
a whole.
(g) Subsequent to the date of the most recent financial statements
in the Circular (exclusive of any amendment or supplement thereto after the
date hereof), the conduct of the business and operations of the Company or the
Subsidiary Guarantors shall not have been interfered with by strike, fire,
flood, hurricane, accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and, except as otherwise stated
therein, the properties of the Company or the Subsidiary Guarantors shall not
have sustained any loss or damage (whether or not insured) as a result of any
such occurrence, except any such interference, loss or damage which would not,
individually or in the aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received certificates of the
Company and each of the Subsidiary Guarantors, dated the Closing Date, signed
on behalf of the Company and each of the Subsidiary Guarantors by their
respective Chairman of the Board and Chief Executive Officer and the President
and Chief Operating Officer, to the effect that:
(i) the representations and warranties of the Company and
each of the Subsidiary Guarantors contained in this Agreement are true
and correct in all material respects as of the date hereof and as of
the Closing Date, and the Company and each of the Subsidiary
Guarantors have performed all covenants and agreements and satisfied
hereunder all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date;
(ii) at the Closing Date, since the date hereof or since
the date of the most recent financial statements in the Circular
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has become
known nor does any condition exist that, individually or in the
aggregate, would have a Material Adverse Effect;
(iii) since the date hereof or since the date of the most
recent financial statements in the Circular (exclusive of any
amendment or supplement thereto after the date hereof), none of the
Company or any of the Subsidiary Guarantors has incurred any
liabilities or obligations, direct or contingent (other than in the
ordinary course of business), that are material to the Company or the
Subsidiary Guarantors or entered into any transactions not in the
ordinary course of business that are material to the business,
condition (financial or other) or results of operations or prospects
of the Company or the Subsidiary Guarantors and there has not been any
change in the capital stock or long-term indebtedness of the Company
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<PAGE> 20
or the Subsidiary Guarantors that is material to the business,
condition (financial or other) or results of operations or prospects
of the Company or the Subsidiary Guarantors, taken as a whole; and
(iv) the sale of the Securities hereunder has not been
enjoined (temporarily or permanently.
(i) On the Closing Date, the Initial Purchaser shall have received
the Rights Agreements executed by the Company and the Subsidiary Guarantors a
party thereto, and such agreements shall be in full force and effect at all
times from and after the Closing Date.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiary
Guarantors as they shall have heretofore reasonably requested from the Company
and the Subsidiary Guarantors.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchaser and counsel for the Initial Purchaser. The
Company and the Subsidiary Guarantors shall furnish to the Initial Purchaser
such conformed copies of such documents, opinions, certificates, letters,
schedules and instruments in such quantities as the Initial Purchaser shall
reasonably request.
8. Offering of Securities; Restrictions on Transfer. The Initial
Purchaser represents and agrees (as to itself only) that it is a qualified
institutional buyer as defined in Rule 144A promulgated under the Act (a
"QIB"). The Initial Purchaser agrees with the Company and the Subsidiary
Guarantors that (a) it has not and will not solicit offers for, or offer or
sell, the Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act; and
(b) it has and will solicit offers for the Securities only from, and will offer
the Securities only to (i) persons whom the Initial Purchaser reasonably
believes to be QIBs, if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to the Initial Purchaser that each such account is a
QIB, to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A under the Act ("Rule 144A"), and, in each case, in
transactions under Rule 144A or (ii) a limited number of other institutional
investors reasonably believed by the Initial Purchaser to be Accredited
Investors that, prior to their purchase of the Securities, deliver to the
Initial Purchaser a letter containing the representations and agreements set
forth in Appendix A to the Circular; provided, however, that, in the case of
this clause (b), in purchasing such Securities such persons are deemed to have
represented and agreed as provided under the caption "Transfer Restrictions"
contained in the Circular.
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<PAGE> 21
9. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, and each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities to which
any Initial Purchaser or such controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of
any material fact contained in any Circular or any amendment or
supplement thereto; or
(ii) the omission or alleged omission to state, in any
Circular or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements
therein not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such
controlling person for any legal or other expenses incurred by the Initial
Purchaser or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action in respect thereof; provided,
however, the Company and the Subsidiary Guarantors will not be liable in any
such case to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Circular or any amendment or
supplement thereto in reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to the Company or the Subsidiary
Guarantors by the Initial Purchaser specifically for use therein. This
indemnity agreement will be in addition to any liability that the Company or
the Subsidiary Guarantors may otherwise have to the indemnified parties.
Neither the Company nor the Subsidiary Guarantors shall be liable under this
Section 9 for any settlement of any claim or action effected without their
prior written consent, which shall not be unreasonably withheld.
(b) The Initial Purchaser agrees to indemnify and hold harmless
each of the Company, the Subsidiary Guarantors, their directors, their officers
and each person, if any, who controls the Company or the Subsidiary Guarantors
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company or the
Subsidiary Guarantors or any such director, officer or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in the Circular or any amendment or supplement
thereto or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in the Circular or any amendment or
supplement thereto or necessary to make the statements therein no misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon an in conformity with written information concerning the Initial
Purchaser, furnished to the Company by the Initial Purchaser specifically for
use therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by
the Company or the Subsidiary Guarantors or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such
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<PAGE> 22
loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability that the Initial Purchaser may
otherwise have to the indemnified parties. The Initial Purchaser shall not be
liable under this Section 9 for any settlement of any claim or action effected
without their consent, which shall not be unreasonably withheld. None of the
Company or any of the Subsidiary Guarantors shall, without the prior written
consent of the Initial Purchaser, effect any settlement or compromise of any
pending or threatened proceeding in respect of which the Initial Purchaser is
or could have been a party, or indemnity could have been sought hereunder by
the Initial Purchaser, unless such settlement (A) includes an unconditional
written release of the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of the
Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such
indemnified party is entitled to indemnification under this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party of the
commencement thereof in writing; but the omission to so notify the indemnifying
party (i) will not relieve it from any liability under paragraph (a) or (b)
above unless and to the extent such failure results in the forfeiture by the
indemnifying party or substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraphs (a) and
(b) above. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial
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<PAGE> 23
Purchaser in the case of paragraph (a) of this Section 9 or the Company or the
Subsidiary Guarantors in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 9, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchaser on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by the Company and the
Subsidiary Guarantors bear to the total discounts and commissions received by
the Initial Purchaser. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Subsidiary
Guarantors on the one hand, or the Initial Purchaser on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or alleged statement or omission, and any
other equitable considerations appropriate in the circumstances.
(e) The Company, the Subsidiary Guarantors and the Initial
Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of the immediately preceding
paragraph (d). Notwithstanding the provisions of this paragraph 9, no Initial
Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchaser under this Agreement, less the aggregate
amount of any damages that the Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of the immediately preceding paragraph (d),
each person, if any, who controls the
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<PAGE> 24
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribute as the Initial
Purchaser, and each director of the Company and the Subsidiary Guarantors, each
officer of the Company and the Subsidiary Guarantors and each person, if any,
who controls the Company and the Subsidiary Guarantors within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company and the Subsidiary Guarantors.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company and the
Subsidiary Guarantors, their respective officers and the Initial Purchaser set
forth in this Agreement or made by or on behalf of them pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company and the Subsidiary
Guarantors, any of their respective officers or directors, the Initial
Purchaser or any controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 14
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchaser by notice to the Company given prior
to the Closing Date in the event that the Company or any of the Subsidiary
Guarantors shall have failed, refused or been unable to perform all obligations
and satisfy all conditions on their respective part to be performed or
satisfied hereunder at or prior thereto or, if at or prior to the Closing Date:
(i) any of the Company or the Subsidiary Guarantors shall
have sustained any loss or interference with respect to its businesses
or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had nor has a Material Adverse Effect, or there
shall have been, in the sole judgment of the Initial Purchaser, any
Material Adverse Change, or any event or development involving or
reasonably likely to cause or result in a Material Adverse Change
(including without limitation a change in management or control of the
Company or the Subsidiary Guarantors), except in each case as
described in the Circular (exclusive of any amendment or supplement
thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power, or (B)
an outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the
-24-
<PAGE> 25
Initial Purchaser, makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities as
contemplated by the Circular; or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible downgrading by
any nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided
in Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements
set forth in the last paragraph on the front cover page and in the final two
sentences of the third paragraph under the heading "Private Placement" in the
Circular (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchaser, shall be mailed or delivered or
telecopied and confirmed in writing to (i) Jefferies & Company, Inc.,11100
Santa Monica Blvd., 10th Floor, Los Angeles, CA 90025, Attention: David J.
Losito, Telecopy No.: (310) 575-5200; and if sent to the Company or the
Subsidiary Guarantors, shall be mailed or delivered or telecopied and confirmed
in writing to the Company at 8572 Katy Freeway, Suite 101, Houston, Texas
77024.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
14. Successors. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchaser, the Company and the Subsidiary
Guarantors and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company and the Subsidiary Guarantors contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Company and the Subsidiary Guarantors, their respective officers and any
person or persons who control the Company or the Subsidiary Guarantors within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from the Initial Purchaser will be deemed a successor
because of such purchase.
15. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
-25-
<PAGE> 26
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-26-
<PAGE> 27
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
the Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
PACKAGED ICE LEASING, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHCO ICE, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
MISSION PARTY ICE, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWEST TEXAS PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
SOUTHWESTERN ICE, INC.
By: /s/ A. J. LEWIS III
---------------------------------------
Name: A. J. Lewis III
Title: President
-27-
<PAGE> 28
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
JEFFERIES & COMPANY, INC.
By: /s/ DAVID J. LOSITO
-------------------------------
Name: David J. Losito
Title: Managing Director
-28-
<PAGE> 29
EXHIBIT C
Pursuant to Section 7(c) of the Purchase Agreement, Deloitte & Touche
L.L.P. shall furnish letters to the Initial Purchaser to the effect that:
(i) They are independent public accountants with respect
to the Company within the meaning of the Securities Act of 1933, as
amended (the "Act"), and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the consolidated financial
statements audited by them and included in the Circular comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the related published rules and
regulations;
(iii) The unaudited summary historical financial
information with respect to the consolidated results of operations and
financial position of the Company for the five most recent fiscal
years included in the Circular agrees with the corresponding amounts
(after restatements where applicable) in the audited consolidated
financial statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below (including, where appropriate, the
performance of the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS 71, Interim Financial Information), a
reading of the latest available interim financial statements of the
Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited
financial statements of the Company included in the Circular,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited consolidated statements of
operations, consolidated balance sheets, consolidated
statements of shareholders' equity and consolidated statements
of cash flows included in the Circular are not in conformity
with generally accepted accounting principles applied on the
basis substantially consistent with the basis for the audited
consolidated statements of operations, consolidated balance
sheets, consolidated statements of shareholders' equity and
consolidated statements of cash flows included in the
Circular;
C-1
<PAGE> 30
(B) any other unaudited income statement data and
balance sheet items of the Company included in the Circular do
not agree with the corresponding items in the unaudited
consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were
not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
consolidated financial statements included in the Circular;
(C) any unaudited pro forma consolidated
financial statements included in the Circular do not comply as
to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(D) as of a specified date not more than five
days prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options or
warrants, in each case which were outstanding on the date of
the latest financial statements included in the Circular) or
any increase in the consolidated long-term debt of the Company
and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items
specified by the Initial Purchaser, or any changes in any
other items specified by the Initial Purchaser, in each case
as compared with amounts shown in the latest balance sheet of
the Company included in the Circular, except in each case for
changes, increases or decreases which the Circular discloses
have occurred or may occur or which are described in such
letter; and
(E) for the period from the date of the latest
financial statements included in the Circular to the specified
date referred to in clause (D) there were any decreases in
consolidated net revenues or operating income or income before
income taxes or the total or per share amounts of consolidated
net income or other items specified by the Initial Purchaser,
or any increases in any items specified by the Initial
Purchaser, in each case as compared with the comparable period
of the preceding year and with any other period of
corresponding length specified by the Initial Purchaser,
except in each case for decreases or increases which the
Circular discloses have occurred or may occur or which are
described in such letter; and
(v) In addition to the examination referred to in their
report(s) included in the Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Initial Purchaser, which are derived from the general accounting
records of the Company and its subsidiaries, which appear in the
Circular, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
C-2
<PAGE> 1
EXHIBIT 10.38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Registration Rights . . . . . . . . . . . . . . . . . . . . 4
2.1 (a) Demand Registration . . . . . . . . . . . . . . . . . . . . 4
(b) Effective Registration . . . . . . . . . . . . . . . . . . . 5
(c) Restrictions on Sale by Holders . . . . . . . . . . . . . . 5
(d) Underwritten Registrations . . . . . . . . . . . . . . . . . 6
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Priority in Demand Registration . . . . . . . . . . . . . . 6
2.2 (a) Piggy-Back Registration . . . . . . . . . . 7
(b) Priority in Piggyback Registration . . . . . . . . . . . . . 7
2.3 Limitations, Conditions and Qualifications to
Obligations Under Registration Covenants . . . . . 8
2.4 Restrictions on Sale by the Company and Others . . 9
2.5 Rule 144 and Rule 144A . . . . . . . . . . . . . . 10
Section 3. Registration Procedures . . . . . . . . . . . . . . . . . . 10
Section 4. Indemnification and Contribution . . . . . . . . . . . . . . 15
Section 5. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 18
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . 18
(b) Adjustments Affecting Registrable Securities . . . . . . . . 18
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . 19
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . 19
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . 20
(j) Third Party Beneficiary . . . . . . . . . . . . . . . . . . 20
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 20
(l) Securities Held by the Company or Its Affiliates . . . . . . 20
</TABLE>
-i-
<PAGE> 2
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
THIS SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and entered into as of October 16, 1997, among PACKAGED
ICE, INC., a Texas corporation (the "Company") and JEFFERIES & COMPANY, INC.
(the"Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated October 10, 1997, among the Company, the Subsidiary Guarantors
named therein, and the Initial Purchaser (the "Purchase Agreement"), which
provides for the issuance and sale to the Initial Purchaser of 25,000 units
consisting of an aggregate of $25,000,000 aggregate principal amount 12% Series
C Senior Notes due April 15, 2004 and 25,000 warrants (the "Warrants"),
initially exercisable for an aggregate of 255,943 shares of common stock, par
value $.01 per share, of the Company (the "Common Stock"). In order to induce
the Initial Purchaser to enter into the Purchase Agreement, the Company has
agreed to provide to the Holders (as defined herein), among other things, the
registration rights for the Warrant Shares (as defined herein) set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the following
defined terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in the last
paragraph of Section 3 hereof.
"Agreement" has the meaning ascribed to such term in the
preamble of this Agreement.
"Business Day" shall mean a day that is not a Legal Holiday.
"Common Stock" has the meaning ascribed to such term in the
preamble of this Agreement.
"Company" shall have the meaning ascribed to that term in the
preamble of this Agreement and shall also include the Company's
successors and assigns.
"Demand Registration" has the meaning ascribed to such term in
Section 2.1(a) hereof.
"Demand Right Holders" means persons with "demand"
registration rights pursuant to a contractual commitment of the
Company.
"DTC" has the meaning ascribed to such term in Section 3(i)
hereof.
<PAGE> 3
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and the rules and regulations of the SEC
promulgated thereunder.
"Holder" means the Initial Purchaser, for so long as it owns
any Warrants and/or Warrant Shares, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of such Warrants or Warrant Shares.
"Included Securities" has the meaning ascribed to such term in
Section 2.1(a) hereof.
"indemnified party" has the meaning ascribed to such term in
Section 4(c) hereof.
"indemnifying party" has the meaning ascribed to such term in
Section 4(c) hereof.
"Initial Purchaser" means Jefferies & Company, Inc.
"Inspectors" has the meaning ascribed to such term in Section
3(n) hereof.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on
which banking institutions in New York, New York are required by law,
regulation or executive order to remain closed.
"Notes" means the $25,000,000 aggregate principal amount of
12% Senior Notes due April 15, 2004 of the Company.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Piggy-Back Registration" has the meaning ascribed to such
term in Section 2.2 hereof.
"Public Equity Offering" means an underwritten offer and sale
of capital stock of the Company pursuant to a registration statement
that has been declared effective by the Commission pursuant to the
Securities Act (other than a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee
benefit plan of the Company).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities
Act), as amended or supplemented by any prospectus supplement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
-2-
<PAGE> 4
"Purchase Agreement" has the meaning ascribed to such term in
the preamble of this Agreement.
"Registrable Securities" means any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) and (ii) any
other securities issued or issuable with respect to any Warrant Shares
by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities
when (i) a Registration Statement with respect to the offering of such
securities by the Holder thereof shall have been declared effective
under the Securities Act and such securities shall have been disposed
of by such Holder pursuant to such Registration Statement, (ii) such
securities are eligible for sale to the public pursuant to Rule 144(k)
(or any similar provision then in force, but not Rule 144A)
promulgated under the Securities Act, (iii) such securities shall have
been otherwise transferred by such Holder and new certificates for
such securities not bearing a legend restricting further transfer
shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any similar
state law then in force or (iv) such securities shall have ceased to
be outstanding.
"Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with its obligations, under
this Agreement, including, without limitation, all SEC and stock
exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the
Registrable Securities), preparing, printing, filing, duplicating and
distributing the Registration Statement and the related Prospectus,
the cost of printing stock certificates, the cost and charges of any
transfer agent, rating agency fees, printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for
the Company and all independent certified public accountants, the fees
and disbursements of underwriters customarily paid by issuers or
sellers of securities (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Selling Holders), fees and expenses of one
counsel for the Holders and other reasonable out-of-pocket expenses of
the Holders.
"Registration Statement" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to
the Securities Act which covers any of the Registrable Securities
pursuant to the provisions of this Agreement and all amendments and
supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Requisite Securities" shall mean a number of Registrable
Securities equal to not less than 25% of the Registrable Securities
held in the aggregate by all Holders.
-3-
<PAGE> 5
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter adopted by
the SEC providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144") or regulation hereafter adopted by
the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time and the rules and regulations of the SEC
promulgated thereunder.
"Securityholder" means, collectively, each Holder and their
respective successors and assigns.
"Selling Holder" shall mean a Holder who is selling
Registrable Securities in accordance with the provisions of Section
2.1 or 2.2 hereof.
"Warrants" has the meaning ascribed to such term in the
preamble of this Agreement.
"Warrant Shares" means the shares of Common Stock deliverable
upon exercise of the Warrants.
"Withdrawal Election" has the meaning ascribed to such term in
Section 2.2(b) hereof.
Section 2. Registration Rights.
2.1 (a) Demand Registration. From time to time, after 180
days following the completion by the Company of a Public Equity Offering,
Holders owning, individually or in the aggregate, not less than the Requisite
Securities may make a written request for registration under the Securities Act
of their Registrable Securities (a "Demand Registration"). Within 120 days of
the receipt of such written request for a Demand Registration, the Company
shall file with the SEC and use its best efforts to cause to become effective
under the Securities Act a Registration Statement with respect to such
Registrable Securities. Any such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. The Company shall give written notice of such registration
request to all other Holders of Registrable Securities within 15 days after the
receipt thereof. Within 20 days after notice of such registration request by
the Company, any Holder may request in writing that such Holder's Registrable
Securities
-4-
<PAGE> 6
be included in such Registration Statement and the Company shall include in
such Registration Statement the Registrable Securities of any such Holder
requested to be so included (the "Included Securities"). Each such request by
such other Holders shall specify the number of Included Securities proposed to
be sold and the intended method of disposition thereof. Subject to Section
2.1(b) hereof, the Company shall be required to register Registrable Securities
pursuant to this Section 2.1(a) on a maximum of two separate occasions.
Subject to Section 2.1(f) hereof, no other securities of the
Company except securities held by any Holder, any Demand Right Holder, and any
Person entitled to exercise "piggy back" registration rights pursuant to
contractual commitments of the Company shall be included in a Demand
Registration.
(b) Effective Registration. A Registration Statement will
not be deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental
or administrative agency or court that prevents, restrains or otherwise limits
the sale of Registrable Securities pursuant to such Registration Statement for
any reason not attributable to any Holder participating in such registration
and such Registration Statement has not become effective within a reasonable
time period thereafter (not to exceed 60 days), such Registration Statement
will be deemed not to have been effected. If (i) a registration requested
pursuant to this Section 2.1 is deemed not to have been effected or (ii) a
Demand Registration does not remain effective under the Securities Act until at
least the earlier of (A) an aggregate of 90 days after the effective date
thereof or (B) the consummation of the distribution by the Holders of all of
the Registrable Securities covered thereby, then the Company shall continue to
be obligated to effect an additional Demand Registration pursuant to this
Section 2.1 provided, that a Demand Registration shall not be counted as such
unless the Selling Holders have sold at least 80% of the Registrable Securities
covered thereby. For purposes of calculating the 90-day period referred to in
the preceding sentence, any period of time during which such Registration
Statement was not in effect shall be excluded. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities from a Demand Registration at any time prior to the effective date
of such Demand Registration.
(c) Restrictions on Sale by Holders. Each Holder of
Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to this Section 2.1 and are to be sold
thereunder agrees, if and to the extent reasonably requested by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of Registrable Securities or of securities of the
Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 30-day period prior to, and during the
120-day period beginning
-5-
<PAGE> 7
on, the closing date of each underwritten offering made pursuant to such
Registration Statement, to the extent timely notified in writing by the Company
or such managing underwriter or underwriters.
The foregoing provisions of Section 2.1(c) shall not apply to
any Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any such public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant
to Rule 144 (except as part of such underwritten offering) during such period,
unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
(d) Underwritten Registrations. If any of the Registrable
Securities covered by a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Holders of not less than
a majority of the Registrable Securities then outstanding to be sold thereunder
and will be reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
(e) Expenses. The Company will pay all Registration
Expenses in connection with the registrations requested pursuant to Section
2.1(a) hereof. Each Holder of Registrable Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a Registration
Statement requested pursuant to this Section 2.1.
(f) Priority in Demand Registration. In a registration
pursuant to Section 2.1 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders who have requested
such Demand Registration or who have sought inclusion therein that in such
underwriter's or underwriters' opinion the total number of securities which the
Selling Holders and any other Person desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event securities shall be registered in such registration
in the following order of priority: (i) first, the securities which have been
-6-
<PAGE> 8
requested to be included in such registration by the Holders of Registrable
Securities pursuant to this Agreement and the Demand Right Holders (pro rata
based on the amount of securities sought to be registered by such Persons),
(ii) second, provided that no securities sought to be included by the Holders
and the Demand Right Holders have been excluded from such registration, the
securities of other Persons entitled to exercise "piggy-back" registration
rights pursuant to contractual commitments of the Company (pro rata based on
the amount of securities sought to be registered by such Persons) and (iii)
third, securities the Company proposes to register.
2.2 (a) Piggy-Back Registration. If at any time after
the Company has completed a Public Equity Offering, the Company proposes to
file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of its
securityholders of any class of its Common Stock in a firmly underwritten
Public Equity Offering (other than (i) a Registration Statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC) or (ii) a
Registration Statement filed in connection with an exchange offer or offering
of securities solely to the Company's existing securityholders), then the
Company shall give written notice of such proposed filing to the Holders of
Registrable Securities as soon as practicable (but in no event fewer than 20
days before the anticipated filing date), and such notice shall offer such
Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request in writing within 30 days after
receipt of such written notice from the Company (which request shall specify
the Registrable Securities intended to be disposed of by such Selling Holder (a
"Piggy-Back Registration"). The Company shall use its best efforts to keep such
Piggy-Back Registration continuously effective under the Securities Act until
at least the earlier of (A) an aggregate of 90 days after the effective date
thereof or (B) the consummation of the distribution by the Holders of all of
the Registrable Securities covered thereby. The Company shall use its best
efforts to cause the managing Underwriter or underwriters, if any, of such
proposed offering to permit the Registrable Securities requested to be included
in a Piggy-Back Registration to be included on the same terms and conditions as
any similar securities of the Company or any other securityholder included
therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Registration Statement pursuant to this
Section 2.2 by giving written notice to the Company of its request to withdraw.
The Company may withdraw a Piggy-Back Registration at any time prior to the
time it becomes effective or the Company may elect to delay the registration;
provided, however, that the Company shall give prompt written notice thereof to
participating Selling Holders. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2, and each Holder of Registrable Securities shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to a Registration Statement effected pursuant to this Section 2.2.
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No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
of Registrable Securities pursuant to Section 2.1 hereof, and no failure to
effect a registration under this Section 2.2 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) Priority in Piggyback Registration. In a registration
pursuant to Section 2.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to adversely affect the success of such offering, including
the price at which such securities can be sold, then the Company will be
required to include in such registration only the amount of securities which it
is so advised should be included in such registration. In such event: (x) in
cases initially involving the registration for sale of securities for the
Company's own account, securities shall be registered in such offering in the
following order of priority: (i) first, the securities which the Company
proposes to register, and (ii) second, the securities which have been requested
to be included in such registration by Persons entitled to exercise "piggy-
back" registration rights pursuant to contractual commitments of the Company
(pro rata on the amount of securities sought to be registered by such Persons);
and (y) in cases not initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in
such offering in the following order of priority: (i) first, the securities of
any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such Person is a Holder of Registrable Securities, as among
Holders of Registrable Securities there shall be no priority and Registrable
Securities sought to be included by Holders of Registrable Securities shall be
included pro rata based on the amount of securities sought to be registered by
such Persons), (ii) second, securities of other persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments (pro rata
based on the amount of securities sought to be registered by such persons) and
(iii) third, the securities which the Company proposes to register.
If, as a result of the provisions of this Section 2.2(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration (a "Withdrawal Election"); provided, however,
that a Withdrawal Election shall be irrevocable and, after making a Withdrawal
Election, a Selling Holder shall no longer have any right to include
Registrable Securities in the registration as to which such Withdrawal Election
was made.
2.3 Limitations, Conditions and Qualifications to
Obligations Under Registration Covenants. The obligations of the Company set
forth in Sections 2.1 and 2.2 hereof are subject to each of the following
limitations, conditions and qualifications:
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<PAGE> 10
(i) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared,
filed and made and kept effective by it hereunder; provided, however, that the
duration of such postponement or suspension may not exceed the earlier to occur
of (A) 15 days after the cessation of the circumstances described in the next
sentence of this paragraph on which such postponement or suspension is based or
(B) 120 days after the date of the determination of the Board of Directors
referred to in the next sentence, and the duration of any such postponement or
suspension shall be excluded from the calculation of the 90-day period
described in Section 2.1(b) hereof. Such postponement or suspension may only be
effected if the Board of Directors of the Company determines in good faith that
the filing or effectiveness of, or sales pursuant to, such Registration
Statement would materially impede, delay or interfere with any financing, offer
or sale of securities, acquisition, corporate reorganization or other
significant transaction involving the Company or any of its affiliates (whether
or not planned, proposed or authorized prior to an exercise of demand
registration rights hereunder or any other registration rights agreement) or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential. If the Company shall so
postpone the filing or effectiveness of a Registration Statement or so suspend
the rights of Holders to make sales it shall, as promptly as possible, notify
any Selling Holders of such determination, and the Selling Holders shall (y)
have the right, in the case of a postponement of the filing or effectiveness of
a Registration Statement, upon the affirmative vote of the Holders of not less
than a majority of the Registrable Securities to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company within 10 days after receipt of such notice or
(z) in the case of a suspension of the right to make sales, receive an
extension of the registration period equal to the number of days of the
suspension. Any Demand Registration as to which the withdrawal election
referred to in the preceding sentence has been effected shall not be counted
for purposes of the two Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(ii) The Company shall not be required by this Agreement
to include securities in a Registration Statement pursuant to Section 2.2
hereof if (i) in the written opinion of counsel to the Company, addressed to
the Holders and delivered to them, the Holders of such securities seeking
registration would be free to sell all such securities within the current
calendar quarter, without registration, under Rule 144, which opinion may be
based in part upon the representation by such Holders, which representation
shall not be unreasonably withheld, that each such Holder is not an affiliate
of the Company within the meaning of the Securities Act and (ii) all
requirements under the Securities Act for effecting such sales are satisfied at
such time.
(iii) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders acknowledge, to
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Company to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such Registration Statement.
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<PAGE> 11
(iv) The Company shall not be obligated to cause any
special audit to be undertaken in connection with any registration pursuant to
this Agreement unless such audit is requested by the underwriters with respect
to such registration.
2.4 Restrictions on Sale by the Company and Others. The
Company covenants and agrees that it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of
any securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 90-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to this Agreement, or a
Piggy-Back Registration.
2.5 Rule 144 and Rule 144A. The Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder in
a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities,
make publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A (to the extent Registrable Securities may
then be sold pursuant to Rule 144A). The Company further covenants for so long
as any Registrable Securities remain outstanding to make available to any
Holder or beneficial owner of Registrable Securities in connection with any
sale thereof and any prospective purchaser of such Registrable Securities from
such Holder or beneficial owner, the information required by Rule 144A(d)(y)
under the Securities Act in order to permit resales of such Registrable
Securities pursuant to Rule 144A. Upon the request of any Holder of Registrable
Securities, the Company will in a timely manner deliver to such Holder a
written statement as to whether it has complied with such information
requirements.
Section 3. Registration Procedures. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall:
(a) Prepare and file with the SEC as soon as practicable
each such Registration Statement (but in any event on or prior to the
date of filing thereof required under this Agreement) and cause each
such Registration Statement to become effective and remain effective
as provided herein; provided, however, that before filing any such
Registration Statement or any Prospectus or any amendments or
supplements thereto (including documents that would be incorporated or
deemed to be incorporated therein by reference, including such
documents filed under the Exchange Act that would be incorporated
therein by reference), the Company shall afford promptly to the
Holders of the Registrable Securities covered by such Registration
Statement, their counsel and the managing underwriter or underwriters,
if any, an opportunity to review copies of all such documents proposed
to be filed a reasonable time prior to the proposed filing thereof.
The Company shall not file any Registration Statement or Prospectus or
any amendments or supplements thereto if the
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<PAGE> 12
Holders of a majority of the Registrable Securities covered by such
Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing unless
failure to file any such amendment or supplement would involve a
violation of the Securities Act or other applicable law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the time periods prescribed hereby; cause the related Prospectus
to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable
to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities, their
counsel and the managing underwriter or underwriters, if any, promptly
(but in any event within two (2) Business Days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective (including in such notice a written statement
that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules and exhibits),
(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation
or threatening of any proceedings for that purpose, (iii) if at any
time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by
Section 3(m) below cease to be true and correct in any material
respect, (iv) of the receipt by the Company of any notification with
respect to (A) the suspension of the qualification or exemption from
qualification of the Registration Statement or any of the Registrable
Securities covered thereby for offer or sale in any jurisdiction, or
(B) the initiation of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or information
becoming known that requires the making of any change in any
Registration Statement or Prospectus so that, in the case of such
Registration Statement, it will conform in all material respects with
the requirements of the Securities Act and it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of any Prospectus, it
will conform in all material respects with the requirements of the
Securities Act and it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not
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<PAGE> 13
misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be
appropriate.
(d) Use every reasonable effort to prevent the issuance
of any order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Securities covered thereby
for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order at the earliest possible
moment.
(e) If requested by the managing underwriter or
underwriters, if any, or the Holders of a majority of the Registrable
Securities being sold in connection with an underwriting offering, (i)
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or
underwriters, if any, or such Holders reasonably request to be
included therein to comply with applicable law, (ii) make all required
filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of
the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to
such Registration Statement.
(f) Furnish to each Holder of Registrable Securities who
so requests and to counsel for the Holders of Registrable Securities
and each managing underwriter, if any, without charge, upon request,
one conformed copy of the Registration Statement and each
post-effective amendment thereto, including financial statements and
schedules, and of all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including exhibits
incorporated by reference).
(g) Deliver to each Holder of Registrable Securities,
their counsel and each underwriter, if any, without charge, as many
copies of each Prospectus and each amendment or supplement thereto as
such Persons may reasonably request; and, subject to the last
paragraph of this Section 3, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of
the Holders of Registrable Securities and the underwriter or
underwriters or agents, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to
register or qualify, and cooperate with the Holders of such
Registrable Securities, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as the managing underwriter or underwriters reasonably
request in writing, or, in the event of a non-underwritten offering,
as the Holders of a majority of such Registrable Securities may
request; provided, however, that where Registrable Securities are
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<PAGE> 14
offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to
this Section 3(h); keep each such registration or qualification (or
exemption therefrom) effective during the period the Registration
Statement relating to such Registrable Securities is required to be
kept effective pursuant to this Agreement and do any and all other
acts or things necessary or advisable to enable the disposition in
such jurisdictions of the securities covered thereby; provided,
however, that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or (C) become subject to taxation in any jurisdiction where it
is not then so subject.
(i) Cooperate with the Holders of Registrable Securities
and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any restrictive legends whatsoever and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request at least two business days prior to any
sale of Registrable Securities in a firm commitment underwritten
public offering.
(j) Use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities within
the United States as may be necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate the
disposition of such Registrable Securities, except as may be required
solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable
respects with the filing of the Registration Statement and the
granting of such approvals.
(k) Upon the occurrence of any event contemplated by
Section 3(c)(v) or 3(c)(vi) above, as promptly as practicable prepare
a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and, subject to
Section 3(a) hereof, file such with the SEC so that, as thereafter
delivered to the purchasers of Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and will
otherwise comply with law.
(1) Prior to the effective date of a Registration,
Statement, (i) provide the registrar for the Registrable Securities
with certificates for such securities in a form eligible for deposit
with DTC and (ii) provide a CUSIP number for such securities.
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<PAGE> 15
(m) Enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the
registration or disposition of such Registrable Securities in any
underwritten offering to be made of the Registrable Securities in
accordance with this Agreement, and in such connection, (i) make such
representations and warranties to, and covenants with, the underwriter
or underwriters, with respect to the business of the Company and the
subsidiaries of the Company, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested:
(ii) use reasonable efforts to obtain opinions of counsel to the
Company and updates thereof, addressed to the underwriter or
underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by underwriters; (iii) use reasonable efforts to
obtain "cold comfort letters and updates thereof from the independent
certified public accountants of the Company (and, if applicable, the
subsidiaries of the Company) and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement, addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested
by the managing underwriter or underwriters and as permitted by the
Statement of Auditing Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain customary
indemnification provisions and procedures no less favorable than those
set forth in Section 5 (or such other provisions and procedures
acceptable to Holders of a majority of Registrable Securities covered
by such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required
thereunder.
(n) Make available for inspection by a representative of
the Holders of Registrable Securities being sold, any underwriter
participating in any such disposition of Registrable Securities, if
any, and any attorney or accountant retained by such representative of
the Holders or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all
financial and other records and pertinent corporate documents of the
Company and the subsidiaries of the Company, and cause the officers,
directors and employees of the Company and the subsidiaries of the
Company to supply all information in each case reasonably requested by
any such Inspector in connection with such Registration Statement;
provided, however, that all information shall be kept confidential by
such Inspector, except to the extent that (i) the disclosure of such
information is necessary to avoid or correct a misstatement or
omission in the Registration Statement, (ii) the release of such
information is ordered pursuant to a subpoena or other order from a
court of
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<PAGE> 16
competent jurisdiction, (iii) disclosure of such information is, in
the opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and
arising out of, based upon, relating to or involving this Agreement or
any of the transactions contemplated hereby or arising hereunder, or
(iv) such information has been made generally available to the public.
Each Selling Holder of such Registrable Securities agrees that
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company or of any of its
affiliates unless and until such is generally available to the public.
Each Selling Holder of such Registrable Securities further agrees that
it will, upon learning that disclosure of such information is sought
in a court of competent jurisdiction, give prompt notice to the
Company and allow the Company to undertake appropriate action to
prevent disclosure of the information deemed confidential at the
Company's sole expense.
(o) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than forty-five (45)
days after the end of any 12-month period (or ninety (90) days after
the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable
Securities are sold to an underwriter or to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to an underwriter or to underwriters in such an offering, commencing
on the first day of the first fiscal quarter of the Company after the
effective date of the relevant Registration Statement, which
statements shall cover said 12-month periods.
(p) Use its best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on
each securities exchange, if any, on which similar securities issued
by the Company are then listed.
(q) Cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any restrictive legends and registered in such names as the
Selling Holders may reasonably request at least two business days
prior to the closing of any sale of Registrable Securities.
Each seller of Registrable Securities as to which any
registration is being effected agrees, as a condition to the registration
obligations with respect to such Holder provided herein, to furnish to the
Company such information regarding such seller and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably
request in writing to comply with the Securities Act and other applicable law.
The Company may exclude from such registration the Registrable Securities of
any seller who fails to furnish such information within a reasonable time after
receiving such request. If the identity of a seller of Registrable Securities
is
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<PAGE> 17
to be disclosed in the Registration Statement, such seller shall be permitted
to include all information regarding such seller as it shall reasonably
request.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(c)(ii),
3(c)(iv), 3(c)(v), or 3(c)(vi) hereof, such Holder will forthwith discontinue
disposition of such Registrable Securities covered by the Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof), or
until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto, and, if so directed by the Company, such
Holder will deliver to the Company all copies, other than permanent file
copies, then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period of time for which a
Registration Statement is required hereunder to be effective shall be extended
by the number of days during such periods from and including the date of the
giving of such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 3(k)
hereof or (y) the Advice.
Section 4. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Holder and each Person, if any, who
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder, from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other reasonable out-of-pocket expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted), caused
by, arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or caused by any omission or alleged omission to state in any such
Prospectus a material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information relating
to any Holder furnished to the Company in writing by such Holder expressly for
use therein; provided, however, that the Company will not be liable if such
untrue statement or omission or alleged untrue statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
or any amendment or supplement thereto and the Prospectus does not contain any
other untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and any
such loss, liability, claim, damage or expense suffered or incurred by the
Holders resulted from any action,
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<PAGE> 18
claim or suit by any Person who purchased Registrable Securities which are the
subject thereof from such Holder and it is established in the related
proceeding that such Holder failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Securities sold to such Person if
required by applicable law, unless such failure to deliver or provide a copy of
the Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 3 of this Agreement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
any Registration Statement, and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Holder, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement or any Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus. The liability of any Holder under this
paragraph shall in no event exceed the proceeds received by such Holder from
sales of Registrable Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
either paragraph (a) or (b) above, such Person (the "indemnified party") shall
promptly notify the Person against which such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of
the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred of such counsel relating to
such proceeding; provided, however, that the failure to so notify the
indemnifying party shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such
failure directly results in the loss or compromise of any material rights or
defenses by such indemnifying party and such indemnifying party was not
otherwise aware of such action or claim). In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed in writing to the contrary, (ii) the indemnifying party shall have
failed to retain within a reasonable period of time counsel reasonably
satisfactory to such indemnified party or parties or (iii) the named parties to
any such proceeding (including any impleaded parties) include both such
indemnified party or parties and the indemnifying parties or an affiliate of
the indemnifying parties or such indemnified parties and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that, unless there exists a
conflict among indemnified parties, the indemnifying parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed promptly after receipt of the invoice
therefore as they are incurred. Any such separate firm for the Holders and such
control Persons of the Holders shall be designated
-17-
<PAGE> 19
in writing by Holders who sold a majority in interest of Registrable Securities
sold by all such Holders and any such separate firm for the Company, its
directors, its officers and such control Persons of the Company shall be
designated in writing by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there is a final non-appealable
judgment for the plaintiff for which the indemnified party is entitled to
indemnification pursuant to this Agreement, the indemnifying party agrees to
indemnify any indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for reasonable fees and expenses actually
incurred by counsel as contemplated by the third sentence of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its prior written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement; provided, however, that the indemnifying party shall not be liable
for any settlement effected without its consent pursuant to this sentence if
the indemnifying party is contesting, in good faith, the request for
reimbursement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement (1) includes an unconditional release of such
indemnified party in form and substance satisfactory to such indemnified party
from all liability on Claims that are the subject matter of such proceeding and
(2) does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in paragraph (a)
or (b) of this Section 4 is unavailable (other than by reason of the exceptions
specifically provided therein) to, or insufficient to hold harmless, an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraphs, in
lieu of indemnifying such indemnified party thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holders on the other
hand from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company on the one hand
and the Holders on the other in connection with the statements or omissions (or
alleged statements or omissions) that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
the Holders on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct
-18-
<PAGE> 20
or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 4, in no event shall a
Holder be required to contribute any amount in excess of the amount by which
proceeds received by such Holder from sales of Registrable Securities exceeds
the amount of any damages that such Holder has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 4 will be in addition to any which the indemnifying parties may
otherwise have to the indemnified parties referred to above.
Section 5. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not
entered into nor will the Company on or after the date of this Agreement enter
into, or cause or permit any of its subsidiaries to enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. The
Company shall not, directly or indirectly, take any action with respect to the
Registrable Securities as a class that would adversely affect the ability of
the Holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company
has obtained the prior written consent of Holders of not less than a majority
of the outstanding Warrants and/or Registrable Securities; provided, however,
that Section 4 hereof and this Section 5(c) may not be amended, modified or
supplemented without the prior written consent of each Holder (including any
Person who was a Holder of Registrable Securities disposed of pursuant to any
Registration Statement). Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Securities whose securities
are being sold
-19-
<PAGE> 21
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by the Holders of not less than a majority of the
Registrable Securities proposed to be sold by such Holders pursuant to such
Registration Statement. In addition, each such amendment, modification,
supplement and waiver must be agreed to in writing by the company.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder at the most current address of such
Holder as set forth in the register for the Warrants or the Warrant Shares,
which address initially is, with respect to the Initial Purchaser, the address
set forth in the Purchase Agreement and (ii) if to the Company, initially at
the Company's address set forth in the Purchase Agreement and thereafter at
such other address, notice of which is given in accordance with the provisions
of this Section (d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto and the Holders; provided, however, that this Agreement shall
not inure to the benefit of or be binding upon a successor or assign of a
Holder unless such successor or assign holds Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
-20-
<PAGE> 22
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Third Party Beneficiary. The Holders are intended
third party beneficiaries of this Agreement and this Agreement may be enforced
by such Persons.
(k) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Warrant Agreement, is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement, the
Purchase Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(l) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities or Warrants is required hereunder, Registrable
Securities or Warrants held by the Company or by any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the holders of such
required percentage.
-21-
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By: /s/ A. J. LEWIS III
-----------------------------
Name: A. J. Lewis III
Title: President
JEFFERIES & COMPANY, INC.
By: /s/ DAVID J. LOSITO
-----------------------------
Name: David J. Losito
Title: Managing Director
-22-
<PAGE> 1
EXHIBIT 10.39
SUPPLEMENTAL INDENTURE (12% SERIES C SENIOR NOTES)
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
October 23, 1997, among Central Arkansas Cold Storage-Texas, Inc. and Golden
Eagle Ice-Texas, Inc. (the "New Subsidiary Guarantors"), subsidiaries of
Packaged Ice, Inc. (or its successor), a Texas corporation (the "Company"),
Packaged Ice Leasing, Inc., Southco Ice, Inc., Mission Party Ice, Inc.,
Southwest Texas Packaged Ice, Inc. and Southwestern Ice, Inc., the Subsidiary
Guarantors (the "Existing Subsidiary Guarantors") and the Company under the
Indenture referred to below, and United States Trust Company of Texas, N.A., as
trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of October 16, 1997, providing for the issuance of an
aggregate principal amount of $25,000,000 of 12% Series C Senior Notes due
April 15, 2004 (the "Securities"); and
WHEREAS, Section 4.21 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantors to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantors shall unconditionally guarantee all of the
Company's obligations under the Securities pursuant to a Subsidiary Guaranty on
the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 10.07 of the Indenture, the Trustee, the
Company and Existing Subsidiary Guarantors are authorized to execute and
deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
New Subsidiary Guarantors, the Company, the Existing Subsidiary Guarantors and
the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Securities as follows:
1. Definitions.
(a) Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
(b) For all purposes of this Supplemental Indenture, except
as otherwise herein expressly provided or unless the context otherwise
requires: (i) the terms and expressions used herein shall have the same
meanings as corresponding terms and expressions used in the Indenture; and (ii)
the words "herein," "hereof" and "hereby" and other words of similar import
used in this Supplemental Indenture refer to this Supplemental Indenture as a
whole and not to any particular section hereof.
<PAGE> 2
2. Agreement to Guarantee. The New Subsidiary Guarantors hereby
agree, jointly and severally with all other Subsidiary Guarantors, to guarantee
the Company's obligations under the Securities on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all
other applicable provisions of the Indenture. From and after the date hereof,
the New Subsidiary Guarantors shall be Subsidiary Guarantors for all purposes
under the Indenture and the Securities.
3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
6. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
7. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction thereof.
[Signature page follows]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
THE COMPANY
PACKAGED ICE, INC.
By:
----------------------------------
A. J. Lewis III, President
NEW SUBSIDIARY GUARANTORS:
CENTRAL ARKANSAS COLD GOLDEN EAGLE ICE-TEXAS, INC.
STORAGE-TEXAS, INC.
By: By:
------------------------------------ -------------------------------
A. J. Lewis III, President A. J. Lewis III, President
EXISTING SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC. SOUTHCO ICE, INC.
By: By:
------------------------------------ -------------------------------
A. J. Lewis III, President A. J. Lewis III, President
MISSION PARTY ICE, INC. SOUTHWEST TEXAS
PACKAGED ICE, INC.
By: By:
------------------------------------ -------------------------------
A. J. Lewis III, President A. J. Lewis III, President
SOUTHWEST TEXAS SOUTHWESTERN ICE, INC.
PACKAGED ICE, INC.
By: By:
------------------------------------ -------------------------------
A. J. Lewis III, President A. J. Lewis III, President
TRUSTEE: UNITED STATES TRUST COMPANY
OF TEXAS, N.A., as Trustee:
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
S-1
<PAGE> 1
EXHIBIT 10.40
TRADEMARK LICENSE AGREEMENT
This TRADEMARK LICENSE AGREEMENT (this "Agreement") dated as of the 31st
day of October, 1997 between Culligan International Company, a Delaware
corporation (the "Licensor"), and Packaged Ice, Inc., a Texas corporation (the
"Company").
WHEREAS, the Licensor has agreed to license to the Company the right to
use the "Water by Culligan" and "Ice by Culligan" trademark and logo (as more
fully described below) in connection with the Products (as defined below) in
the Territory (as defined below), subject to the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
(a) The term "Mark" shall be used herein to mean the trademark
"Culligan" used solely in the phrases "Water by Culligan" and "Ice by Culligan"
solely in the accompanying logos in the full and complete form identified in
Exhibit A hereto, as modified from time to time in writing by the Licensor.
(b) The term "Products" shall mean comestible ice sold from machines
that make and package and merchandise ice that are located in retail outlets
where ice is sold to consumers.
(c) The term "Revenues" shall mean gross revenues which arise from
the sale of Products in connection with the Mark, less (i) promotional and cash
discounts, (ii) rebates, allowances, refunds, charge-backs and credits, (iii)
amounts collected for sales, excise and value-added taxes and (iv) duties,
handling and shipping charges billed as separate items.
(d) The term "Territory" shall mean the United States of America and
Mexico.
<PAGE> 2
2. LICENSE.
(a) The Licensor hereby grants to the Company an exclusive (except as
provided in Section 14 hereof) license to use the Mark in connection with the
advertising, promotion, distribution, and sale of Products in the Territory
during the Term (as defined below) and subject to the terms and conditions
hereof. The license granted hereby is non-transferable and non-assignable
(except as provided in Section 15.5 hereof) and may not be directly or
indirectly sub-licensed.
(b) The Company warrants, represents and agrees that it shall not use
the Mark, alone or in combination with other terms, as part of a corporate
name.
3. TERM. The "Term" of this Agreement shall commence on the date
hereof (the date hereof through December 31, 1997 constituting the "Initial
Term") and, subject to earlier termination as provided below, shall
automatically renew for successive one year terms beginning on January 1 and
ending on December 31 of each subsequent calendar year (the "Renewal Terms").
4. ROYALTIES.
(a) The Company agrees to pay to the Licensor $1,750,000 on the date
hereof as a one-time, non-refundable fee which has been fully earned by the
Licensor as of the date hereof.
(b) The Company further agrees to pay to the Licensor as a minimum
royalty ("Minimum Royalties") the following sums for the Initial Term and each
Renewal Term:
<TABLE>
<CAPTION>
Initial and Renewal Terms Minimum Royalties
------------------------- -----------------
<S> <C>
1997 $ 0
1998 $ 50,000
1999 $ 500,000
2000 $1,000,000
2001 $1,500,000
</TABLE>
The Licensor and the Company shall negotiate in good faith the Minimum
Royalties for the Renewal Terms after 2001. In the event that the Licensor and
the Company do not agree in writing by June 1, 2001 to Minimum Royalties for
the Renewal Terms subsequent to 2001, this Agreement shall automatically
terminate on December 31, 2001.
2
<PAGE> 3
(c) Minimum Royalties for each Renewal Term shall be payable on a
quarterly basis (i.e., one-quarter of the Minimum Royalties for each Renewal
Term shall be payable in cash on the March 31, June 30, September 30, and
December 31 of such Renewal Term, respectively). All of the payments made by
the Company as Minimum Royalties in any calendar year shall be credited against
Earned Royalties (hereinafter defined) payable for such calendar year. No
credit shall be permitted against Minimum Royalties payable for any Renewal
Term on account of Earned Royalties (as defined below) or Minimum Royalties
paid for any other Renewal Term, and Minimum Royalties shall be non-refundable.
(d) The Company further agrees to pay to the Licensor earned
royalties ("Earned Royalties") in an amount in cash equal to 2.5% of all
Revenues. Within thirty days after the end of the Initial Term and each
Renewal Term (each, a "Preceding Term"), the Company shall prepare and furnish
to the Licensor a statement certified by the chief accounting officer of the
Company (the "Statement") setting forth in reasonable detail (i) a description,
including the total quantity, of Products sold during the Preceding Term, (ii)
a description, including the total quantity, of Products sold in connection
with the Mark during the Preceding Term, (iii) the gross revenues from all
Products sold during the Preceding Term, (iv) the gross revenues from all
Products sold in connection with the Mark during the Preceding Term, (v) a de-
scription of, including the amount of and reasons for, each deduction from
gross revenues from all Products to determine Revenues, and (v) the Earned
Royalties attributable to the Preceding Term. In the event that the Earned
Royalties attributable to such Preceding Term exceed the amount of Minimum
Royalties paid during such Preceding Term, the Company shall pay to the
Licensor at the time that it furnishes the Statement (but not later than the
30th day following the end of such Preceding Term) an amount in cash equal to
the excess of the amount of Earned Royalties for such term over the amount of
Minimum Royalties paid in respect of such term. This Section 4(d) shall
survive any termination or expiration of this Agreement.
5. AUDIT. The Company shall keep true, complete and accurate
records, books of account and related information containing particulars
showing (i) all of its shipments and sales of Products, (ii) all of its
shipments and sales of Products in connection with the Mark, (iii) all
deductions from gross revenues from Products to determine Revenues, and (iv)
all other information which may be necessary for the purpose of verifying the
amount of Earned Royalties due and payable to the Licensor. Such records,
books of account and related information shall be kept in the principal place
of business of the Company and said records, books and the supporting data
shall be available, upon reasonable advance notice and
3
<PAGE> 4
during normal business hours, at the request of the Licensor for inspection by
an independent certified public accountant retained by the Licensor at the
Licensor's expense for the purpose of verifying any matter relevant to this
Agreement. In the event that an inspection reveals that the amount of Earned
Royalties reported and paid to the Licensor for any Preceding Term was under-
reported in an amount which exceeds 3% of the total amount due for such
Preceding Term, the Company shall be required to pay to the Licensor the
reasonable fees charged by the independent certified public accountant to
determine the underpayment. In any event, the Company shall pay any Earned
Royalties determined to be due by reason of such inspection. This Section 5
shall survive any termination or expiration of this Agreement.
6. MARKING. The Company agrees to use the Mark with the appropriate
common law or statutory trademark notice to maintain and enhance the validity
and protectability of the Mark (for example, the trademark notice would consist
of "Water by Culligan(R)" or "Ice by Culligan(R)," as the case may be). Such
notice shall be placed on all packaging and machines for the Products bearing
the Mark (or otherwise utilizing the Mark in connection with sales thereof) and
in all other ways customary in the trade.
7. QUALITY OF GOODS AND SERVICES. The design, manufacture, styling,
workmanship, safety and quality of all Products, packaging for Products,
machines dispensing Products used in connection with the Mark (including all
services in connection therewith), and all advertising, marketing and
promotional materials relating or referring to the Mark and every use of the
Mark shall at all times be in conformance with applicable industry standards,
shall at all times comply in all material respects with all applicable laws and
regulations of any relevant jurisdiction, and shall at no time be at a level
below that maintained by the Company as of the date of this Agreement. Within
60 days of the execution of this Agreement, the Licensor and the Company shall
create and adopt written guidelines (the "Guidelines") with respect to the
acceptable quality of the Products, packaging for Products, machines dispensing
Products and all other materials (including but not limited to all advertising,
marketing and promotional materials) using the Mark. The Company shall furnish
to the Licensor, at the Licensor's request not more than once every six (6)
months, representative samples of Products, packaging for Products, photographs
of machines dispensing Products and all other materials (including but not
limited to all advertising, marketing and promotional materials) using the
Mark. In the event the Licensor provides written notice to the Company stating
that any Products, packaging for Products, machines dispensing Products or
materials used in connection with the Mark (including all services in
connection therewith), do not meet the quality standards set forth in the
Guidelines (or if such Guidelines have not yet been adopted,
4
<PAGE> 5
such Products, machines or materials do not in the reasonable judgment of the
Licensor meet the level of quality generally associated with the Mark or
otherwise tarnish the goodwill or reputation associated with the Mark) or the
other quality standards in this Section 7, then the Licensor or its authorized
agents and representatives shall have the right, at the Licensor's expense, to
inspect all facilities or premises maintained by or on behalf of the Company
and all facilities and premises at which Products are sold, including, without
limitation, the retail stores at which the Products are sold, the Company's
showrooms and the plants, factories or other manufacturing, production or
warehouse facilities of the Company at which the Products, packaging, machines
or materials using the Mark are being or are proposed to be manufactured,
produced, displayed or stored to ascertain whether the quality standards
provided for in this Section 7 are being satisfied. Such inspection shall be
conducted in a manner that shall not unreasonably interfere with the business
operations of the Company. In the event the Company receives written notice
from the Licensor setting forth a reasonable basis and with reasonable
specificity that the Products, machines, or materials using the Mark do not
comply with the Guidelines (or if such Guidelines have not yet been adopted,
such Products, machines, or materials do not in the reasonable judgment of the
Licensor meet the level of quality generally associated with the Mark or
otherwise tarnish the goodwill or reputation associated with the Mark) or the
other quality standards in this Section 7, the Company shall achieve conformity
with such standards within 30 days of receipt of such notice, or, if conformity
with such standards is not reasonably achievable within such 30-day period,
then the Company shall have an additional 90 days to achieve such conformity
provided that the Company promptly commences and vigorously pursues remedial
steps during the initial 30-day period and diligently pursues remedial steps
thereafter.
8. OWNERSHIP OF MARK. The Company acknowledges that the Licensor is
the sole and exclusive owner of the Mark, and the Company shall not contest the
Licensor's rights in the Mark or the validity of this Agreement. The Company
will cooperate with the Licensor and execute any and all documents during and
following the Term of this Agreement, reasonably requested by the Licensor and
at the Licensor's reasonable expense, in order to protect and maintain the
Licensor's exclusive rights and title to the Mark including, without
limitation, filing any applications, recordings of this Agreement or other
documentation regarding the Mark with governmental authorities having
jurisdiction over the granting and maintaining of trademark registrations. The
Company further agrees to notify the Licensor of any infringing use of the Mark
by others promptly after such infringing use comes to the attention of the
Company. The Licensor shall have the sole right to bring infringement or
unfair competition proceedings involving the Mark.
5
<PAGE> 6
9. TERMINATION. The Licensor shall have the right to terminate this
Agreement upon 30-days' prior written notice to the Company if (a) any
Insolvency Event (as defined below) occurs, or (b) the Company breaches any of
its duties or obligations under this Agreement and such breach is not remedied
by the Company within 30 days of receipt of written notice from the Licensor
setting forth such breach, or if such breach can not be reasonably cured within
such 30-day period the Company shall have up to an additional 90 days to cure
such breach provided that the Company promptly commences and vigorously pursues
remedial steps during the initial 30-day period and diligently pursues remedial
steps thereafter. An "Insolvency Event" shall have occurred if (A) 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
Company or any significant subsidiary (as defined in Regulation S-X under the
Securities Act of 1933) of the Company, or of a substantial part of the
property or assets of the Company or any such significant subsidiary, under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator, liquidator, administrator or similar official for
the Company or any such significant subsidiary or for a substantial part of the
property or assets of the Company or any such significant subsidiary or (iii)
the winding-up or liquidation of the Company; and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered; or (B) the Company or any such
significant subsidiary shall (i) voluntarily commence any proceeding or file
any petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceedings or the filing of any petition described in (A) above, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator, liquidator, administrator or similar official for
the Company or any such significant subsidiary or for a substantial part of the
property or assets of the Company or any such significant subsidiary, (iv) file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail generally
to pay its debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing. The Company shall have the right to terminate
this Agreement effective on the last day of any Renewal Term provided that it
has given at least 90 days' prior written notice to the Licensor; provided,
however, that no such termination by the Company shall limit the Licensor's
right to terminate this Agreement as provided above.
10. EFFECT OF TERMINATION. Upon the effective date of termination
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<PAGE> 7
of this Agreement, the Company shall immediately cease all use of the Mark or
any term confusingly similar thereto and shall cease selling any additional
inventory bearing the Mark and (at the option of the Company) destroy, modify
(with the consent of the Licensor) or surrender to the Licensor all signs,
letterhead, product name plates and other materials in the possession, custody
or control of the Company which use the Mark or any term confusingly similar
thereto so as to cease using the Mark or any term confusingly similar thereto;
provided, however, that upon the date of notice of termination pursuant to
Section 9, the Company shall have the right to sell inventory on hand or on
order in the ordinary course of business for an additional 90 days (subject to
the payment of Earned Royalties that exceed Minimum Royalties paid for such
time period) after receipt of such notice of termination (unless such inventory
poses a significant risk to the safety or health of consumers). The Company
acknowledges that all rights in, to and under the Mark and the goodwill
connected therewith shall remain the property of the Licensor.
11. THE LICENSOR'S RIGHTS. All use of the Mark by the Company and in
any variation thereof shall inure to the exclusive benefit of the Licensor.
All rights in the Mark other than those specifically retained by or granted to
the Company hereunder are reserved to the Licensor.
12. INDEMNIFICATION AND INSURANCE.
(a) The Company agrees to indemnify and hold harmless the Licensor
and each of its shareholders, officers, directors, employees and agents against
any and all liability, claims, causes of action, suits, damages and expenses
for which they or any of them may become liable or may incur or be compelled to
pay in any action or claim against them or any of them by any party, other than
the Licensor, its officers, directors, employees or agents, for or by reason of
(i) the infringement of patents, trade secret rights or rights to any
intellectual property of a third party, other than the Mark, as a result of the
manufacture, warehousing, marketing, promotion, publicity, advertising, sale or
distribution of the Products by the Company or any of its agents,
representatives, contractors, sublicensees or assigns, (ii) any acts, whether
of omission or commission, that may be committed or suffered by the Company or
any of its agents, representatives, contractors, sublicensees or assigns in
connection with this Agreement, (iii) any liability (including, without
limitation, any personal injury or property damage) arising out of the
manufacture, warehousing, marketing, promotion, publicity, sale, advertising,
or distribution of or the use by any consumer of, the Products, or any
violation of any warranty, representation or agreement made by the Company or
any of its agents, representatives, contractors, sublicensees or assigns with
respect to the Products, or (iv) the breach by the Company of any of its
representations, warranties or covenants in this Agreement. The Licensor shall
give
7
<PAGE> 8
the Company written notice of any such claim promptly following its receipt
thereof. The Company shall have the opportunity to undertake and to control
the defense and settlement thereof through attorneys selected by the Company.
Notwithstanding the foregoing, the Company shall not, without the consent of
the Licensor, which consent shall not be unreasonably withheld or delayed,
settle or compromise any claim or consent to the entry of any judgment which
settlement, compromise or judgment would adversely affect the Licensor or the
value, reputation or prestige of the Mark. The Licensor will cooperate with
the Company in the investigation, defense and settlement of any such claim and
shall have the right to participate in (but not to control) any such defense
through counsel of its own choice, and at the Licensor's own expense. If the
Company elects not to undertake the defense of any such claim, it will be
responsible for reimbursing the Licensor for any expenses reasonably incurred
by the Licensor, including but not limited to reasonable attorneys',
accountants', and other experts' fees and expenses in the investigation,
defense and settlement of such claim and in enforcing its rights pursuant to
this Section 12(a), in addition to any damages ultimately awarded against the
Licensor.
(b) Without limiting the indemnification provided in Section 12(a)
above, the Company agrees to carry and maintain, throughout the Term of this
Agreement and for five years thereafter, with an insurance carrier authorized
to do business in the State of Illinois and having a rating of A VI or better
according to Best's Insurance Reports, a broad form Comprehensive General
Liability Insurance Policy or, if such policy is not reasonably available, such
other policy as would provide substantially the same protection to the Licensor
and the Company written on an occurrence basis covering the activities of the
Company with respect to the Products which includes but is not limited to
coverage for contractual liability, premises operations, products liability,
personal injury and advertising injury liability and broad form property damage
liability, which shall provide protection to the Licensor of at least One
Million Dollars ($1,000,000) per occurrence and Ten Million Dollars
($10,000,000) in the aggregate; provided that the Company may have a deductible
or self-insured retainage in an amount of not in excess of $500,000. The
Company shall have the Licensor named as an additional insured on such
policies. The Company shall, within thirty (30) days after the date hereof,
provide to the Licensor a certificate of such insurance from the insurance
carrier which sets forth the scope of coverage and the limits of liability
stated above and further provides that the policies may not be materially
changed or cancelled without at least thirty (30) days' prior written notice to
the Licensor. Prior to any such cancellation, the Company shall provide the
Licensor with a certificate of insurance evidencing that a new insurance policy
with the same coverage and terms described above will be in place prior to such
termination. Upon reasonable request by the Licensor during the Initial Term
and each Renewal Term, the Company shall deliver to the Licensor evidence in
form and
8
<PAGE> 9
substance reasonably satisfactory to the Licensor, of the maintenance and
renewal of the required insurance, including without limitation, renewal
certificates and copies of those portions of policies, riders and endorsements
pertaining to this Agreement. Any insurance policy purchased by or carried by
the Licensor shall not be required to contribute in case of any loss by any
third party, including the Licensor or the Company, relating to the Products
and either the certificate of insurance to be provided hereunder or an
endorsement to such policy shall so state.
(c) The Licensor agrees to indemnify and hold harmless the Company
and each of its shareholders, officers, directors, employees and agents against
any and all liability, claims, causes of action, suits, damages and expenses
for which they or any of them may become liable or may incur or be compelled to
pay in any action or claim against them or any of them by any party, other than
the Company, its officers, directors, employees or agents, for or by reason of
(i) the infringement of the Mark, as a result of the manufacture, warehousing,
marketing, promotion, publicity, advertising, sale or distribution of the
Products by the Licensor or the Company or any of its agents, representatives,
contractors, sublicensees or assigns, (ii) any wrongful acts, whether of
omission or commission, that may be committed or suffered by the Licensor or
any of its agents, representatives, contractors, sublicensees or assigns in
connection with this Agreement, or (iii) the breach, in any material respect,
by the Licensor of any of its representations, warranties or covenants in this
Agreement. The Company shall give the Licensor written notice of any such
claim promptly following its receipt thereof. The Licensor shall have the
opportunity to undertake and to control the claim and settlement thereof
through attorneys selected by the Licensor after notice to and consultation
with the Company and good faith negotiations regarding alternative counsel if
the Company has reasonable objections to the Licensor's choice of counsel.
Notwithstanding the foregoing, the Licensor shall not, without the consent of
the Company, which consent shall not be unreasonably withheld or delayed,
settle or compromise any claim or consent to the entry of any judgment which
settlement, compromise or judgment would materially and adversely affect the
Company. The Company will cooperate with the Licensor in the investigation,
defense and settlement of any such claim and shall have the right to
participate in (but not to control) any such defense through counsel of its own
choice, but at the Company's own expense. If the Licensor elects not to
undertake any such claim, it will be responsible for reimbursing the Company
for any expenses reasonably incurred by the Company, including but not limited
to reasonable attorneys', accountants', and other experts' fees and expenses in
the investigation, defense and settlement of such claim and in enforcing its
rights pursuant to this Section 12, in addition to any damages ultimately
awarded against the Company. This Section 12 shall survive any termination or
expiration of this Agreement.
9
<PAGE> 10
13. INFRINGEMENT.
(a) The Company agrees that if during the Term of this Agreement, the
Mark shall in the opinion of the Company or the Licensor be infringed or used
without authorization by any other person, firm, corporation or other entity,
the Licensor shall have the sole and exclusive right, but not the obligation,
to take any and all steps in its name, or in the name of the Company or in
their joint names, as the Licensor (in its sole discretion) may deem advisable,
including, without limitation, the institution of any action or proceeding to
seek damages for and/or to enjoin such infringement or unauthorized use, and to
prosecute, settle, compromise or otherwise dispose of the same. Notwith-
standing the foregoing, the Company shall have an opportunity to participate in
the decision-making process related thereto, but the final decision shall be
controlled by the Licensor. In the event of any such action or proceeding, the
Company agrees to execute any and all papers deemed necessary or advisable by
counsel for the Licensor and, at the Licensor's reasonable expense (except in
the case of an action or proceeding taken or initiated by the Company), to do
whatever else may be deemed necessary or advisable by such counsel to assist in
the prosecution of such action or proceeding. The Licensor shall be entitled
to the full recovery of any money or other property collected by way of
judgment, settlement (whether prior to or after institution of any action or
proceeding) or otherwise in connection with any such action except to the
extent of actual damages suffered by the Company.
(b) In the event that the Company is made a party defendant in any
action or proceeding for infringement based on or arising from the use during
the Term hereof of any Mark on or in connection with the Products, then the
Company shall promptly give written notice to the Licensor thereof and the
Licensor shall have the right to join in the defense of such action or proceed-
ing at its own cost and expense and, at its option, the Licensor may take over,
on behalf and in the name of the Company, the conduct of the defense of such
action or proceeding.
14. RIGHT OF FIRST REFUSAL. During the Term of this Agreement, the
Company shall have the right (subject to agreement on price, structure and
other material terms which shall be negotiated in good faith) to purchase from
the Licensor any on-premise comestible ice making and merchandising machine
business which the Licensor may acquire. Such negotiations shall commence
following the time that such an acquisition by the Licensor is consummated. If
the Company fails to exercise the right of first refusal set forth herein, then
the license to use the Mark granted herein shall not be exclusive with respect
to the business or assets in respect of which the right of first refusal has
not been exercised and nothing contained herein shall prevent the Licensor from
licensing or using the Mark in connection therewith. In addition,
10
<PAGE> 11
notwithstanding the foregoing, during the term of this Agreement, the Licensor
shall not (a) purchase Reddy Ice ("Reddy"), a subsidiary of Suiza Foods, Inc.,
or acquire, directly or indirectly, more than 5.0% of the outstanding voting
securities of Reddy, or license the Mark or any other mark containing the mark
"Culligan" to Reddy for Products, without the Company's prior written consent,
which consent may be withheld in the sole discretion of the Company, or (b)
purchase any other business that is principally engaged in the selling of ice
or any direct or indirect controlling interest in such a business, without the
Company's prior written consent, which consent shall not be unreasonably
withheld or delayed.
15. MISCELLANEOUS.
15.1 ENTIRE AGREEMENT. This Agreement, together with the Exhibit
hereto, sets forth the entire understanding of the parties with respect to its
subject matter and merges and supersedes all prior understandings of the
parties hereto with respect to its subject matter.
15.2 AMENDMENTS; WAIVERS. This Agreement (including the Exhibit
hereto) may be amended by the parties only if set forth in an instrument in
writing signed by the parties. Either the Licensor or the Company may waive
compliance by the other party with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
waiver shall be valid only if set forth in an instrument in writing signed by
the parties. The failure of any party to this Agreement to assert any of its
rights under, or to enforce any provision of, this Agreement or otherwise shall
not constitute a waiver of its rights under such provision or any other
provision.
15.3 NO AGENCY. Nothing in this Agreement shall constitute the
parties hereto as principal and agent, partners or joint venturers for any
purpose and the Company shall have no power or authority to bind the Licensor
or to incur any obligations on the Licensor's behalf.
15.4 COMMUNICATIONS. All notices and other communications given under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand or by Federal Express or a similar overnight courier
to, (b) five days after being deposited in any United States Post Office
enclosed in a postage prepaid registered or certified envelope addressed to, or
(c) when successfully transmitted by facsimile transmission (with a confirming
copy of such communication to be sent as provided in clauses (a) or (b) above)
to, the party for whom intended, at the address or facsimile number for such
party set forth below, or to such other address or facsimile number as may be
furnished by such party by notice in the
11
<PAGE> 12
manner provided herein; provided, however, that any notice of change of address
or facsimile number shall be effective only upon receipt.
If to the Licensor:
Culligan International Company
c/o Culligan Water Technologies, Inc.
One Culligan Parkway
Northbrook, Illinois 60062-6209
Attention: General Counsel
Facsimile No. (847) 205-6050
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Gregory A. Fernicola, Esq.
Facsimile No. (212) 735-2000
If to the Company:
Packaged Ice, Inc.
Attn: Chief Executive Officer
8572 Katy Freeway, Suite 101
Houston, Texas 77204
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 NationsBank Plaza
300 Convent Street
San Antonio, Texas 78205
Attn: Alan Schoenbaum, P.C.
15.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on,
enforceable against and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and nothing herein is intended to
confer any right, remedy or benefit upon any other person. The Company may
not, directly or indirectly (by merger, consolidation or otherwise), assign or
otherwise transfer any of
12
<PAGE> 13
its rights or delegate any of its obligations under this Agreement except (i)
in connection with the sale of the Company or substantially all of the assets
of the Company, which sale shall require the express written consent of the
Licensor, which consent shall not be unreasonably withheld or delayed, or (ii)
to a wholly-owned subsidiary of the Company, in which case the consent of the
Licensor shall not be required.
15.6 COMPLIANCE WITH LAWS. The Company shall comply with all laws,
rules, regulations, and requirements of any governmental body which may be
applicable to the operations of the Company contemplated hereby, including,
without limitation, as they relate to the Products, packaging for Products,
machines dispensing Products and materials (including but not limited to adver-
tising, marketing and promotional materials) used in connection with the Mark
or any services in connection therewith, notwithstanding the fact that Licensor
may have approved such item or conduct. The Company shall advise Licensor
promptly upon obtaining knowledge that any Product, packaging for Product,
machine dispensing Products or materials (including but not limited to
advertising, marketing and promotional materials) used in connection with the
Mark or any service in connection therewith does not comply with any such law,
rule, regulation or requirement.
15.7 GOVERNING LAW; JURISDICTION; ARBITRATION. THIS AGREEMENT SHALL
IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO APPLICABLE CONFLICTS OF LAW PRINCIPLES.
EACH OF THE PARTIES HERETO EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE PERSONAL JURISDICTION OF THE UNITED STATES DISTRICT COURT AND TO THE
JURISDICTION OF ANY OTHER COMPETENT COURT OF THE STATE OF ILLINOIS LOCATED IN
COOK COUNTY, IN CONNECTION WITH ALL LAWSUITS IN AID OF ARBITRATION ARISING OUT
OF THIS AGREEMENT. ALL DISPUTES, CONTROVERSIES, OR DIFFERENCES WHICH MAY ARISE
OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS AGREEMENT, OR FOR THE
BREACH THEREOF, AND WHICH CANNOT BE AMICABLY SETTLED BETWEEN THE PARTIES
HERETO, SHALL BE FINALLY SETTLED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION
RULES OF THE AMERICAN ARBITRATION ASSOCIATION BY ONE ARBITRATOR SELECTED IN
ACCORDANCE WITH SAID RULES. THE SEAT OF ARBITRATION SHALL BE ST. LOUIS,
MISSOURI. THE ARBITRATOR SHALL DECIDE ALL PROCEDURAL AND SUBSTANTIVE ISSUES,
AND SHALL MAKE EVERY EFFORT TO RENDER AS SOON AS POSSIBLE A DECISION AND AWARD.
THE DECISION AND
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<PAGE> 14
AWARD RENDERED BY THE ARBITRATOR SHALL BE FINAL AND BINDING UPON LICENSOR AND
THE COMPANY AND JUDGMENT MAY BE ENTERED IN ACCORDANCE WITH APPLICABLE LAW IN
ANY COURT HAVING PROPER JURISDICTION.
15.8 SAVINGS CLAUSE. If any provision of this Agreement is held to
be invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected thereby, and such
provision shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
15.9 EQUITABLE REMEDIES. The Company acknowledges that its failure
to comply with the provisions of this Agreement may cause irreparable harm and
damage to the Licensor, including, without limitation to the Licensor's name,
reputation, goodwill and trademarks, for which no adequate remedy at law would
exist and that the Licensor, therefore, would in such event be entitled to
specific performance and other forms of injunctive and equitable relief
(without having to post a bond) hereunder. Without limiting the generality of
the foregoing, the Company acknowledges and agrees that (a) its covenants and
obligations hereunder are special, unique and relate to matters of
extraordinary importance to the Licensor, that in the event that the Company
fails to perform, observe or discharge any of its obligations hereunder the
Licensor will be irreparably harmed and, therefore, that no remedy at law will
provide adequate relief to the Licensor and (b) the Licensor shall be entitled
to seek, after notice to the Company, a temporary restraining order and
temporary and permanent injunctive and other equitable relief in the case of
any failure by the Company to perform, observe or discharge any of its
covenants or obligations hereunder and without the necessity of proving actual
damages or posting a bond. The remedies provided herein shall be cumulative
and shall not preclude assertion of any other rights or the seeking of other
remedies, either legal or equitable.
15.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
15.11 CONSTRUCTION. Headings contained in this Agreement are for
convenience only and shall not be used in the interpretation of this Agreement.
References herein to the Agreement shall be deemed to include Exhibit A hereto.
As used herein, the singular includes the plural, and the masculine, feminine
and neuter gender each includes the others where the context so indicates.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Culligan International Company
By:
-----------------------------------------
Name: Edward A. Christensen
Title: Vice President, General Counsel
and Secretary
Packaged Ice, Inc.
By:
-----------------------------------------
Name: A. J. Lewis, III
Title: President and Chief Operating
Officer
<PAGE> 16
EXHIBIT A
Trademark and Logo
[to be added]
<PAGE> 1
EXHIBIT 10.41
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of June 30, 1997 ("Effective Date"), by and between Southwestern Ice, Inc.,
a Texas corporation (the "Buyer"), a wholly-owned subsidiary of Packaged Ice,
Inc., a Texas corporation, or Buyer's nominee, and Pure Flo Package Water and
Ice Co., a California corporation (the "Seller"), with respect to the following
facts:
RECITALS
A. Seller is in the business of producing, storing and distributing
ice to customer accounts located in San Diego County, California (the
"Business").
B. Seller desires to sell substantially all of the assets of the
Business to Buyer, upon the conditions set forth in this Agreement.
C. Buyer desires to purchase and acquire substantially all of the
assets of the Business, upon the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter contained, the parties hereto hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Purchase and Sell Assets. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
will sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
will purchase or acquire from the Seller, all right, title and interest of the
Seller in and to all of the assets of the Business owned by Seller (other than
the Excluded Assets) used in or in connection with, or arising out of, the
Business (the "Assets"), including, but not limited to:
(a) Property and Equipment. All of Seller's right, title and
interest in and to all personal property and equipment (the "Property and
Equipment") used by Seller in the Business including, but not be limited to,
ice making equipment, merchandisers, bagging equipment, rolling stock including
vehicles, forklifts, etc., spare parts and repair equipment, supporting
equipment including pipes, electrical, condensers, compressors, bins, etc.,
furniture and fixtures, supplies, inventory, materials and computers used
exclusively in the Business (both hardware and software) which are located at
7737 Mission Gorge Road, Santee, California (the "Facility"). Such Property
and Equipment shall include, but not be limited to, the list of property and
equipment set forth on Exhibit A. The Property and Equipment set forth on
Exhibit A includes vehicles which are owned by Grant's Mark, Inc. ("Grant's
Mark"), which is owned by Charles R. Grant, a principal shareholder of Seller.
(b) Claims. Any and all claims and rights against third
parties, if and to the extent they relate to the condition of the Assets
including, without limitation, all rights under manufacturers'
<PAGE> 2
and vendors' warranties, and specifically including the credit balance with
Leer Manufacturing (collectively the "Claims");
(c) Goodwill. All of Seller's goodwill in, and the going
concern value of, the Business; and
(d) Other Property. All telephone numbers and directory
listings, telephone and mobile communications equipment, service contracts,
customer lists and contracts, sales records, transferable licenses and permits,
and normal business records associated with the Business.
1.2 Excluded Assets. The Assets shall not include, and Seller shall
not sell to Buyer, any of the following items (collectively, the "Excluded
Assets"):
(a) Cash. All cash on hand or in bank accounts, and any other
cash equivalents, including without limitation certificates of deposit,
commercial paper, treasury bills, asset or money market accounts, marketable
securities and all such similar accounts or investments.
(b) Accounts Receivable. All accounts receivable earned in
the Business before the Closing Date (the "Accounts Receivable"). As set forth
in Section 10.1, Buyer will remit to Seller any payments received by it on any
of the accounts receivable incurred in the Business prior to the Closing Date.
(c) Benefit Plan Assets. Pension, profit sharing and savings
plans and trusts and any assets thereof or any assets resulting from the
rollover by Seller's employees of any of the assets out of such plans.
(d) Personal Property Consumed. All tangible personal
property consumed by Seller in the ordinary course of business between the date
hereof and the Closing Date.
(e) Tax Refunds. All amounts due the Seller in connection
with any tax refunds, prepaid taxes, rights under any tax-sharing agreement, or
similar payments.
(f) Corporate Records. The corporate minute book, corporate
seals, tax return work papers, and similar corporate records of Seller.
(g) Licenses and Permits. All governmental licenses and
permits, or similar rights that cannot by their terms be assigned to Buyer.
1.3 Liabilities.
(a) Except as specifically provided for in this Section 1.3,
Buyer shall not assume and shall not be responsible for, any liabilities, debts
or obligations of Seller or of the Business, of any kind or nature whatsoever.
Buyer agrees, as of the Closing Date, to assume only the following liabilities
and obligations of Seller (collectively, the "Assumed Liabilities"):
2
<PAGE> 3
(i) The obligations of Seller under the contracts
listed on Exhibit B hereto (the "Contracts").
(ii) All liabilities and obligations relating to the
Assets or the Business incurred or arising in connection with Buyer's operation
of the Business on and after the Closing Date;
(iii) One-half of the sales, transfer, recording, and
similar taxes (other than income taxes) arising out of the sale and transfer of
the Assets.
Buyer's obligation to assume the Contracts is limited in
accordance with Section 12.4 below.
(b) The Assumed Liabilities shall not include, and Buyer shall
not assume or be liable for, and does not undertake or attempt to assume or
discharge any of the following:
(i) All current or long term liabilities of Seller
relating to the Assets or the Business set forth on the Balance Sheet;
(ii) All current liabilities of Seller relating to the
Assets or the Business arising in the ordinary course of business from the
Balance Sheet Date through the Closing Date;
(iii) Any income tax, sales tax, or payroll liability or
obligation of Seller relating to the operation of the Business prior to the
Closing Date or any delinquent sales, payroll or other delinquent tax
obligation;
(iv) Any workers' compensation liabilities with respect
to employees of the Business relating to illnesses or injuries occurring prior
to the Closing Date;
(v) Any liability or obligation of Seller created under
this Agreement or arising out of the transactions contemplated hereby, except
as specifically provided in this Agreement;
(vi) Any liability or obligation of Seller arising out
of or relating to any pension, retirement or profit-sharing plan or trust or
any liability relating to the rollover by Seller's employees of any assets into
or out of such plans ;
(vii) Any liability or obligation relating to the Assets
or the Business incurred or arising in connection with the Seller's operation
of the Business prior to the Closing Date; and
(viii) Any other liabilities or obligations of Seller not
expressly assumed by Buyer hereunder.
3
<PAGE> 4
1.4 Purchase Price and Method of Payment. The total purchase price
to be paid by Buyer for the Assets (the "Purchase Price") shall consist of (i)
a cash payment at the Closing to Seller of Two Million Eight Hundred Thousand
Dollars ($2,800,000) subject to adjustment by the amount of the Ice Bag
Adjustment and (ii) the payment of Two Hundred Thousand Dollars ($200,000) (the
"Contingent Payment") to Seller pursuant to the provisions of Section 1.6. The
cash payment to Seller at the Closing shall be paid by wire transfer or
cashier's check.
1.5 Ice Bag Adjustment. As set forth in Section 1.4 above, the cash
payment to Seller shall be adjusted by the amount of the Ice Bag Adjustment, if
any. The Purchase Price will be subject to an upward adjustment at the Closing
equal to the value of the quantity of ice bags received by Seller from and
including June 20, 1997 to and including the Closing Date (the "Ice Bag
Adjustment"). The ice bags shall be valued at Seller's cost. The quantity of
ice bags received by Seller shall be determined from Seller's invoices and
delivery tickets.
1.6 Contingent Payment. At the Closing, the Contingent Payment shall
be deposited by Buyer into an escrow account (the "Escrow") with Mission Valley
Escrow to be paid to Seller in the manner set forth in this Section 1.6. Sales
of product which are attributable to the Business for the calendar year 1997,
including sales prior to the Closing, shall be measured as of December 31, 1997
(the "1997 Sales"). For each dollar by which the 1997 Sales exceed $1,800,000
(the "Target Sales Amount"), Seller shall be paid from Escrow one dollar of the
Contingent Payment. To the extent the 1997 Sales are less than the Target
Sales Amount or the 1997 Sales are less than $2,000,000, the Contingent Payment
or any remaining portion thereof shall remain in Escrow to be paid to Seller
based on First Year Sales. Sales of product which are attributable to the
Business for the one year period from the Closing Date shall be measured as of
June 30, 1998 (the "First Year Sales"). For each dollar by which the First
Year Sales exceed the 1997 Sales, Seller shall be paid from Escrow one dollar
of the remaining portion of the Contingent Payment. To the extent the greater
of the 1997 Sales or First Year Sales are less than $2,000,000, the Contingent
Payment or any remaining portion thereof shall be returned to Buyer. The
Contingent Payment or any portion thereof which is due to Seller hereunder
shall be paid to Seller within forty-five (45) days after December 31, 1997 or
June 30, 1998. If Buyer replaces the service currently provided by Seller to a
customer existing as of the Closing Date with service from another business of
Buyer or an affiliate of Buyer, then the 1997 Sales and First Year Sales shall
be credited by the amount of sales by Seller to that customer during the one
(1) year period prior to the Closing Date. Sales by Seller to such a customer
for any period less than one (1) year prior to the Closing Date shall be
annualized for purposes of crediting the 1997 Sales and First Year Sales. The
Buyer shall pay the costs of the Escrow. Buyer and Seller shall execute escrow
instructions (the "Escrow Instructions") to be delivered to Mission Valley
Escrow.
1.7 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets as provided in Exhibit A. Each Party agrees that it
shall not take any position that varies from or is inconsistent with such
allocation in any filing made by such party with the United States Internal
Revenue Service or with any other local, state or federal regulatory authority.
1.8 Covenant Not to Compete. At the Closing, the Seller and the
principals of Seller shall enter into Covenants Not to Compete with Buyer (the
"Non-Compete Agreement").
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1.9 Lease Agreement. At the Closing, Seller and Buyer shall enter
into a Lease Agreement (the "Lease Agreement") for (i) use of the ice plant
portion of the Facility until February 28, 1998, and (ii) sublease of the ice
storage containers located in Vista, California until February 28, 1998. The
terms of the Lease Agreement will include, but not be limited to, (i) a monthly
rental of $1.00 per month, (ii) a set fee for utilities which are not
separately metered (all water used will be included without additional charge),
and (iii) the requirement that Buyer provide at least $5,000,000 general
liability insurance together with insurance on the ice plant portion of the
Facility and an indemnity to Seller, its officers, directors, employees, and
shareholders from any liability relating to the operation of the ice plant
portion of the Facility, specifically including the operation of the Ammonia
Refrigeration System.
1.10 Closing. The date of Closing (herein referred to as the "Closing
Date") shall be on or before June 30, 1997 with the actual day of Closing on or
before such date as mutually agreed to by the parties in writing. Unless
otherwise agreed, the Closing shall take place at the offices of Luce, Forward,
Hamilton & Scripps LLP, 600 West Broadway, Suite 2600, San Diego, California,
at the hour of 4:00 p.m.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically disclosed by Seller to Buyer in this Agreement or
in Seller's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Seller),
Seller represents and warrants to Buyer as follows:
2.1 Corporate Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. Seller only conducts its business in San Diego County and is not
required to be qualified to do business in any other jurisdiction. Seller has
all necessary corporate powers to carry on the Business as it is now being
conducted. Seller has full right, power and authority to execute and deliver
this Agreement and consummate the transactions contemplated hereby.
2.2 Corporate Actions. All actions and proceedings necessary to be
taken by or on the part of the Seller in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement, including, to the extent required by its
Articles of Incorporation, Bylaws and by law, the obtaining of votes, and
consents and approvals by the shareholders and board of directors of Seller,
have been duly and validly taken and obtained, and this Agreement has been duly
and validly authorized, executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with and subject to its terms.
2.3 Capitalization; No Subsidiaries. The authorized number of shares
of Seller is 8,200, all of one class, all of which are issued and outstanding,
of which 4,184 shares are owned by the Charles R. Grant Family Trust which was
established December 13, 1988, and Brian T. Grant, Jean A. Daly, Susan E.
Troutman and Carol M. Bird each own 1,004 shares. The trustees of the Charles
R. Grant Family Trust are Charles R. Grant and Marian L. Grant.
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2.4 No Defaults. Neither the execution, delivery or performance by
Seller of this Agreement nor the consummation by Seller of the transactions
contemplated hereby, itself or with the giving of notice or the passage of time
or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or the Bylaws of Seller;
(b) Violate or conflict with or result in any breach or in any
default under, result in any termination or modification of, or cause any
acceleration of any obligation of the Business under any contract, mortgage,
indenture, agreement, lease or other instrument to which Seller is a party or
by which it, the Business or any of the Assets is bound, or result in the
creation of any encumbrance upon any of the Assets such as would have a
material adverse effect on the Business or Assets taken as a whole; or
(c) Violate any judgment, decree, order, statute, law, rule or
regulation applicable to Seller.
2.5 Breach. Seller is not in violation or breach of any of the
terms, conditions or provisions of its Articles of Incorporation, as amended,
or Bylaws, or any indenture, mortgage or deed of trust or other contracts,
lease, instrument, court order, judgment, arbitration award, or decree
affecting the Business or the Assets, to which Seller is a party or by which it
is bound, and has received no notices of same, where the effect thereof would
have a material adverse effect on the Business or the Assets, taken as a whole.
Further, Seller is current with all rent obligations owing under the Business'
real property leases and with regard to all maintenance and repair expenses
relating to equipment of the Business, invoices for which Seller pays in due
course following receipt.
2.6 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Seller in connection with the consummation of the transactions
contemplated by this Agreement. To Seller's knowledge, no permit, license,
consent, approval or authorization of, or filing with, any governmental
regulatory authority or agency is required in connection with the execution,
delivery and performance of this Agreement, or the consummation of the
transactions contemplated hereby, except where its absence would not have a
material adverse effect on the Business and Assets taken as a whole.
2.7 Title to and Condition of Assets; Leases.
(a) Seller has good, valid and marketable title to all of the
Assets, free and clear of all liens, encumbrances and security interests of
every kind or character.
(b) Seller owns or leases all tangible assets necessary for
the conduct of its Business. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
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(c) Seller has all rights necessary to occupy the Facility and
to enter into the Lease Agreement contemplated by this Agreement.
(d) Seller is not in breach of the terms of the lease
agreement for the ice storage containers used by Seller which are located in
Vista, California (the "Vista Storage Lease"). The Vista Storage Lease is paid
in full and current as of the date hereof.
(e) Seller has the full right, power and authority to transfer
to Buyer the vehicles owned by Grant's Mark.
2.8 Balance Sheet of Seller. The Balance Sheet and Income Statement,
a copy of which is contained in Seller's Disclosure Memorandum:
(a) Presents fairly in all material respects the financial
position of the Business as of the date shown thereon; and
(b) Has been prepared for use in the ordinary course of the
Business and in accordance with the books and records of Seller.
2.9 Events Since Balance Sheet Date. Except as set forth in the
Balance Sheet, and except as disclosed in this Agreement or in Seller's
Disclosure Memorandum, there has not been since the Balance Sheet Date:
(a) Any material adverse change in the assets or liabilities
of the Business, other than changes in the ordinary course of business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Assets; or
(c) Any material transactions entered into or any material
liabilities or obligations incurred by the Business, other than in the ordinary
course of Business.
2.10 Liabilities. Except for those liabilities (i) reflected or
reserved against in the Balance Sheet, (ii) not yet due and payable or
obligations to be performed or satisfied after the date hereof under contracts
and agreements set forth in Seller's Disclosure Memorandum, (iii) disclosed in
this Agreement or Seller's Disclosure Memorandum, and (iv) incurred in the
ordinary course of business of the Business between the Balance Sheet Date and
the Closing, there are no liabilities or obligations of Seller relating to the
Business, known or unknown, due or not yet due, liquidated or unliquidated,
fixed, contingent or otherwise, where the effect thereof would have a material
adverse effect on the Business or the Assets taken as a whole.
2.11 Taxes. Seller has filed all applicable federal, state, local and
foreign tax returns required to be filed to date, in accordance with provisions
of law pertaining thereto, and has paid all taxes, interest, penalties and
assessments shown as due thereon (including without limitation income,
withholding, excise, unemployment, social security, occupation, transfer,
franchise, property, sales
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and use taxes, import, duties or charges, and all penalties and interest in
respect thereof) except where the failure to file such returns or pay such
taxes has no material adverse effect on the Business and the Assets taken as a
whole.
2.12 Compliance With Law and Regulations. To the best of Seller's
knowledge, Seller is in compliance with all requirements of law, federal, state
and local, and all requirements of all governmental bodies or agencies having
jurisdiction over it, the operation of the Business and the use of the Assets,
except where the failure to be in such compliance would not have a material
adverse effect on the Business or the Assets taken as a whole. To the best of
Seller's knowledge, Seller and the Facility are in full compliance with
applicable environmental laws. Seller is not aware of any past or current
tenant of the Facility violating any law, including, but not limited to, any
environmental laws. Seller has properly filed all reports and other documents
required to be filed with federal, state, local, or foreign governments or
subdivisions or agencies thereof. Seller has not received any notice, not
heretofore complied with, from any federal, state or municipal authority or any
insurance or inspection body that any of its properties, facilities, equipment
or business procedures or practices fails to comply with any applicable law,
ordinance, regulation, or requirement of any public authority or body.
2.13 Employees: Labor Problems. Seller has not suffered or sustained
any labor disputes resulting in any work stoppage, and no such work stoppage is
threatened. Seller is not a party to a collective bargaining agreement. There
do not currently exist any written or oral contracts for long-term employment,
consulting agreements or agreements containing provisions for significant
severance or parachute payments. Seller is current in all of its salary
obligations to its employees who are employed in connection with the Business,
and each of such employees has been provided with an address and telephone
number of Seller.
2.14 Litigation. To the best of Seller's knowledge, there are no
suits, judgments, arbitrations, administrative charges or other legal
proceedings, claims or governmental investigations pending against, or to
Seller's knowledge, threatened against the Seller or the Business which will
have a material adverse effect on the Business or the Assets taken as a whole
after the Closing. There are no lawsuits, legal proceedings or investigations
of any nature pending or, to Seller's knowledge, threatened against or
affecting it which would materially impair Seller's ability to carry out the
transactions contemplated by this Agreement.
2.15 No Broker or Finder. Except for the Delphos Group and its agent,
Richard Haskell, whose compensation in connection with this transaction will be
paid solely by Seller, Seller has not employed or used the services of any
broker or finder in connection with this transaction and shall hold Buyer
completely free and harmless from the claims of any person claiming to have so
acted on behalf of Seller.
2.16 Operation in Ordinary Course. Since the Balance Sheet Date:
(a) Seller has operated the Business in the ordinary course of
business, consistent with past practice, except as related to the transactions
contemplated hereby; and
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(b) Seller has maintained its books, accounts and records in
the usual, customary and ordinary manner.
2.17 Disclosure. Neither this Agreement nor Seller's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as specifically disclosed by Buyer to Seller in this Agreement or
in Buyer's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Buyer),
Buyer represents and warrants to Seller as follows:
3.1 Corporate Status. Buyer is a corporation which is duly
organized, validly existing, and in good standing under the laws of the State
of Texas. Buyer is duly qualified to do business in each jurisdiction in which
the character of and location of its assets or operations makes qualification
to do business as a foreign corporation necessary. Buyer has full corporate
power to carry on its business as it is now being conducted and as proposed to
be conducted and to own and operate its assets. Buyer has full corporate power
and authority to execute and deliver this Agreement and perform the
transactions contemplated hereby.
3.2 Corporate Actions. All corporate or other actions and
proceedings necessary to be taken by or on the part of Buyer in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly and validly taken,
and this Agreement has been duly and validly authorized, executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with and subject to its terms.
3.3 No Defaults. Neither the execution, delivery or performance by
Buyer of this Agreement nor the consummation by Buyer of the transactions
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or Bylaws of Buyer;
(b) Violate or conflict with or result in any breach of or any
default under, result in any termination or modification of, or cause any
acceleration of any obligation under, any contract, mortgage, indenture,
agreement, lease or other instrument to which Buyer is a party or by which it
is bound, or by which it may be affected, or result in the creation of any lien
or encumbrance upon any of Buyer's assets, except for agreements, indentures
and instruments related to the financing of the transactions contemplated by
this Agreement; or
(c) Violate any judgment, decree, order, statute, rule or
regulation applicable to Buyer.
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3.4 Breach. Buyer is not in violation or breach of any of the terms,
conditions or provisions of its Articles of Incorporation, as amended, its
Bylaws, or any indenture, mortgage or deed of trust or other contracts, lease,
instrument, court order, judgment, arbitration award, or decree materially
affecting the business of the Buyer, to which Buyer is a party or by which it
is otherwise bound, where the effect thereof would have a material adverse
effect on the Buyer.
3.5 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
3.6 Litigation. There are no lawsuits, judgments, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations pending against, or to Buyer's knowledge, threatened against the
Buyer relating to or affecting the execution, delivery or performance of this
Agreement or the ability of Buyer to perform its obligations under this
Agreement.
3.7 No Broker or Finder. There is no broker or finder or other
person who would have any valid claim against any of the parties for a
commission or brokerage fee or payment in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement of or action
taken by Buyer. Buyer shall hold Seller completely free and harmless from the
claims of any person claiming to have so acted on behalf of Buyer.
3.8 Disclosure. Neither this Agreement nor Buyer's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE IV
DISCLOSURE MEMORANDUM
Seller's Disclosure Memorandum (the "Seller's Disclosure Memorandum"),
is attached to this Agreement as Attachment I, shall be executed on behalf of
Seller, and shall contain accurate, true and correct information and data and,
to the extent expressly set forth herein, shall be accompanied by a copy of
each document referred to therein or otherwise identified as to its location to
the reasonable satisfaction of Buyer. Buyer's Disclosure Memorandum (the
"Buyer's Disclosure Memorandum") shall be executed on behalf of Buyer, and
shall contain accurate, true and correct information and data in all material
respects. Terms used and defined in this Agreement shall have the same
definition when used in the Seller's Disclosure Memorandum or Buyer's
Disclosure Memorandum, as the case may be, and any schedules or exhibits
attached thereto.
ARTICLE V
COVENANTS OF SELLER
5.1 Representations and Warranties. Seller shall give detailed
written notice to Buyer promptly upon learning of any fact which (i) would
render untrue in any material respect any of
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Seller's or Buyer's representations or warranties contained in this Agreement
or the information contained in Seller's Disclosure Memorandum or Buyer's
Disclosure Memorandum, or (ii) would cause Seller or Buyer to fail to comply
with its obligations hereunder in any material respect between the Effective
Date and the Closing Date.
5.2 Notice of Proceeding. Seller will promptly notify Buyer in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereby; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
5.3 Consummation of Agreement. Seller shall use its best efforts to
fulfill and perform all conditions and obligations on its part to be fulfilled
and performed under this Agreement, and cause the transactions contemplated by
this Agreement to be fully consummated.
5.4 Confidentiality. Seller agrees to keep confidential any
information obtained from Buyer concerning Buyer or the business of Buyer,
unless readily ascertainable from public or published information, or trade
sources.
5.5 Operations. Seller agrees, through the Closing Date, at Seller's
sole cost and expense to (i) keep all existing insurance policies affecting the
Assets in full force and effect; (ii) continue to provide all services and
maintain all of the fixed Assets in good working order in a responsible manner
consistent with past practice; and (iii) upon Closing, terminate all employees
and settle all employment contracts.
5.6 Operations Pending Closing. Subsequent to the date of this
Agreement and prior to the Closing Date, Seller shall cause the Business to be
operated in the ordinary course, consistent with past practice. Until and
including the Closing Date, Seller shall use its best efforts to cause the
Business to maintain its insurance coverage and its books, accounts and records
in the usual manner in a basis consistent with current practice and to comply
in all material respects with all laws, ordinances and regulations of
governmental authorities applicable to the Business.
5.7 Restrictions. Except as disclosed in this Agreement or in
Seller's Disclosure Memorandum, prior to the Closing Date, and without the
prior written consent of Buyer, Seller shall not:
(a) Encumber or grant any security interest in any Asset other
than in the ordinary course of business; or
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(b) In the ordinary course of business, enter into any
Contract which obligates the Business to expend more than Ten Thousand Dollars
($10,000.00) following the Closing Date.
5.8 Consents. Notwithstanding any other provision of this Agreement,
to the extent that the consent or approval of any third person is required
under any Contract in order to assign any such Contract from Seller to Buyer or
otherwise by reason of the transactions provided for in this Agreement, except
as set forth in the Seller's Disclosure Memorandum, Seller shall use its
reasonable efforts to obtain such consents and approvals. If any such consent
or approval is not obtained, then such Contract shall not be assigned until
such consent or approval is obtained and Seller will use reasonable efforts to
establish a mutually satisfactory arrangement to provide to Buyer the benefits
of such Contract after the Closing.
5.9 Access to Properties and Information. Following the Effective
Date, Buyer and its representatives shall be afforded full access to all of the
assets, properties, books, records, agreements, other documents and employees
of Seller relating to the Business, in all cases during normal business hours
and upon reasonable prior notice. Buyer and its representatives shall have the
right to make abstracts from or copies of any such books, records, agreements,
and commitments, and such Business shall furnish Buyer's representatives with
such information concerning such affairs and copies of such documents,
contacts, agreements and records as Buyer may reasonably request. All such
information provided to Buyer in written form by Seller to the knowledge of
Seller shall be true, complete and correct and shall be deemed represented as
such by Seller to Buyer. Any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Business.
Buyer shall not contact any of Seller's employees or visit any portion of
Seller's properties without Seller's prior knowledge. Buyer shall be
responsible for ensuring that its employees or representatives maintain the
confidentiality of any information learned during the investigation subject to
the terms of Section 6.4 hereto.
5.10 Termination of Employees. On the Closing Date, Seller will
terminate its employees, deliver final paychecks to them for unpaid wages,
accrued vacation, unused sick days and any other amounts owing to them. Seller
shall cooperate with Buyer in the hiring and transitioning of those employees
that Buyer desires to hire. On and after the Closing Date, Seller shall have
the sole responsibility and obligation for complying with the health care
continuation coverage requirements of Internal Revenue Code ("Code") Section
4980B and Section 601 et seq. of ERISA ("COBRA") that are applicable to the
employees and the spouses and dependents of such employees not hired by Buyer
and retained in Buyer's employ for at lease six months. Seller shall be solely
responsible for providing COBRA continuation coverage to any person entitled to
such coverage in connection with any health plan sponsored by Seller. Seller
shall indemnify, defend and hold harmless Buyer and its employees, officers,
directors, successors, assigns, subsidiaries, shareholders, agents, attorneys,
representatives and affiliates from and against any and all losses,
liabilities, demands, claims, expenses, judgments, costs, attorneys' fees,
taxes and penalties arising under Code Section 4980B or ERISA Section 601 et
seq. with respect to any individual who was an employee (or a spouse or
dependent of such employee) of Seller prior to the Closing and who had or has a
"qualifying event" (within the meaning of Code Section 4980(B)(f)(3)) before,
on or after the Closing.
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ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees that from the date hereof until the
completion of the Closing:
6.1 Representations and Warranties. Buyer shall give detailed
written notice to Seller promptly upon learning of any fact which (i) would
render untrue in any material respect any of Buyer's or Seller's
representations or warranties contained in this Agreement or the information
contained in Buyer's Disclosure Memorandum or Seller's Disclosure Memorandum or
(ii) would cause Buyer or Seller to fail to comply with its obligations
hereunder in any material respect between the Effective Date and the Closing
Date.
6.2 Notice of Proceeding. Buyer will promptly notify Seller in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereunder; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
6.3 Consummation of Agreement. Buyer shall fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement, and cause the transactions contemplated by this Agreement to be
fully carried out.
6.4 Confidentiality. Upon the termination of this Agreement prior to
Closing, Buyer shall keep confidential and shall not use in any manner any
information obtained from Seller concerning Seller or the Business.
6.5 Offer of Employment. Buyer shall offer employment to certain
employees of the Business to whom Buyer decides, in its sole discretion, to
offer employment. Seller shall offer employment to Chris Holding and Forest
Davis (without relocation from the Business) on terms and conditions acceptable
to Buyer in its sole discretion. Any and all costs, expenses and liabilities
arising from or relating to the failure of Buyer to hire existing employees of
the Business shall be the sole responsibility of Seller.
6.6 Post-Closing Sale. Buyer shall use its best efforts to maximize
the sales of the Business during the period from the Closing Date to June 30,
1998
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
7.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall have been true and correct as of the
Effective Date and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except to the extent changes are permitted or contemplated pursuant to this
Agreement; and
(b) Buyer shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
7.2 Officer's Certificate. Buyer shall have furnished Seller with a
certificate, dated the Closing Date and duly executed by a duly authorized
manager of Buyer, in form and substance satisfactory to the Seller, certifying
that the conditions set forth in Sections 7.1(a) and (b) have been satisfied.
7.3 Deliveries. Buyer shall have complied with each and every one of
its obligations set forth in Section 9.2.
7.4 Consents. All of the consents required to be obtained pursuant
to Section 5.8 shall have been obtained.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
8.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Seller
contained in this Agreement shall have been true and correct as of the
Effective Date and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except to the extent changes are permitted or contemplated pursuant to this
Agreement;
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(b) Seller shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date; and
8.2 Officer's Certificate. Seller shall have furnished Buyer with a
certificate, dated the Closing Date and duly executed by a duly authorized
executive officer of Seller, to the effect that the conditions set forth in
Sections 8.1 (a) and (b) have been satisfied.
8.3 Deliveries. Seller shall have complied with each and every one
of its obligations set forth in Section 9.1.
8.4 Consents. All of the consents required to be obtained and the
estoppel certificate referenced in Sections 5.8 shall have been obtained.
ARTICLE IX
ITEMS TO BE DELIVERED AT THE CLOSING
9.1 Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer duly executed by Seller or such other signatory as may be required by the
nature of the document:
(a) Such deeds, bills of sale, certificates of title,
endorsements, assignments and other good and sufficient instruments of sale,
conveyance and transfer and assignment in form and substance reasonably
satisfactory to Buyer sufficient to sell, convey, transfer and assign to Buyer
all right, title and interest of Seller in and to the Assets;
(b) Certified copies of resolutions, duly adopted by the
shareholders and board of directors of Seller which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby;
(c) The consents obtained pursuant to Section 5.8;
(d) The certificate referred to in Section 8.2(c);
(e) The Non-Compete Agreement executed by principals of
Seller;
(f) Certificates of Title to motor vehicles and titles to
titled equipment and a bill of sale;
(g) The Lease Agreement;
(h) Uniform Commercial Code ("UCC") termination statements
terminating all UCC financing statements which cover any of the Assets or
portions thereof; and
(i) The Escrow Instructions.
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9.2 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller, duly executed by Buyer or other signatory as required by the nature of
the document:
(a) The cash portion of the Purchase Price;
(b) Certified copies of resolutions, duly adopted by the
directors of Buyer, which shall be in full force and effect at the time of the
Closing, authorizing the execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated hereby;
(c) The certificate referred to in Section 7.2;
(d) The Lease Agreement; and
(e) The Escrow Instructions.
9.3 Property Tax Proration. The parties shall prorate and adjust at
Closing the 1997 personal property tax, if any, covering assets purchased based
upon their reasonable best estimate of amounts owning as of the Closing Date.
9.4 Transfer Sales Tax. The parties shall share equally the sales,
transfer, recording or similar taxes (other than income taxes) arising out of
the sale and transfer of the Assets.
ARTICLE X
POST-CLOSING MATTERS
10.1 Collections. Seller will promptly remit to Buyer any payments
received by it on any of the accounts receivable incurred in the Business on or
after the Closing Date. Buyer will promptly remit to Seller any payments
received by it on any of the accounts receivable incurred in the Business prior
to the Closing Date. Buyer shall use its best efforts to collect accounts
receivable incurred in the Business prior to the Closing Date. Buyer may
endorse checks for deposit, payable to Seller, received in payment of accounts
receivable incurred in the Business on or after the Closing Date. Buyer shall
apply payments received by it on any accounts receivable which do not specify
an invoice number to the oldest, non-disputed invoice.
10.2 Asset Removal and Relocation.
(a) Buyer's Rights and Duties. The parties acknowledge that
following the Closing Date but prior to February 28, 1997, Buyer intends to
remove the Assets from the Facility. In connection with Buyer's preparation,
disassembly, packing, loading and transporting of the Assets from the Facility
after the Closing Date (the "Removal"), Buyer shall use reasonable care and
shall conduct the Removal in a reasonably orderly manner. Except as otherwise
provided below, Buyer shall be solely responsible for all costs incurred in
connection with the Removal, including, but not
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limited to, all costs associated with the destruction or demolition of any
interior and/or exterior walls or other structures which are necessary for
efficient Removal.
(b) Seller's Rights and Duties. In connection with the
Removal, Seller shall: (i) provide the Buyer with physical access to the
Facility necessary for the Removal, (ii) cooperate with Buyer to obtain all
necessary governmental consents, permits and licenses to permit the Removal
(including the right to remove walls, etc. to the extent reasonably necessary
to accomplish the Removal), and (iii) maintain public liability insurance
during the course of the Removal in such amounts as have been historically
maintained by Seller.
10.3 License. Seller hereby grants to Buyer an exclusive license to
use the name "Pure Flo" and all associated logos for the conduct of the
Business for a period of one (1) year from the Closing Date. For as long as
Buyer or any subsidiary or parent entity of Buyer are in the business of
producing, storing or distributing ice, Seller shall not grant to any party
other than Buyer or Buyer's assigns the right to use the name "Pure Flo" or any
associated trademarks, trade names or logos for the conduct of the business of
producing, storing or distributing ice.
10.4 SDG&E Agreement. From the Closing Date until February 28, 1997,
Buyer shall comply with all material terms and conditions of the Thermal Energy
Ice Storage Agreement dated April 22, 1988 between San Diego Gas & Electric
("SDG&E") and Seller.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Seller. Seller shall indemnify, defend and
hold Buyer harmless from and against any and all liabilities or obligations
arising with respect to the Assets or the Business up to the Closing, excepting
only those certain liabilities expressly assumed by Buyer hereunder. Further,
Seller shall indemnify, defend and hold harmless Buyer from and against any and
all claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries, and deficiencies, including reasonable attorney's fees and
costs (the "Losses") that Buyer may incur or suffer, which arise, result from,
or relate to: (i) any inaccuracy of Seller's representations and warranties
contained in this Agreement or in any agreement, instrument or document entered
into pursuant hereto or in connection with the Closing, (ii) any breach of or
failure by Seller to perform any of its covenants or agreements contained in
this Agreement or in any agreement, instrument or document pursuant hereto or
in connection with the Closing, (iii) any violation of environmental or health
and safety or other laws (as in effect at the Closing) arising out of the
ownership or operation of the Business, including the real estate upon which
the Facility is located, based on conditions existing prior to the Closing,
regardless of when such claim, liability or loss is asserted, claimed or
sustained, or (iv) any liability or obligation of Seller not included in the
Assumed Liabilities. Seller shall not have any liability under this Section
11.1(a) unless Buyer gives written notice to Seller asserting a claim for such
Losses, including reasonably detailed facts and circumstances pertaining
thereto, before the expiration of two (2) years from the Closing Date, except
for claims arising from breach of: (i) representations and warranties as to
taxes and environmental matters, which shall survive until the expiration of
the applicable statute of limitations.
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11.2 Indemnification by Buyer. Buyer shall indemnify, defend and hold
Seller harmless from and against any and all liabilities or obligations arising
with respect to the Assets or the Business, as conducted by Buyer, after the
Closing Date, excepting claims asserted after the Closing Date which relate to
products sold or actions taken by Seller prior to the Closing Date. Further,
Buyer shall indemnify, defend and hold harmless Seller from and against any and
all Losses that Seller may incur or suffer, which arise, result from, or relate
to: (i) any inaccuracy of Buyer's representations and warranties contained in
this Agreement or in any agreement, instrument or document pursuant hereto or
in connection with the Closing, (ii) any breach of or failure by Buyer to
perform any of its covenants or agreements contained in this Agreement or in
any agreement, instrument or document pursuant hereto or in connection with the
Closing, (iii) or any act, omission or breach by Buyer relating to any of the
Assumed Liabilities. Buyer shall not have any liability under this Section
11.2 unless Seller gives written notice to Buyer asserting a claim for such
Losses, including reasonably detailed facts and circumstances pertaining
thereto, before the expiration of two (2) years from the Closing Date.
Notwithstanding the foregoing, nothing in this Section 11.2 shall limit
Seller's right to enforce Buyer's obligations pursuant to Section 1.4 at any
time after the Closing Date.
11.3 Defense of Third Party Actions.
(a) Promptly after receipt of notice of any written assertion
of a claim, or the commencement of any action, suit, or proceeding, by a third
party against a party to this Agreement ("Third Party Action"), the party in
receipt of such notice who believes that it is entitled to indemnification
under this Article XII (the "Indemnified Party") shall give notice to the other
party hereto (the "Indemnifying Party") of such action. The failure of the
Indemnified Party to give such notice to the Indemnifying Party will not
relieve the Indemnifying Party of any liability hereunder unless it was
prejudiced thereby, nor will it relieve it of any Liability which it may have
other than under this Article XI.
(b) Upon receipt of a notice of a Third Party Action, the
Indemnifying Party shall have the right, at its option and at its own expense,
to participate in and be present at the defense of such Third Party Action, but
not to control the defense, negotiation or settlement thereof, which control
shall remain with the Indemnified Party, unless the Indemnifying Party makes
the election provided in paragraph (c) below.
(c) By written notice within 20 days after receipt of a notice
of a Third Party Action, an Indemnifying Party may elect to assume control of
the defense, negotiation and settlement thereof, with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that the Indemnifying
Party agrees (a) to promptly indemnify the Indemnified Party for its expenses
to date, and (b) to hold the Indemnified Party harmless from and against any
and all Losses caused by or arising out of any settlement of the Third Party
Action approved by the Indemnifying Party or any judgment in connection with
that Third Party Action. The Indemnifying Party shall not in the defense of
the Third Party Action enter into any settlement which does not include as a
term thereof the giving by the third party claimant of an unconditional release
of the Indemnified Party, or consent to entry of any judgment except with the
consent of the Indemnified Party.
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(d) Upon assumption of control of the defense of a Third Party
Action under paragraph (iii) above, the Indemnifying Party will not be liable
to the Indemnified Party hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other than
reasonable expenses of investigation.
(e) If the Indemnifying Party does not elect to control the
defense of a Third Party Action under paragraph (c), the Indemnifying Party
shall promptly reimburse the Indemnified Party for expenses incurred by the
Indemnified Party in connection with defense of such Third Party Action, as and
when the same shall be incurred by the Indemnified Party.
(f) Any party who has not assumed control of the defense of
any Third Party Action shall have the duty to cooperate with the party which
assumed such defense.
11.4 Miscellaneous.
(a) Either party hereto shall be entitled to indemnification
hereunder unless the matter giving rise to the applicable liability, payment,
obligation or expense was previously disclosed in writing to the Indemnified
Party prior to the Closing Date.
(b) If any Loss is recoverable under more than one provision
hereof, the Indemnified Party shall be entitled to assert a claim for such Loss
until the expiration of the longest period of time within which to assert a
claim for Loss under any of the provisions which are applicable.
ARTICLE XII
MISCELLANEOUS
12.1 Termination of Agreement. This Agreement may be terminated at
any time on or prior to the Closing Date: (a) by the mutual consent of Seller
and Buyer; (b) by either Buyer or Seller if the Closing has not occurred on or
before June 30, 1997; or (c) by Buyer at any time prior to five (5) days after
Seller has supplied all of the requested due diligence materials to Buyer if
Buyer, prior to such date, determines in its sole discretion that the results
of its due diligence investigation of Seller is in any way unsatisfactory. A
termination pursuant to this Section 12.1 shall not relieve any Party of any
liability it otherwise has for a breach of this Agreement. As a condition to
any termination by Buyer hereunder, all information and materials relating to
the Business and to which Buyer obtained access during the negotiations leading
to, or following, execution of this Agreement, and any other writings
containing excerpts of such materials or information, and any or all copies
thereof, shall be delivered to Seller.
12.2 Expenses. Each party hereto shall bear all of its expenses
incurred in connection with the transactions contemplated by this Agreement,
including without limitation, accounting and legal fees incurred in connection
herewith.
12.3 Preservation of Records. Buyer shall preserve and make available
(including the right to inspect and copy) to Seller, its attorneys and
accountants, for a reasonable period of time from and
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after the Closing Date (but in any event at least until all applicable statutes
of limitation with respect to audits by taxing authorities have expired) and
during normal business hours, such of the books, records, files,
correspondence, memoranda and other documents transferred pursuant to this
Agreement as Seller may reasonably require in connection with any legitimate
purpose, including, but not limited to, the preparation of tax reports and
returns and the preparation of financial statements and Buyer shall at its own
expense cause its employees to fully cooperate and to provide such reasonable
assistance as may be requested by Seller. Buyer shall notify Seller prior to
the destruction of such records and shall offer to return such records to the
Seller.
12.4 Non-Assignable Contracts. Nothing contained in this Agreement
shall be construed as an assignment or an attempted assignment of any Contract
which is by law nonassignable without the consent of the other party or parties
thereto, unless such consent shall be given.
12.5 Further Assurances. From time to time prior to, on and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including without limitation the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and
with their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement.
12.6 Risk of Loss. The risk of loss, damage or destruction to any of
the Assets to be transferred to Buyer hereunder from fire or other casualty or
cause shall be borne by Seller at all times up to the time of the Closing, and,
subject to the provisions of this Section 12.6, it shall be the responsibility
of Seller to repair or cause to be repaired and to restore the property to its
condition prior to any such loss, damage, or destruction. In the event of any
such loss, damage or destruction in excess of $250,000, then Seller may elect
to terminate this Agreement without any liability to it, unless Buyer elects to
take the damaged property "as is" and an assignment of any insurance proceeds.
In the event of any such loss, damage, or destruction, the proceeds of any
claim for any loss, payable under any insurance policy with respect thereto,
shall be used to repair, replace, or restore any such property to its former
condition, subject to the conditions stated below. It is expressly understood
and agreed that, in the event of any loss or damage to any of the Assets to be
sold hereunder from fire, casualty or other causes prior to the close of
business on the day before the Closing Date, Seller shall notify Buyer of same
in writing immediately. Such notice shall specify with particularity the loss
or damage incurred, the cause thereof (if known or reasonably ascertainable),
and the insurance coverage. In the event that the property is damaged in an
amount estimated by the parties in good faith to exceed $250,000, and is not
completely repaired, replaced or restored on or before the Closing Date, the
Buyer at its sole option and with no other recourse against Seller in respect
of such loss, damage or destruction: (a) may elect, subject to Seller's right
to terminate as referred to above, to postpone Closing until such time as the
property has been completely repaired, replaced or restored to the reasonable
satisfaction of Buyer, (b) may elect to consummate the Closing and accept the
property in its then condition, in which event Seller shall
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pay to Buyer all proceeds of insurance and assign to Buyer the right to any
unpaid proceeds; or (c) terminate this Agreement without liability to either
party.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 Direct Discussion. In the event of any dispute, claim, question,
or disagreement arising out of or relating to this Agreement (a "Dispute"), the
parties involved in such Dispute shall use their best efforts to settle such
Dispute. To this effect, senior management of the parties involved shall
consult and negotiate with each other in good faith to attempt to reach a just
and equitable solution satisfactory to both parties.
13.2 Arbitration. In the event that the Dispute cannot be settled
under Section 13.1 above, the Dispute shall be submitted to binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and the procedures set forth below. In the event of any
inconsistency between the Rules of the American Arbitration Association and the
procedures set forth below, the procedures set forth below shall control.
Judgment upon the award rendered by the arbitrators may be enforced in any
court having jurisdiction thereof.
(a) Location. The location of the arbitration shall be in San
Diego County, California.
(b) Selection of Arbitrators. The arbitration shall be
conducted by a panel of three neutral arbitrators who are independent and
disinterested with respect to the parties, this Agreement, and the outcome of
the arbitration. Each party shall appoint one neutral arbitrator, and these
two arbitrators so selected by the parties shall then select the third
arbitrator. If one party has given written notice to the other party as to the
identity of the arbitrator appointed by the party, and the party thereafter
makes a written demand on the other party to appoint its designated arbitrator
within the next thirty days, and the other party fails to appoint its
designated arbitrator within thirty-one days after receiving said written
demand, then the arbitrator who has already been designated shall appoint the
other two arbitrators.
(c) Discovery. Unless the parties mutually agree in writing
to some additional and specific pre-hearing discovery, the only pre-hearing
discovery shall be (a) reasonably limited production of relevant and non-
privileged documents, and (b) the identification of witnesses to be called at
the hearing, which identification shall give the witness's name, general
qualifications and position, and a brief statement as to the general scope of
the testimony to be given by the witness. The arbitrators shall decide any
disputes and shall control the process concerning these pre-hearing discovery
matters. Pursuant to the Rules of the American Arbitration Association, the
parties may request the arbitrator or other person authorized by law to
subpoena witnesses and documents for presentation at the hearing.
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(d) Case Management. Prompt resolution of any dispute is
important to the parties; and the parties hereto agree that the arbitration of
any dispute shall be conducted expeditiously. The arbitrators are instructed
and directed to assume case management initiative and control over the
arbitration process (including scheduling of events, pre-hearing discovery and
activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the Dispute.
(e) Legal Representation. Counsel to the parties in
connection with the negotiation of and consummation of the transactions under
this Agreement shall be entitled to represent their respective party in any and
all proceedings under this Section 13.2 or in any other proceeding. Seller and
Buyer, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such proceeding for any reason, including
but not limited to the fact such counsel or any member thereof may be a witness
in any such proceeding or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to
the party represented by such counsel in any such proceeding.
(f) Remedies. The arbitrators may grant any legal or
equitable remedy or relief that the arbitrators deem just and equitable, to the
same extent that remedies or relief could be granted by a state or federal
court, provided however, that no punitive damages may be awarded. The decision
of any two of the three arbitrators appointed shall be binding upon the
parties.
(g) Expenses. The expenses of the arbitration, including the
arbitrators' fees, expert witness fees, and attorney's fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.
(h) Confidentiality. Except as set forth below, the parties
shall keep confidential the fact of the arbitration, the dispute being
arbitrated, the decision of the arbitrators, and any documents produced by the
parties in the course of the arbitration. Notwithstanding the foregoing, the
parties may disclose information about the arbitration to persons who have a
need to know, such as directors, trustees, management employees, witnesses,
experts, investors, attorneys, lenders, insurers, and others who may be
directly affected. Once the arbitration award has become final, if the
arbitration award is not promptly satisfied, then the prevailing party may,
notwithstanding the foregoing, disclose information about the arbitration only
to the extent necessary to obtain judicial enforcement of the award.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective representative, successors and assigns.
No party hereto may assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the other party, and any such
attempted
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assignment or delegation without such consent shall be void. Seller agrees not
to unreasonably withhold its consent to any assignment by Buyer of its rights
hereunder prior to Closing to a corporation or other entity controlled by
Buyer, provided that (a) such assignee will assume all obligations of Buyer
hereunder, without Buyer being released, and (b) such assignment will not, in
Seller's reasonable judgment, delay in any material way or make more doubtful
the Closing.
14.2 Amendments; Waivers. The terms, covenants, representations,
warranties and conditions of this Agreement may be changed, amended, modified,
waived, discharged or terminated only by a written instrument executed by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right of such party at a later date to enforce the same. No waiver
by any party of any condition or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
14.3 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing (which shall
include notice by telex or facsimile transmission) and shall be deemed to have
been duly made and received when personally served, or when delivered by
Federal Express or a similar overnight courier service, expenses prepaid, or,
if sent by telex, graphic scanning or other facsimile communications equipment,
delivered by such equipment, addressed as set forth below:
(a) If to Buyer, then to:
Southwestern Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A. J. Lewis, III, President
Fax: (713) 464-4681
With a copy to:
Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, CA 92101
Fax: (619) 232-8311
(b) If to Seller, then to:
Pure Flo Package Water And Ice Co.
7737 Mission Gorge Road
Santee, California 92071
Fax: (619) 596-4154
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(c) With a copy to:
David S. Lane, Esq.
Hinchy, Witte, Wood, Anderson & Hodges, APC
525 B Street, Suite 1500
San Diego, California 92101
Fax: (619) 696-0555
Any party may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 14.3 providing for the giving of notice.
14.4 Announcements. Neither party shall make any written or other
announcement regarding this Agreement or any of its terms without the prior
written consent of the other party.
14.5 Non-Disclosure of Purchase Price. Seller and Buyer shall keep
confidential the amount of and payment terms of the Purchase Price.
Notwithstanding the foregoing, either party may disclose the terms of the
Purchase Price to persons who have a need to know, such as directors, trustees,
management, investors, attorneys, lenders, accountants or insurers.
14.6 Captions. The captions of Articles and Sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
14.7 Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of California.
[remainder of page intentionally left blank]
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14.8 Entire Agreement. This Agreement and the other documents
delivered hereunder constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof, and supersedes
all prior agreements, understandings, inducements or conditions, express or
implied, oral or written, relating to the subject matter hereof, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of trade inconsistent with any of the terms hereof.
14.9 Execution; Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized signatories, all as of the day and year first
above written.
SOUTHWESTERN ICE, INC., a Texas corporation
By: /s/ A. J. Lewis, III
---------------------------------------
A. J. Lewis, III, President
PURE FLO PACKAGE WATER AND ICE CO., a
California corporation
By: /s/ Charles R. Grant
---------------------------------------
Charles R. Grant, President
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EXHIBIT "B"
The Contracts for which Buyer will assume the obligations of Seller are
as follows:
Buyer's standing purchase order to purchase bags from Bemis Bag
Co. and Arrow Bag Co.
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EXHIBIT 10.42
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made as of
this 13th day of August, 1997, by and among Packaged Ice, Inc., a Texas
corporation (the "Buyer"), and W. Brad Troutman and James U. White, Jr. (each
individually, a "Stockholder" and collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders are the owners of an aggregate of 501 shares
of common stock of First Ice Company, par value $1.00 per share, and 500 shares
of common stock of Codorus Leasing Company, par value $1.00 per share (the
"Stock"), being all of the issued and outstanding shares of First Ice Company
and Codorus Leasing Company, Inc., (collectively the "Company"); and
WHEREAS, the Stockholders desire to sell, and the Buyer desires to
purchase all of the outstanding shares of Stock of the Company through the
purchase of the stock owned by the Stockholders; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Stockholders and Buyer agree as
follows:
1. PURCHASE AND SALE OF STOCK.
1.1. SALE OF STOCK. At the Closing (as defined below), the
Stockholders shall sell to Buyer and Buyer shall purchase from the
Stockholders, the Stock, for the purchase price set forth herein in Article 2
of this Agreement. Upon payment of the Purchase Price, each Stockholder shall
execute all necessary documents and/or instruments to effectively transfer each
Stockholder's interest in the Stock to Buyer.
2. PURCHASE PRICE
2.1. PURCHASE PRICE.
(a) The Purchase Price for the Stock shall be five million
($5,000,000) dollars as adjusted under Section 2.2. Up to 20% of the
Purchase Price, at the sole discretion of Stockholders, may be paid in
the form of Buyer's common stock valued at $10 per share and issued
directly to the Stockholders on a pro rata basis. Such election to
receive any portion of the Purchase Price in Buyer's common stock shall
be made no later than August 26, 1997 by giving written Notice (as that
term is defined herein) to Buyer.
(b) The Purchase Price that is paid in cash shall first be
used to pay and discharge all of the Company's debts, obligations and
other liabilities including, without limitation, all current
liabilities, all long term liabilities, all Liens (hereinafter defined)
against the assets of the Company and all leases of any personal
property, excluding accounts payable (collectively, the "Liabilities")
which are estimated to exist as of the Closing Date. The cash portion of
the Purchase Price remaining after the estimated Liabilities have been
paid and discharged shall be paid directly to the Stockholders in
exchange for all of the Stock owned by the Stockholders. In addition,
all cash and accounts receivable as of the Closing Date will be
distributed to the Stockholders at the Closing. The intent and effect
of this Section 2.1(b) is to convey all of the outstanding stock of the
Company to Buyer with there being no cash, Liabilities or Liens
(hereinafter defined) immediately after Closing. Stockholders hereby
agree all Liabilities which are not discharged at Closing are assumed by
the Stockholders through an Undertaking Agreement attached as Exhibit
2.1.
<PAGE> 2
2.2 CASH ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
subject to the following adjustments:
(a) The Purchase Price shall be increased to reflect the value
of the Inventory on hand at Closing. For the purposes of this Agreement,
the term "Inventory" shall mean up to 100,000 bags of ice valued at $.12
per eight pound bag, useable plastic bags at cost, spare truck tires
(not including spares carried on trucks) at cost, and Event Deposits.
For the purpose of this Agreement, the term "Event Deposits" shall mean
the $2,500.00 on deposit with The Oklahoma State Fair. The amount of
increase to the Purchase Price shall be determined by the parties at
Closing and shall be added to the Purchase Price as a whole, subject to
terms and provisions governing payment of the Purchase Price as set
forth in this Agreement.
(b) On or before September 20, 1997, the Stockholders shall
deliver to Buyer a copy of the balance sheet of the Company as of the
Effective Date (the "Effective Date Balance Sheet") certified by the
Shareholders to the best of their knowledge and belief to be true and
correct. The Effective Date Balance Sheet shall (i) fairly present the
financial position of the Company as at the close of business on the
Effective Date in accordance with the accounting methods consistently
utilized by the Company, and (ii) include a detailed schedule of
Liabilities. The Effective Date Balance Sheet shall be used to
calculate any adjustments to the Purchase Price and the amount of any
liabilities to be paid by Stockholders in accordance with the terms and
conditions set forth in this Agreement.
(c) The Stockholders and the Buyer agree that they will, and
will cause the Company's employees and representatives to, cooperate and
assist in the preparation of the Effective Date Balance Sheet including
without limitation, the making available to the extent necessary of
books, records, work papers and personnel.
3. CLOSING.
Unless this Agreement shall have been terminated, the closing of this
Agreement shall take place, subject to the terms and conditions set forth in
this Agreement, on or before September 2, 1997 at 11:00 a.m. Central Daylight
Time in a manner and place that is mutually agreeable to the parties hereto,
with an effective date of August 31, 1997 at 11:59 p.m. ("Effective Date")
provided that if the conditions to Closing set forth in this Agreement have not
been satisfied or waived, the Stockholders and Buyer may mutually agree, in
writing, to delay such Closing until such condition has been satisfied.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
The Stockholders, jointly and severally, represent and warrant to the
Buyer as of the date hereof and as of the Closing Date as follows:
4.1. OWNERSHIP OF STOCK. Each Stockholder has full legal right, power
and authority to sell, assign, transfer and convey the shares Stock so owned by
such Stockholder in accordance with the terms and subject to the conditions of
this Agreement. Each Stockholder is the record and beneficial owner of the
number of shares of Stock, listed in the Company's stock registry, free and
clear of all Liens, and any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of the shares), and
the Stockholders hold in the aggregate all of the outstanding shares of the
Company's capital stock. The delivery to the Buyer of the Stock pursuant to the
provisions of this Agreement will transfer to the Buyer valid title thereto,
free and clear of any Lien and any such limitation or restriction. For the
purposes of this
STOCK PURCHASE AGREEMENT - PAGE 2
<PAGE> 3
Agreement, the term "Lien" means, with respect to the Stock or any property or
asset of the Company, any restrictions on or conditions to transfer or
assignment, and any mortgages, liens, pledges, charges, security interests,
conditional sales agreements, encumbrances, equities, claims, easements, rights
of way, covenants, conditions, restrictions or other adverse claims or
interests of any nature whatsoever. For the purposes of this Agreement, a
Person (as defined in Section 11.5 herein) shall be deemed to own subject to a
Lien any property or asset which it has any claim or encumbrance whatsoever
from whatever source against said property or asset.
4.2. EXISTENCE AND GOOD STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is duly qualified or licensed as a foreign
corporation to do business and is in good standing in each jurisdiction in
which property may be owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary and has all
governmental licenses, authorizations, permits, consents and approvals required
for the operation of its business, except where the failure to be so duly
qualified or licensed or to have such governmental licenses, authorizations,
permits, consents and approvals would not have a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or
prospects of the Company (hereinafter a "Material Adverse Effect").
4.3. VALIDITY OF AGREEMENT. This Agreement has been duly executed and
delivered by the Stockholders and constitutes the valid and legally binding
obligation of the Stockholders enforceable against the Stockholders in
accordance with its terms.
4.4. CAPITALIZATION. First Ice Company has an authorized
capitalization consisting of 50,000 shares of Stock, of which 501 shares are
issued and outstanding. Codorus Leasing Company has an authorized
capitalization consisting of 1,000 shares of Stock of which 500 are issued and
outstanding. All such outstanding shares have been duly authorized and validly
issued and are fully paid and nonassessable. As of the Closing Date, there are
no outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements providing for
the purchase, issuance or sale of any shares of the capital stock of the
Company, other than as contemplated by this Agreement. Except as contemplated
by this Agreement, there are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company.
4.5. SUBSIDIARIES. As of the Closing Date, the Company will have no
subsidiaries and will own no capital stock, bonds or other securities of, nor
will it have any proprietary interest in, any other corporation, association or
business organization. First Ice Company presently owns all of the common
stock of Hot Ice Company, an inactive Oklahoma corporation with no assets.
First Ice Company will convey said stock to Stockholders who will then change
the name of said corporation and will cause the corporation to assign to Buyer
any rights the corporation holds to the name Hot Ice Company.
4.6. FINANCIAL STATEMENTS. Stockholders have previously caused to be
furnished to Buyer the Company's unaudited balance sheet as of December 31,
1996, and the related unaudited statements of income for the fiscal year then
ended, and the unaudited balance sheet of the Company as of June 30, 1997
("June 30, 1997 Balance Sheet"), and the related unaudited statement of income
for the six month period beginning January 31, 1997 and ending June 30, 1997
(such balance sheets and related statements are collectively referred to herein
as the "Financial Statements"). The Financial Statements taken as a whole
fairly present the financial position of the Company as of December 31, 1996,
and June 30, 1997, respectively, and the statements of income of the Company
for the respective periods then ended.
STOCK PURCHASE AGREEMENT - PAGE 3
<PAGE> 4
Except as and to the extent reflected or reserved against in the
Financial Statements or as is disclosed herein and except for liabilities
arising in the ordinary course of business and consistent with past practice
since the date of the June 30, 1997 Balance Sheet, the Company has been
operated in the ordinary course and has incurred no material liabilities as of
the date hereof. Since June 30, 1997 there has not been any material adverse
change in the business, operations, properties, prospects, assets or condition
of the Company, and no event has occurred or circumstance exists that may
result in such a material adverse change. The Stockholders further warrant and
represent that the actual sales made and expenses incurred of the Company are
reflected in the December 31, 1996 and June 30, 1997 Financial Statements.
4.7. BOOKS AND RECORDS. The Company's books and records are complete
and correct in all material respects, have been maintained on a consistent
basis and reflect the basis for the Financial Statements.
4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as is disclosed
herein, or in the schedule of disclosures to be provided at Closing and
incorporated herein (the "Disclosure Schedule"), since December 31, 1996 the
Company's business has been conducted in the ordinary course consistent with
past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected to have a
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the Company of
any outstanding shares of capital stock or other securities of the Company
except for cash dividends paid prior to the Closing out of operating cash flow;
(c) any amendment of any material term of any outstanding
security of the Company;
(d) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on
any material asset;
(f) any making of any loan, advance or capital contributions
to or investment in any Person;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company
which, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or business or
any relinquishment by the Company of any contract or other right, that has not
been in the ordinary course of business consistent with past practices;
(i) any change in any method of accounting or accounting
practice by the Company;
STOCK PURCHASE AGREEMENT - PAGE 4
<PAGE> 5
(j) any (i) employment, severance, termination, retirement or
other similar agreement entered into with any director, officer or employee of
the Company (or any amendment to any such existing agreement), (ii) grant of
any severance or termination pay to any director, officer or employee of the
Company, or (iii) change in compensation or other benefits payable to any
director, officer or employee of the Company except in the ordinary course of
business consistent with past practices, except a $5.00 per future working day
raise commencing September 1, 1997 for truck drivers who have perfect
attendance at work for the month of August, 1997, and who have been employed by
the Company in excess of one year;
(k) any labor dispute, or any activity or proceeding by a
labor union or representative thereof to organize any employees of the Company,
which employees were not subject to a collective bargaining agreement at the
Closing Date, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to any employees of the Company;
(l) any transaction between the Company and any of the Persons
referred to in Section 4.12(j);
(m) any significant change in the pricing of materials or
supplies or for the sale of products in connection with the Company's business
or the introduction or discontinuance of any menu items which could reasonably
be expected to have a Material Adverse Effect; or
(n) any capital expenditure by the Company (except as set
forth herein).
4.9. TITLE TO PROPERTIES; ENCUMBRANCES.
(a) The Company has good and marketable title to all of its
assets and properties, whether real, personal or mixed, tangible or intangible
(the "Assets"). The Assets constitute all of the operating assets used in the
businesses of the Company. All of the Assets are free and clear of except for
those disclosed in the June 30, 1997 Balance Sheet or in Sections 4.9 of the
Disclosure Schedule. Except as set forth in Sections 4.10 or 4.11 of the
Disclosure Schedule, there is no real property or personal property necessary,
appropriate or used in the business of the Company that is not owned by the
Company or possessed by the Company pursuant to a binding written agreement
therefor permitting the use of the property in the manner used by the Company
on the date hereof. Any such agreement is set forth in Sections 4.12 of the
Disclosure Schedule.
(b) Except as set forth in Sections 4.10 and 4.11 of the
Disclosure Schedule, all real property and tangible personal property included
in the Assets is in good operating condition and repair, ordinary wear and tear
excepted
4.10. REAL PROPERTY .
(a) Section 4.10 of the Disclosure Schedule contains (i) a
complete and accurate legal description of each parcel of real property owned
by, leased to or used by the Company (the "Real Property") and (ii) a complete
and accurate list of all current leases, lease amendments, subleases,
assignments, licenses and other agreements to which the Real Property is
subject (the "Leases"). The Company has delivered to Purchaser true and
complete copies of the Leases.
(b) Except as disclosed in Section 4.10 of the Disclosure
Schedule, (i) each of the Leases is in full force and effect and has not been
amended or modified; (ii) neither the
STOCK PURCHASE AGREEMENT - PAGE 5
<PAGE> 6
Company, nor any other party thereto, is in default thereunder, nor is there
any event which with notice or lapse of time, or both, would constitute a
default thereunder; (iii) the Company has received no notice that any party to
any Lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder; and (iv)
no rental under the Leases has been paid more than one month in advance.
(c) To the best of Stockholders' knowledge and belief, except
as disclosed in Section 4.10 of the Disclosure Schedule, (i) there are no tanks
on or below the surface of the Real Property, (ii) there is no hazardous or
toxic waste, substance or material or other contaminant or pollutant (as
determined under federal, state or local law) present on or below the surface
of the Real Property including, without limitation, in the soil, subsoil,
groundwater or surface water, which constitutes a violation of any law,
ordinance, rule or regulation of any governmental entity having jurisdiction
thereof or subjects or could subject Purchaser to any liability to third
parties, and (iii) the Real Property has never been used by the Company or by
any previous owners or operators to generate, manufacture, refine, produce,
store, handle, transfer, process or transport any hazardous or toxic waste,
substance or material or other contaminant or pollutant.
(d) The zoning of each parcel of the Real Property permits the
improvements located thereon and the continuation of business presently being
conducted thereon. The Real Property is served by utilities and services
necessary for the normal and continued operation of the business presently
conducted thereon.
4.11 PERSONAL PROPERTY.
(a) Section 4.11 of the Disclosure Schedule is a complete and
accurate schedule as of June 30, 1997 describing, and specifying the location
of, all inventory, motor vehicles, machinery, fixtures, equipment, furniture,
supplies, tools and all other tangible or intangible personal property (other
than the rights arising under the Contracts and the accounts receivable) owned
by, in the possession of, or used by the Company (the "Personal Property").
(b) Each lease, license, rental agreement, contract of sale or
other agreement applicable to any Personal Property is listed as a "Contract"
under Section 4.12 of the Disclosure Schedule and is in full force and effect;
neither the Company nor any other party thereto is in default thereunder, nor
is there any event which with notice or lapse of time, or both, would
constitute a default thereunder. The Company has received no notice that any
party to any such lease, license, rental agreement, contract of sale or other
agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the business, properties or financial condition of
the Company.
(c) The inventory of the Company as described in Section 4.11
of the Disclosure Schedule consisted and consists of items substantially all of
which were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or salable
within a reasonable period of time in the ordinary course of business of the
Company, except items of inventory which have been written down to realizable
market value or written off completely, and damaged or broken items in an
amount which does not materially affect the value of the inventory as reflected
on the Financial Statements. With respect to inventory in the hands of
suppliers for which the Company is committed as of the date hereof, such
inventory is reasonably expected to be usable in the ordinary course of
business of the Company as presently being conducted.
STOCK PURCHASE AGREEMENT - PAGE 6
<PAGE> 7
4.12 MATERIAL CONTRACTS. Except as disclosed on Schedule 4.12 of the
Disclosure Schedule, the Company has no or is not bound by any of the following
("Contracts"):
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other instrument
relating to the borrowing of money, or the guaranty of any such obligation for
the borrowing of money;
(c) joint venture or other agreement with any person, firm,
corporation or unincorporated association doing business either within or
outside the United States relating to sharing of present or future commissions,
fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts and/or
rebates).
(j) any agreement with any Stockholder or any of its affiliate
or any director or officer of any such affiliate or the Company or with any
"associate" or member of the "immediate family" (as such terms are respectively
defined in Rules 12b-2 and 16a-1 of the Securities Exchange Act of 1934) of any
such Stockholder, affiliate, director or officer; or
(k) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the Company.
Except as disclosed in the Disclosure Schedule, each Contract
disclosed or required to be disclosed in this Agreement is a valid and binding
agreement of the Company and is in full force and effect and neither the
Company nor, to the knowledge of the Stockholders, any other party thereto, is
in default or breach in any material respect under the terms of any such
Contract, and no condition exists that with notice or lapse of time or both
would constitute a default of the Company or any other party thereto, under,
any agreement or other instrument binding upon the Company.
4.13. NO CONFLICT. Except as set forth in the Disclosure Schedule the
consummation of the transactions contemplated herein (i) will not conflict with
or violate any provision of the Articles of Incorporation or by-laws of the
Company, each as amended (ii) will not conflict with or violate any applicable
law, rule, regulation, judgment, injunction, order or decree or require any
action by or in respect of, or filing with, any governmental body, agency, or
official, and (iii) will not conflict with or result in a violation or breach
of, or constitute a default under, any license, franchise, permit, indenture,
agreement or other instrument to which the Company is a party, or by which the
Company or any of its assets or properties is bound or result in the creation
or imposition of any Lien on any asset of the Company.
STOCK PURCHASE AGREEMENT - PAGE 7
<PAGE> 8
4.14. LITIGATION. Except as set forth in Section 4.14 of the
Disclosure Schedule there is no action, suit or proceeding at law or in equity
by any Person or any arbitration or any administrative or other proceeding or
investigation by or before any governmental or other instrumentality or agency,
pending, or, to the knowledge of the Stockholders, threatened against or
affecting the Company.
4.15. TAXES.
(a) The Company has, at all times, been an S corporation, as
defined under the Internal Revenue Code of 1986, as amended (the "Code") since
the effective date of the valid election as disclosed in Section 4.15 of the
Disclosure Schedule.
(b) Except as set forth on Section 4.15 of the Disclosure
Schedule, (i) all Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
the Company (collectively, the "Returns"), have, to the extent required to be
filed, been filed when due (including any applicable extensions thereof); (ii)
all Taxes shown as due and payable on the returns that have been filed have
been timely paid, or withheld and remitted to the appropriate Taxing Authority;
(iii) the charges, accruals and reserves for Taxes not previously paid with
respect to the Company for any Pre-Closing Tax Period (including any Pre-
Closing Tax Period for which no Return has yet been filed) reflected on the
books of the Company (excluding any provision for deferred income Taxes) are
adequate to cover such Taxes; (iv) there have been proper withholding and
reporting of all employees compensation (including tips income and allocated
tips) and employment Taxes throughout the Pre-Closing Tax Period; (v) the
Company is not delinquent in the payment of any Tax (including any applicable
extensions); (vi) the Company has not requested any extension of time within
which to file any Return which it has subsequently not filed; (vii) the Company
has not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension
or waiver) has not yet expired; (viii) there is not a claim, audit, action,
suit, proceeding, or investigation now pending or threatened against or with
respect to the Company in respect of any Tax; (ix) there are no requests for
rulings or determinations in respect of any Tax pending between the Company and
any Taxing Authority; (x) none of the property owned by the Company is "tax-
exempt" use property within the meaning of Section 168(h) of the Code; (xi)
neither the Stockholders nor the Company, nor any other person on behalf of the
Company has entered into nor will it enter into any agreement or consent
pursuant to Section 341(f) of the Code; (xii) there are no liens for Taxes upon
the assets of the Company except liens for current Taxes not yet due; (xiii)
the Stockholders are not subject to withholding under Section 1445 of the Code
with respect to any transaction contemplated hereby; (xiv) the Company will not
be required to include any adjustment in taxable income for any Post-Closing
Tax Period under Section 481(c) of the Code (or any similar provision of the
Tax laws of any jurisdiction) as a result of a change in method of accounting
for a Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of the
Company for any Pre-Closing Tax Period; (xv) the Company has not been a member
of an affiliated group (as defined in Section 1504(a) of the Code) or a
consolidated, combined or unitary group for purposes of any other Taxes; (xvi)
no Returns of the Company have been examined or audited; and (xvii) none of the
material property used by the Company is subject to a lease, other than a
"true" lease for federal income tax purposes.
(c) Oklahoma is the only state to which any Tax is properly
payable by the Company.
4.16. INTELLECTUAL PROPERTIES. Section 4.16 of the Disclosure Schedule
sets forth a list of the material domestic and foreign patents, patent
applications, patent licenses, software licenses,
STOCK PURCHASE AGREEMENT - PAGE 8
<PAGE> 9
trade names, trademarks, service marks, service names, trademark registrations
and applications, service mark registrations and applications, copyright
registrations and applications or any other similar type of proprietary
intellectual property right owned, used or held for such use by the Company
(collectively, the "Intellectual Property"). To the knowledge of the
Stockholders, (a) there are no pending proceedings or litigation or other
adverse claims made in writing affecting or with respect to the Intellectual
Property, (b) there is no business operating in the State of Oklahoma under the
name "First Ice Company" or "Codorus Leasing Company" or any deceptively
similar name other than the Company, (c) neither the Stockholders nor the
Company has been sued or charged in writing with or been a defendant in any
claim, suit, action or proceeding relating to its business that has not been
finally terminated prior to the date hereof and that involves a claim of
infringement by the Company of any the intellectual property rights of any
other Person, and (c) the Stockholders have no knowledge of any basis for any
such claim of infringement and have no knowledge of any continuing infringement
by any other Person of any Intellectual Property. No Intellectual Property of
the Company is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company or restricting the
licensing thereof by the Company to any Person. The Company has not entered
into any agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property.
4.17. COMPLIANCE WITH LAWS. To the best of the Stockholders' knowledge
and belief, except as set forth on Section 4.17 of the Disclosure Schedule;
(a) The Company is and has been in compliance with all
applicable Federal, state, local or other laws, rules, regulations, judgments,
injunctions, orders or decrees (excluding for the purposes of this subparagraph
(a) all environmental laws and regulations) in all aspects as those laws
related to the Company, its business operations and its assets to include all
real property owned or leased by the Company;
(b) The Company has complied in all material respects with all
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) which have jurisdiction over the
Company concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Hazardous
Materials") and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. There are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal (on-site or off-site)
of any Hazardous Materials that could form the basis of any claim or liability
under any applicable Federal, state, local or other environmental law against
the Company or against any Person or entity whose liability the Company may
have retained or assumed either contractually or by operation of law or
otherwise. Without limiting the generality of the preceding sentences, the
Company has obtained and been in material compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are
required under, and has complied, in all material respects, with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in such laws.
(c) The Company is not in default under, and no condition
exists that with notice or lapse of time or both would constitute a default of
the Company under any license,
STOCK PURCHASE AGREEMENT - PAGE 9
<PAGE> 10
franchise, permit or similar authorization held by the Company.
4.18. EMPLOYEE BENEFIT PLANS. Each material employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), maintained by the Company (collectively, the
"Plans") is set forth in Schedule 4.18 to be provided at Closing, is in
substantial compliance with applicable law and has been administered and
operated in all material respects in accordance with its terms and applicable
law. Each Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal Revenue Service
and, to the knowledge of the Stockholders, no event has occurred and no
condition exists which could reasonably be expected to result in the revocation
of any such determination. No event which constitutes a "reportable event" (as
defined in Section 4043(b) of ERISA) for which the 30-day notice requirement
has not been waived by the Pension Benefit Guaranty Corporation (the "PBGC")
has occurred with respect to any Plan. No Plan subject to Title IV of ERISA
has been terminated or is or has been the subject of termination proceedings
pursuant to Title IV of ERISA. Full payment has been made of all amounts which
the Company was required under the terms of the Plans to have paid as
contributions to such Plans (excluding any amounts not yet due) and no Plan
which is subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred any
"accumulated funding deficiency" (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived. Neither the Company or any
other "disqualified person" or "party in interest" (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in
any transactions in connection with any Plan that could reasonably be expected
to result in the imposition of a material penalty pursuant to Section 502(i) of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975(a) of the Code. No material liability, claim, action or litigation, has
been made, commenced or, to the knowledge of the Stockholders, threatened with
respect to any Plan (other than for benefits payable in the ordinary course and
PBGC insurance premiums). No Plan or related trust owns any securities in
violation of Section 407 of ERISA. With respect to all Plans which are subject
to Title IV of ERISA, as of the most recent actuarial valuation prepared for
each such Plan, the aggregate present value of the accrued liabilities thereof
did not exceed the aggregate fair market value of the assets allocable thereto.
Each "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
the Company is obligated to contribute ("Multiemployer Plan") is listed on
Schedule 4.18 to be provided at Closing. Except as set forth in Schedule 4.18,
all contributions required to have been made by the Company to a Multiemployer
Plan have been made on a timely basis. The Company has not been advised by any
Multiemployer Plan that it has any withdrawal liability under Sections 4201 or
4204 of ERISA with respect to any Multiemployer Plan, nor is the Company aware
of any such withdrawal liability.
4.19. INSURANCE. Schedule 4.19 to be provided at Closing contains a
list of all significant policies and contracts for insurance maintained by the
Company. All such policies are in full force and effect. The Stockholders
shall cause the Company to keep or cause to be kept such policies (or
substantial equivalents) in such amounts duly in force until the end of the
Closing Date and shall give the Buyer notice of any material change in such
policies. The term life insurance policies on Stockholders' lives shall be
assigned to Stockholders on or before closing who will assume the obligation to
pay premiums.
4.20. BROKER'S OR FINDER'S FEES. The Company and Stockholders have not
employed, commissioned or otherwise engaged any agent, broker, person or firm
to act on its behalf of either party that is or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, except
for the services provided by William Inman to the Stockholders whose fee, if
any, shall be payable solely by the Stockholders.
STOCK PURCHASE AGREEMENT - PAGE 10
<PAGE> 11
4.21. OWNERSHIP OF ASSETS. All of the assets used in the Company's
business are owned by the Company except certain leased equipment and certain
office furniture and equipment as set forth on Schedule 4.21 of Company's and
Stockholders' Disclosure Schedule.
4.22. LABOR MATTERS.
(a) Section 4.22 of the Disclosure Schedule contains a
complete and accurate list of the name, base compensation, bonus and
position(s) of each person employed by the Company, together with a description
of all bonus formulas used by the Company to produce the bonus amounts set
forth.
(b) Except as disclosed in Section 4.22 of the Disclosure
Schedule, the Company is not a party to any of the following:
(i) management, employment or other contract providing
for the employment or rendition of executive services;
(ii) contract for the employment of any employee which
is not terminable by the Company on thirty (30) days' notice;
(iii) collective bargaining agreement or other agreement
with any labor union or other employee organization (and no such
agreement is currently being requested by, or is under discussion by
management with, any group of employees or others); or
(iv) any other employment contract or other compensation
agreement or arrangement (including, without limitation, any contract,
agreement or arrangement dealing with vacation pay or other benefits)
affecting or relating to current or former employees of the Company.
(c) There are no controversies pending or, to the best
knowledge of the Stockholders, threatened between the Company and any employees
of the Company. The Company has complied with all laws relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining, immigration, safety and the payment of withholding and
social security and similar taxes, and the Company has no liability for any
arrears of wages or taxes or penalties for failure to comply with any of the
foregoing.
4.23 CAPITAL IMPROVEMENTS . There are no capital improvements or
purchases or other capital expenditures which the Company has committed to or
contracted for which have not been completed prior to the date hereof.
4.24 FULL DISCLOSURE . No information furnished by the Stockholders
to Buyer in connection with this Agreement (including, without limitation, the
Financial Statements and all information in the Disclosure Schedules) is false
or misleading and such information includes all facts required to be stated
therein or necessary to make the statements therein not misleading. All copies
of original documents delivered to Buyer are true and correct copies of such
original documents.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Buyer represents and warrant to the Stockholders as follows:
5.1. CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas and is
STOCK PURCHASE AGREEMENT - PAGE 11
<PAGE> 12
duly qualified to do business in all other jurisdictions as a foreign
corporation, and is in good standing in all such jurisdictions, where the
nature of its business would require such qualification.
5.2. POWER AND AUTHORITY. Buyer has the requisite corporate power and
authority, and has been duly authorized, to enter into this Agreement and the
ancillary documents required hereunder and to perform all of its obligations
hereunder and thereunder. The consummation of the transactions contemplated
hereby (i) will not violate any provision of the Bylaws or Articles of
Incorporation of the Buyer, as amended to date, will not violate any statute,
rule, regulation, order or decree of any public body or authority by which
Buyer is bound.
5.3. BROKER'S OR FINDER'S FEES. Except as otherwise contemplated
hereby, no agent, broker, person or firm acting on behalf of Buyer is, or will
be, entitled to any commission or broker's or finder's fees from any of the
parties hereto, or from any Person controlling, controlled by or under common
control with any of the parties hereto, in connection with any of the
transactions contemplated herein.
6. COVENANTS AND AGREEMENTS.
6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as disclosed on
Schedule 6.1 and in Section 4.8(j), during the period from the date of this
Agreement to the Closing Date, the Stockholders agree to cause the Company to,
and the Company shall, conduct its operations in the ordinary course of
business consistent with past practices. Except as may be first approved by
the Buyer (such approval not to be unreasonably withheld) or as is otherwise
required by this Agreement, the Stockholders agree that as of the execution of
this Agreement and through the Closing Date (i) the Company's Articles of
Incorporation and by-laws shall not be amended, (ii) the salaries payable to
all employees shall not be increased, (iii) the Company shall refrain from
making any bonus, pension, retirement or insurance payment or arrangement to or
with any such persons, (iv) the Company shall refrain from entering into any
contract or commitment except contracts and commitments in the ordinary course
of business, (v) the Company shall refrain from increasing indebtedness for
borrowed money, (vi) the Company shall not cancel or waive any claims or rights
of substantial value to the Company, (vii) the Stockholders shall not take or
agree to take any action that would make any representation and warranty of the
Stockholders hereunder inaccurate in any material respect on or prior to the
Closing Date, and (vii) the Stockholders shall not agree, whether or not in
writing, to do any of the foregoing.
6.2. REVIEW OF THE COMPANY. The Buyer may, prior to the Closing Date,
through their representatives, review the properties, books and records of the
Company to become familiarized with such properties and the business of the
Company. The Stockholders shall cause the Company to permit the Buyer and their
representatives to have reasonable access to the premises and to the books and
records of the Company during normal working hours and to furnish the Buyer
with such financial and operating data and other information with respect to
the business and properties of the Company as the Buyer shall from time to time
reasonably request.
STOCK PURCHASE AGREEMENT - PAGE 12
<PAGE> 13
6.3. REASONABLE EFFORTS. Each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action to do, or cause to
be done, and to assist and cooperate with the other parties hereto in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement, including, but not limited to, (i) the obtaining of all necessary
waivers, consents and approvals from governmental or regulatory agencies or
authorities and the making of all necessary registrations and filings and the
taking of all reasonable steps as may be necessary to obtain any approval or
waiver from, or to avoid any action or proceeding by, any governmental agency
or authority, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties and (iii) the defending of any lawsuits or any other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby
including, without limitation, seeking to have any temporary restraining order
entered by any court or administrative authority vacated or reversed.
6.4. PUBLIC ANNOUNCEMENT. The Buyer and the Stockholders shall
consult with one another in advance of and agree on the timing and content of
all press releases or public announcements and disclosures with respect to this
Agreement and the transactions contemplated hereby.
6.5 FURTHER ASSURANCES. From time to time prior to and after the
Closing, each party hereto shall, at their own expense, execute and deliver, or
cause to be executed and delivered, all such other instruments, including
instruments of conveyance, assignment and transfer, and to make all filings
with and to obtain all consents, approvals or authorizations of any
governmental or regulatory authority or any other Person under any permit,
license, agreement, indenture or other instrument and take all such other
actions as such party may reasonably be requested to take by the other party
hereto, consistent with the terms of this Agreement, in order to effectuate
better the provisions and purposes of this Agreement and the transactions
contemplated hereby.
6.6. NONCOMPETITION. Each party to this Agreement acknowledges and
agrees to the execution of the Noncompetition Agreement attached hereto as
Exhibit 6.6.
6.7. NO SHOPPING. Unless and until this Agreement has been terminated
in accordance with its terms, the Stockholders will not solicit, initiate or
participate, directly or indirectly, or cause or cause or permit any other
person to solicit, initiate or participate, directly or indirectly, in
discussions or negotiations with, or provide any information to, any other
person (other than the Buyer) concerning, or enter into any agreement providing
for (other than in the ordinary course of business) the acquisition of the
stock of the Stockholders in the Company or any part (whether by merger,
purchase of stock or assets or other similar transaction), other than the
acquisition contemplated by this Agreement. Stockholders further represent and
warrant that they will disclose to Buyer any and all communications they
receive from any third parties (to include the identity of the third party)
with respect to any proposals, inquiries, discussions, or negotiations with any
such third parties regarding the sale, merger or disposition of the Company or
its assets or the sale, merger or other disposition of Stockholders' Stock,
after execution of this Agreement.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF STOCKHOLDERS.
The sale of the Stock by the Stockholders to the Buyer on the Closing
Date is conditioned upon the satisfaction or waiver, at or prior the Closing
Date, of the following conditions:
7.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Buyer herein contained shall be true and correct in all
material respects on the Closing Date as though made on and as of such date.
STOCK PURCHASE AGREEMENT - PAGE 13
<PAGE> 14
7.2. PERFORMANCE OF AGREEMENTS. Buyer shall have performed all
obligations and agreements in all material respects and complied with all
covenants and conditions in all material respects contained in this Agreement
to be performed or complied with by it at or prior to the Closing.
7.3. OFFICER'S CERTIFICATE. Buyer shall have delivered to the
Stockholders a certificate of an officer of Buyer, dated the Closing Date,
certifying on behalf of such Buyer that the conditions set forth in Sections
7.1 and 7.2 have been fulfilled.
7.4. PROHIBITION. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any United
States federal or state court of competent jurisdiction or governmental
authority (which has jurisdiction over the enforcement of any applicable laws)
making illegal the consummation of any of the transactions hereunder.
7.6. PROCEEDINGS. All proceedings to be taken by the Buyer in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Stockholders and their counsel, and the Stockholders shall
have received copies of all such documents and other evidences as they or their
counsel may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER.
The purchase of the Stock by the Buyer and the paying of the Purchase
Price on the Closing Date is conditioned upon the satisfaction or waiver, at or
prior to the Closing, of the following conditions:
8.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Stockholders contained in this Agreement shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
8.2. PERFORMANCE OF AGREEMENTS. The Stockholders shall have performed
all obligations and agreements in all material respects and complied with all
covenants and conditions in all material respects contained in this Agreement
to be performed or complied with by them at or prior to the Closing.
8.3. CERTIFICATE OF THE STOCKHOLDERS. Each Stockholder shall have
executed and delivered to the Buyer a certificate dated the Closing Date
certifying that the conditions set forth in Sections 8.1 and 8.2 have been
fulfilled.
8.4. PROHIBITION. There shall have been no order or preliminary or
permanent injunction entered in any action or proceeding before any United
States federal or state court of competent jurisdiction or governmental
authority (which has jurisdiction over the enforcement of any applicable laws)
making illegal or prohibiting the consummation of the transactions hereunder.
8.5. CONSENTS. All material consents, approvals, authorizations or
permits of, or filings with or notifications to any third party required for
the consummation of the transaction, contemplated herein shall have been
obtained.
8.6. DUE DILIGENCE. Buyer shall have conducted and shall be satisfied
with its due
STOCK PURCHASE AGREEMENT - PAGE 14
<PAGE> 15
diligence investigation.
8.7. CERTIFICATES EVIDENCING THE STOCK. Stockholders shall have
delivered to the Buyer validly issued certificates representing the Stock to be
transferred in accordance with this Agreement, duly endorsed or accompanied by
duly executed documents of transfer in accordance with this Agreement.
8.8. OPINION OF COUNSEL TO THE STOCKHOLDERS. At the Closing, the
Stockholders shall have delivered to the Buyer the opinion of counsel to the
Stockholders and the Company, dated the Closing Date, in a form that is
satisfactory to the Buyers.
8.9. NO MATERIAL ADVERSE CHANGE. From the date of this Agreement
until the Closing Date, there shall not have been any material adverse change
in the financial condition of the Company.
8.10. RESIGNATIONS. The Buyer shall have received the written
resignation of all directors, officers and consultants of the Company unless
the Buyer shall have notified the Stockholders that it wishes certain of such
directors, officers and consultants to continue in such positions after the
Closing.
8.11. PROCEEDINGS. All proceedings to be taken by the Stockholders or
the Company in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and their counsel, and the Buyer shall have received
copies of all such documents and other evidences as they or their counsel may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
8.12. SIGNING AUTHORITY. The Stockholders and all officers of the
Company shall have taken the necessary action to terminate their (i) access to
all bank accounts of the Company and (ii) authority to sign on behalf of the
Company, except as otherwise agreed to by the Buyer.
9. TAX MATTERS.
9.1. TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
STOCK PURCHASE AGREEMENT - PAGE 15
<PAGE> 16
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or the Stockholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Buyer Indemnitee" means the Buyer Indemnified Parties as defined in
Section 10.1.
"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign). "Tax" includes any employment or withholding tax
relating to employee tips income (actual and allocated).
"Tax Indemnification Period", means with respect to any Tax, any Pre-
Closing Tax Period of the Company.
9.2. FILING OF SHORT PERIOD RETURNS. The Buyer and the Stockholders
shall treat and cause the Company to treat August 31, 1997 as the last day of
the taxable period in which the Company is an S corporation, as defined under
the Code. All Tax returns of the Company, which are required and/or permitted
by the authorized taxing authorities (herein collectively referred to as the "S
Short Year Returns"), shall be filed accordingly. In accordance with Section
1362(e)(6)(D) and related regulations of the Code, the books of the Company
shall be closed August 31, 1997. The Stockholders will cause their accounting
firm to prepare, at the Stockholders' expense, the S Short Year Returns.
9.3. COVENANTS.
(a) Without the prior written consent of the Buyer, the
Stockholders shall not cause the Company to make or change any tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a Tax refund, consent
to any extension or waiver of the limitations period applicable to any Tax
claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of increasing the Tax liability of the
Company or the Buyer.
(b) All Returns not required to be filed on or before the date
hereof (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
STOCK PURCHASE AGREEMENT - PAGE 16
<PAGE> 17
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in connection
with this Agreement (including any real property transfer Tax and any similar
Tax) shall be accrued by the Company on the Effective Date Balance Sheet and be
paid by the Company when due (including any applicable extensions), and the
Company will, at the Stockholders' expense, file all necessary Tax returns and
other documentation with respect to all such Taxes and fees.
9.4. COOPERATION ON TAX MATTERS.
(a) The Buyer and the Stockholders shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the preparation and filing of any Tax return, statement, report or form
(including any report required pursuant to Section 6043 of the Code and all
Treasury Regulations promulgated thereunder), any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding. The Buyer and Stockholders shall cause the Company to: (i) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any Pre-Closing Tax Period, and to abide by all record
retention requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give the
Stockholders reasonable written notice prior to destroying or discarding any
such books and records and, if the Stockholders so request, the Buyer shall
allow the Stockholders to take possession of such books and records.
(b) The Buyer and the Stockholders further agree, upon
request, to use all reasonable efforts to obtain any certificate or other
document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
9.5. TAX INDEMNIFICATION. The Stockholders hereby jointly and
severally indemnify Buyer Indemnitee against and agree to hold Buyer Indemnitee
harmless from any loss, liability or expense attributable to (i) any Tax with
respect to income (including, to the extent based on income, state franchise
Taxes), transfer Tax, employment or withholding Tax related to employee tips
income (actual and allocated) and related reporting requirements, and gross
receipts or royalty Tax in respect of any franchise operation and any other Tax
of the Company related to the Tax Indemnification Period, (ii) any Tax
resulting from a breach of the provisions of Section 9.3, and (iii) any
liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax described in (i) or (ii),
including those incurred in the contest in good faith in appropriate
proceedings relating to the imposition, assessment or assertion of any such
Tax, and any liability as transferee or successor (the sum of (i), (ii), and
(iii) being referred to herein as a "Loss").
9.6. PURCHASE PRICE ADJUSTMENT. Any amount paid by the Stockholders,
the Buyer or the Company under Section 9.5 or Section 10 will be treated as an
adjustment to the relevant purchase price for all Tax purposes unless a Final
Determination causes any such amount not to constitute an adjustment to the
relevant purchase price. In the event of such a Final Determination, the
Buyer, the Company or the Stockholders, as the case may be, shall pay an amount
that reflects the hypothetical Tax consequences of the receipt or accrual of
such payment, using the maximum statutory rate (or rates, in the case of an
item that affects more than one Tax) applicable to the recipient of such
payment for the relevant year, reflecting for example, the effect of deductions
available for interest paid or accrued and for Taxes such as state and local
STOCK PURCHASE AGREEMENT - PAGE 17
<PAGE> 18
income Taxes. Any payment required to be made by the Buyer or the Stockholders
under Section 9 that is not made when due shall bear interest at the rate per
annum determined, from time to time, under the provision of Section 6621(a)(2)
of the Code for each day until paid.
9.7. SURVIVAL. The provisions of this Section 9 with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes related to employee tips income
(actual and allocated) and related reporting requirements, gross receipts or
royalty Taxes in respect of any franchise operation shall survive for the full
period of all applicable statutes of limitations (giving effect to any waiver,
mitigation or extension thereof) and, with respect to all other Taxes, the
provisions shall survive the Closing Date until the earlier of (a) ninety days
after the completion of the audit of the Company's financial statements for the
fiscal year ended December 31, 1995 and (b) June 30, 1996, in each such case
regardless of any investigations or inquiries made by the Buyer, the
Stockholders or any of their respective representatives. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if a Notice of Claim relating to the inaccuracy or breach thereof giving rise
to such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
10. INDEMNIFICATION.
10.1. INDEMNIFICATION BY THE STOCKHOLDERS. Stockholders shall, jointly
and severally, indemnify, defend, reimburse and hold the Buyer and its
affiliates (including its affiliates, each of their respective directors,
officers, employees and agents, and each of their respective heirs, executors,
successors and assigns of any of the foregoing, collectively, the "Buyer
Indemnified Parties") harmless from, against and in respect of any and all
claims, losses, liabilities, and expenses, including reasonable fees and
disbursements of counsel (including any such fees and expenses for the
collection of any claim against any third party incurred by any Buyer
Indemnified Party arising from or in connection with any or all of the
following:
(a) Any breach of any covenant, obligation or agreement of the
Stockholders under this Agreement or because any representation or warranty
made by the Stockholders pursuant to this Agreement (ignoring for this purpose
any qualification as to materiality or Material Adverse Effect contained in any
such representation or warranty) shall be inaccurate.
(b) Any action, suit, proceeding, compromise, assignment or
judgment arising out of or incidental to any of the matters indemnified against
in this Section 10.1 to include, but not limited to all liabilities,
obligations, claims and/or lawsuits incurred by the Company on or prior to the
Closing Date.
10.2. INDEMNIFICATION BY BUYER. From and after the Closing Date, the
Buyer shall indemnify, defend, reimburse and hold harmless the Stockholders and
their affiliates, each of their employees and agents, and each of their
respective heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Stockholder Indemnified Parties") from, against and in
respect of, any and all claims, losses, liabilities, and expenses, including
reasonable fees and disbursements of counsel, incurred by any Stockholder
Indemnified Party arising from or in connection with any or all of the
following:
(a) Any breach of any covenant, obligation or agreement of the
Buyer under this Agreement, or because any representation or warranty made by
the Buyer pursuant to this Agreement shall be inaccurate.
STOCK PURCHASE AGREEMENT - PAGE 18
<PAGE> 19
(b) Any action, suit, proceeding, compromise, assignment or
judgment arising out of or incidental to any of the matters indemnified against
in this Section 10.2.
(c) Any action, suit, proceeding, compromise, assignment or
judgment arising out of Buyer's operation of the business after Effective Date.
10.3. CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party.
10.4. RIGHT TO DEFEND. If the facts giving rise to any such claim for
indemnification involve any actual or threatened claim or demand by any third
party against the Indemnified Party, the Indemnifying Party shall be entitled
(without prejudice to the right of the Indemnified Party to participate in the
defense of such claim or demand at its expense through counsel of its own
choosing) to assume the defense of such claim or demand in the name of the
Indemnified Party at the Indemnifying Party's expense and through counsel of
its own choosing, which counsel shall be reasonably satisfactory to the
Indemnified Party, if it gives written notice to the Indemnified Party within
forty-five (45) days after receipt of the Notice of Claim that the Indemnifying
Party intends to assume the defense of such claim and acknowledges its
liability to indemnify the Indemnified Party for any losses resulting from such
claim; provided, however, that if the Indemnifying Party does not elect to
assume the defense of any claim, then (a) the Indemnifying Party shall have the
right to participate in the defense of such claim or demand at its expense
through counsel of its own choosing, provided the Indemnified Party shall
control the defense of such claim, (b) the Indemnified Party may settle any
such claim without the consent of the Indemnifying Party, however, the
Indemnifying Party may not settle any such claim without the prior written
consent of the Indemnified Party; and (c) Section 10.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent the Company is the Indemnified Party for
any actual or threatened claim or demand by any third party, the Company shall
have the right to control the prosecution of any counterclaim or right related
to such a claim or demand, provided that the Company agrees to reasonably
cooperate with the Stockholders with respect to the prosecution of such
counterclaim or right.
10.5. SETTLEMENT. Except as provided in Section 10.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Section 10 without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
10.6. CLAIM REDUCTION. Any claim for indemnification under this
Section 10 shall be
STOCK PURCHASE AGREEMENT - PAGE 19
<PAGE> 20
reduced to the extent of any third party insurance (excluding any deductibles
or arrangements in the nature of a financing) or condemnation payment actually
received by the Indemnified Party.
11. MISCELLANEOUS.
11.1. EVENTS OF TERMINATION. This Agreement may be terminated (i) by
mutual written agreement of the Buyer and the Stockholders, (ii) by the Buyer
by written notice to the Stockholders, if the conditions set forth in Section 8
hereof shall not have been complied with or performed on or prior to the
Closing Date or (iii) by the Stockholders by written notice to the Buyer, if
the conditions set forth in Section 7 hereof shall not have been complied with
or performed on or prior to the Closing Date, and, in either case, such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) on or before September 30, 1997.
STOCK PURCHASE AGREEMENT - PAGE 20
<PAGE> 21
11.2. EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agreement (other than pursuant to Section 11.3 and Section
11.4 and as provided in the Noncompetition Agreement) shall terminate without
further liability or obligation of either party to the other party hereunder.
11.3. FAILURE TO CLOSE.
(a) If the Buyer fail to consummate the transactions
contemplated on its part to occur in circumstances where all conditions of the
Closing set forth in Section 8 have been satisfied or waived, then Stockholders
may enforce this Agreement either by the specific performance of this Agreement
and Stockholders shall be entitled to recover the costs associated with
enforcing such specific performance or Stockholders may recover the actual
costs incurred with the negotiating of this Agreement.
(b) If the Stockholders fail to consummate the transactions
contemplated on their part to occur in circumstances where all conditions of
the Closing set forth in Section 7 have been satisfied or waived, the Buyer
shall be entitled to either enforce this Agreement through specific performance
and recover the costs associated with enforcing such specific performance or
Buyer may recover the actual costs (including attorneys' fees) incurred with
the negotiating of this Agreement.
11.4. EXPENSES. Each party to this Agreement shall pay its own costs
and expenses (including attorneys' and accountants' fees) incurred in
connection with the negotiation, execution and performance of this Agreement.
Any sales, transfer, stamp, or other like taxes applicable to the conveyance of
the Company's Stock to Buyer shall be borne by Buyer.
11.5. CERTAIN DEFINITIONS. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof. An "Affiliate of any Person" shall mean an "Affiliate" of such Person
as defined in Rule 405 promulgated under the Securities Act. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and polices of a Person, whether
through the ownership of voting securities, by contract or otherwise.
11.6. NOTICES. All notices, requests, demands, waivers or other
communications provided for herein shall be made in writing and shall be deemed
to have been duly given if delivered personally or sent by first class mail
with postage prepaid, or sent by telex, telegram or facsimile, as follows:
if to the Buyer: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis III, President
STOCK PURCHASE AGREEMENT - PAGE 21
<PAGE> 22
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attn: Alan Schoenbaum, P.C.
if to the Company: First Ice Company/Codorus Leasing Company
P.O. Box 22056
Oklahoma City, Oklahoma 73123
if to the Shareholders: James U. White, Jr.
6520 North Western, Suite 300
Oklahoma City, Oklahoma 73116
W. Brad Troutman
6112 Winchester
Oklahoma City, Oklahoma 73162
with a copy to: White, Coffey, Galt & Fite, P.C.
6520 North Western, Suite 300
Oklahoma City, Oklahoma 73116
Attn: John M. Coffey
or to such other address as a party shall have specified by notice in
writing to the other parties. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of personal
delivery or on the third business day after the mailing thereof or on the date
of confirmation of transmission of any telex, telegram or facsimile.
11.7. ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits, constitutes the entire agreement among the parties and supersedes all
prior agreements, correspondence, conversations and negotiations, with respect
to the subject matter hereof.
11.8. SEVERABILITY. If any provisions of this Agreement shall be
declared by any court of competent jurisdiction illegal, void or unenforceable,
the other provisions shall not be affected, but shall remain in full force and
effect.
11.9. MODIFICATION. This Agreement may not be modified or changed
except by an instrument in writing duly executed by the parties hereto, and no
waiver of compliance of any provision or condition hereof and no consent
provided for herein shall be effective unless evidenced by an instrument in
writing duly executed by the party seeking to be charged with such waiver or
consent.
11.10. CHOICE OF LAW. This Agreement shall be governed by and construed
according to the laws of the State of Oklahoma.
STOCK PURCHASE AGREEMENT - PAGE 22
<PAGE> 23
11.11. ASSIGNABILITY; SUCCESSOR AND ASSIGNS. This Agreement shall not
be assignable by any party without the prior written consent of the other
parties; provided, however, that the Buyer may assign their interest in this
Agreement to any of their Affiliates if such Affiliate undertakes to perform
the Buyer' obligations hereunder. This Agreement shall be binding upon and
shall inure to the benefit of the parties and, subject to the preceding
sentence, their respective successors in interest and assigns. Nothing in this
Agreement expressed or implied, is intended to confer on any person other than
the parties and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement. No
attempted assignment shall relieve the assignor of any of its obligations
hereunder without the written consent of the other party hereto. Any permitted
assignor of this Agreement shall give the other party to this Agreement notice
of any such assignment.
11.12. PRINCIPLES OF CONSTRUCTION. All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States in conformity with those used in the preparation of the Financial
Statements.
11.13. SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
11.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
11.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Any and all
representations and warranties set forth herein or in any Schedule or Exhibit
(including but not limited to any such representations, warranties or
statements made in or in connection with any amendment), or any certificate,
financial statement, or other instrument, delivered to Buyer by or on behalf of
Shareholders pursuant to or in connection with this Agreement shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the date of this Agreement and at the Closing Date. Unless otherwise
provided herein, all representations and warranties made or deemed to be made
under this Agreement shall survive the closing Date for a period of one (1)
year, regardless of any investigations or inquiries made by Buyer, and shall
not be waived by the Closing or by operation of law, except those
representations relating to any taxes which shall run indefinitely.
11.16. PARTIES IN INTEREST. This Agreement shall bind and inure to the
benefit of each party hereto and their legal representative, successors and
assigns.
11.17. ATTACHMENTS. All Exhibits and Schedules shall be attached to
this agreement and shall form an integral part hereof.
11.18. CONSTRUCTION. This Agreement is in all respects intended by each
party hereto to be deemed and construed to have been jointly prepared by the
parties. The parties hereby expressly agree that any uncertainty or ambiguity
existing herein shall not be interpreted against either of them as a result of
the actual identity of the draftsman.
11.19. WAIVER. No delay or failure by any party hereto in exercising
any of its rights, remedies, powers or privileges under this Agreement or at
law or in equity and no custom,
STOCK PURCHASE AGREEMENT - PAGE 23
<PAGE> 24
practice or course of dealing between or among any of such parties or any other
person shall be deemed a waiver by such party of any such rights, remedies,
powers or privileges, even if such delay or failure is continuous or repeated.
No single or partial exercise of any right, remedy, power or privilege shall
preclude any other or further exercise thereof by any such party or the
exercise of any other right, remedy, power or privilege by such party,
including, without limitation, the right of such party subsequently to demand
exact compliance with the terms of this Agreement.
11.20. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Oklahoma City, Oklahoma County, Oklahoma and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof, and shall not be appealable. Judicial proceedings
may be commenced only to enforce this arbitration agreement or to enforce the
results of arbitration; provided that such prohibition shall not apply in the
event that a court ordered injunction is an appropriate remedy for a breach of
this Agreement.
11.21. TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly enforced, construed and
rigidly enforced. The failure or delay in the enforcement of any rights or
interests granted herein shall not constitute a waiver of any such right or
interest or be considered as a basis for estoppel.
[STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
STOCK PURCHASE AGREEMENT - PAGE 24
<PAGE> 25
[STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, this Agreement has been duly executed by each of the
parties as of the date first above written.
STOCKHOLDERS:
/s/ W. Brad Troutman
---------------------------------------------
W. BRAD TROUTMAN, Stockholder
/s/ James U. White, Jr.
---------------------------------------------
JAMES U. WHITE JR., Stockholder
BUYER:
PACKAGED ICE, INC.
By: /s/ A. J. Lewis III
------------------------------------------
A.J. LEWIS III, President
[SPOUSAL DISCLAIMERS FOLLOW]
STOCK PURCHASE AGREEMENT - PAGE 25
<PAGE> 26
DISCLAIMER
The undersigned disclaims any interest in and to the capital stock of
First Ice Company/Codorus Leasing Company and consents, if necessary, to its
sale by her husband, James U. White, Jr.
/s/ Jane C. White
-----------------------------
JANE C. WHITE
STOCK PURCHASE AGREEMENT - PAGE 26
<PAGE> 27
DISCLAIMER
The undersigned disclaims any interest in and to the capital stock of
First Ice Company/Codorus Leasing Company and consents, if necessary, to its
sale by her husband, W. Brad Troutman.
/s/ Tonya R. Troutman
-----------------------------
TONYA R. TROUTMAN
STOCK PURCHASE AGREEMENT - PAGE 27
<PAGE> 28
EXHIBIT 6.6
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of August
13, 1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"),
First Ice Company, an Oklahoma corporation and wholly-owned subsidiary of
Parent ("First Ice"), and W. Brad Troutman ("Troutman") and James U. White, Jr.
("White").
RECITALS
WHEREAS, Troutman and White have sold or agreed to sell all of the stock
they own in First Ice Company to Parent pursuant to that certain Stock Purchase
Agreement dated as of August 13, 1997 (the "Stock Purchase Agreement"); and
WHEREAS, Section 6.6 of the Stock Purchase Agreement requires that
Troutman and White execute and deliver a noncompetition agreement as a
condition to the consummation of the transactions contemplated by the Stock
Purchase Agreement.
AGREEMENT
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. ACKNOWLEDGMENTS BY TROUTMAN AND WHITE.
Troutman and White understand, acknowledge and agree that (a) First Ice
and Parent have required that Troutman and White make the covenants set forth
in Sections 2 and 3 of this Agreement as a condition to Parent's acquisition of
the Stock (as defined in the Stock Purchase Agreement); (b) the provisions of
Sections 2 and 3 of this Agreement are reasonable and do not impose a greater
restraint on Troutman and White than is necessary to protect the goodwill or
other business interest of First Ice and Parent; (c) the provisions set forth
in Sections 2 and 3 are not oppressive to Troutman and White nor injurious to
the public; and (d) First Ice and Parent would be irreparably damaged if
Troutman or White were to breach the covenants set forth in Sections 2 and 3 of
this Agreement.
2. CONFIDENTIAL INFORMATION.
Troutman and White acknowledge and agree that all confidential
information known or obtained by Troutman and White, whether before or after
the date hereof, relating to First Ice is now the property of First Ice.
Therefore, Troutman and White agree that they will not, at any time, disclose
to any unauthorized persons or use for their own account or for the benefit of
any third party any confidential information, whether Troutman and White have
such information in their respective memory or embodied in writing or other
physical form, without the written consent of First Ice of Parent, unless and
to the extent that such confidential information (i) is or becomes generally
known to and available for use by the public, other than as a result of the
fault of Troutman or White or any other person bound by a duty of
confidentiality to Parent of First Ice, (ii) becomes available to Troutman or
White on a non-confidential basis from a source other than Parent of First Ice,
provided that such source is not bound by a confidentiality agreement or other
contractual, legal or fiduciary obligation of confidentiality to Parent or
First Ice, or (iii) Troutman and White or any of their representatives are
compelled to disclose by judicial or
<PAGE> 29
administrative process or, in the opinion of Troutman's or White's respective
or joint counsel, by other mandatory requirements of law. Troutman and White
agree to deliver to Parent or First Ice at any time Parent or First Ice may
request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing,
excluding Troutman's and White's personal copies of the transactional documents
related to the aforementioned Stock Purchase Agreement), relating to First Ice
that Troutman and White may then possess or have under their respective or
joint control. Troutman's and White's obligations with respect to this Section
2 shall terminate five years after the date of this Agreement.
3. NONCOMPETITION.
As an inducement for Parent to enter into and consummate the Stock
Purchase Agreement, and in exchange for the consideration paid to Troutman and
White under the Stock Purchase Agreement, Troutman and White agree that:
(a) For a period of five (5) years after the date hereof with the
State of Oklahoma or any state bordering Oklahoma:
(i) Except with respect to services provided to First Ice or
Parent, Troutman and White will not, directly or indirectly, engage or invest
in, own, manage, operate, finance, control or participate in the ownership,
management, operation, financing or control of, be employed by, associated
with, or in any manner connected with, lend Troutman's and/or White's name or
any similar name to, lend Troutman's and/or White's credit to, or render
services or advice to, any business whose products or activities compete in
whole or in part with the products or activities of First Ice or Parent as it
relates to the production, distribution, transportation, and sale of packaged
ice products, as of the date hereof; provided, however, that Troutman and White
may purchase or otherwise acquire up to (but not more than) one percent of
any class of securities of any enterprise (but without otherwise participating
in the activities of such enterprise) if such securities are listed on any
national or regional securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934. Troutman and White agree that
this covenant is reasonable with respect to its duration, geographical area,
and scope;
2
<PAGE> 30
(ii) Troutman and White will not, directly or indirectly,
either for their respective selves or any other person (a) solicit or attempt
to solicit any employee of Parent or First Ice in attempt to encourage the
employee to leave the employ of Parent or First Ice, (b) in any way interfere
with the relationship between Parent, First Ice and any employee of Parent or
First Ice, (c) knowingly employ, or otherwise engage as an employee,
independent contractor, or otherwise any employee of Parent or First Ice or (d)
induce or attempt to induce any customer, supplier, licensee, or business
relation of Parent or First Ice to cease doing business with Parent or First
Ice, or in any way interfere with the relationship between any customer,
supplier, licensee, or business relation of Parent or First Ice; and
(iii) Troutman and White will not, directly or indirectly,
either for itself or any other person, solicit the business of any person known
to Troutman and White to be a customer or prospective customer of Parent or
First Ice, whether or not Troutman or White had personal contact with such
person, with respect to products or activities which compete in whole or in
part with the products or activities of Parent, First Ice or any subsidiary
thereof.
(b) In the event of a breach by Troutman and White of any covenant
set forth in Subsection 3(a) of this Agreement, the term of such covenant will
be extended by the period of the duration of such breach;
(c) The provisions set forth in this Section 3 shall not preclude the
shareholders or members, other than White, of White, Coffey, Galt & Fite, P.C.,
an Oklahoma professional corporation, from undertaking future representation of
other ice companies.
4. REMEDIES.
If either Troutman and/or White breaches the covenants set forth in
Sections 2 or 3 of this Agreement, Parent and First Ice will be entitled to the
following remedies;
(a) Damages from Troutman and White; and
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 2 and 3 of this Agreement, it being agreed that money damages alone
may be inadequate to compensate the Parent and First Ice and would be an
inadequate remedy for such breach.
3
<PAGE> 31
(c) Prior to commencing any legal action, Parent and/or First Ice
shall first give notice, as provided for herein, to Troutman and White. Upon
the giving of notice by Parent and/or First Ice, Troutman and/or White shall
have no more than thirty (30) days to cure whatever breach of this Agreement is
alleged by Parent and/or First Ice.
5. SUCCESSORS AND ASSIGNS.
This Agreement will be binding upon Troutman and White and their
respective assigns, heirs and legal representatives and will inure to the
benefit of Parent and First Ice and their affiliates, successors and assigns.
Neither this Agreement nor any rights or obligations hereunder shall be
assignable by Troutman and White. First Ice and Parent shall have the right
to assign their rights under this Agreement to any entity which acquires all
or substantially all of the assets of First Ice or Parent.
6. WAIVER.
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. To the maximum extent permitted by applicable law: (a) no
claim or right arising out of this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing and signed by the other party; (b) no waiver that may be given by a
party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of
any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
7. GOVERNING LAW.
This Agreement will be governed by the laws of the State of Oklahoma.
8. JURISDICTION.
The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in this Agreement upon the District Court of Oklahoma
County, Oklahoma.
4
<PAGE> 32
9. SEVERABILITY.
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by law or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of
this Agreement. If any of the covenants set forth in this Agreement are held by
a court of competent jurisdiction to contain limitations as to time,
geographical area or scope of activity to be restrained that are not reasonable
and impose a greater restraint than is necessary to protect the goodwill or
other business interest of First Ice or Parent, the court shall reform the
covenants to the extent necessary to cause the limitations contained in the
covenants as to time, geographical area and scope of activity to be restrained
to be reasonable and to impose a restraint that is not greater than necessary
to protect the goodwill or other business interest of First Ice or Parent and
enforce the covenants as reformed.
10. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
11. SECTION HEADINGS, CONSTRUCTION.
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will
be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
12. NOTICES.
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when:
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as
a party may designate by notice to other parties):
W. Brad Troutman: 6112 Winchester
Oklahoma City, Oklahoma 73162
James U. White, Jr.: 6520 N. Western, Suite 300
Oklahoma City, Oklahoma 73116
5
<PAGE> 33
With a copy to: John Coffey
White, Coffey, Galt & Fite
6520 N. Western, Suite 300
Oklahoma City, Oklahoma 73116
Parent and First Ice: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, President
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
13. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement. This Agreement may not be
amended except by a written agreement executed by the party to be charged with
the amendment.
[NONCOMPETITION AGREEMENT SIGNATURE PAGE FOLLOWS]
6
<PAGE> 34
[NONCOMPETITION AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
/s/ W. Brad Troutman
------------------------------------
W. BRAD TROUTMAN
/s/ James U. White, Jr.
------------------------------------
JAMES U. WHITE, JR.
FIRST ICE COMPANY:
By: /s/ A. J. Lewis III
-----------------------------
A.J. LEWIS III, PRESIDENT
PACKAGED ICE, INC.:
By: /s/ A. J. Lewis III
----------------------------
A.J. LEWIS III, PRESIDENT
7
<PAGE> 1
EXHIBIT 10.43
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of September 4, 1997 ("Effective Date"), by and between Southwestern Ice,
Inc., a Texas corporation (the "Buyer"), a wholly-owned subsidiary of Packaged
Ice, Inc., a Texas corporation, or Buyer's nominee, and CMC Ice, Inc., a
California corporation (the "Seller"), Carlos Shannon, individually
("Shannon"), and the persons identified on the signature pages hereof as
shareholders of the Seller, who agree to be jointly and severally obligated
hereunder with Seller (the "Shareholders"), with respect to the following
facts:
RECITALS
A. Seller is in the business of producing, storing and distributing
ice to customer accounts located in San Diego County, California (the
"Business").
B. Seller desires to sell substantially all of the assets of the
Business to Buyer, upon the conditions set forth in this Agreement.
C. Buyer desires to purchase and acquire substantially all of the
assets of the Business, upon the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter contained, the parties hereto hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Purchase and Sell Assets. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
will sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
will purchase or acquire from the Seller, all right, title and interest of the
Seller in and to all of the assets of the Business owned by Seller (other than
the Excluded Assets) used in or in connection with, or arising out of, the
Business (the "Assets"), including, but not limited to:
(a) Property and Equipment. All of Seller's right, title and
interest in and to all personal property and equipment (the "Property and
Equipment") used by Seller in the Business including, but not be limited to,
ice making equipment, merchandisers, bagging equipment, rolling stock including
vehicles, forklifts, etc., spare parts and repair equipment, supporting
equipment including pipes, electrical, condensers, compressors, bins, etc.,
furniture and fixtures, supplies, inventory, materials and computers used
exclusively in the Business (both hardware and software) which are located at
3417 30th Street, San Diego, California 92104 (the "Main Facility") and at 3302
32nd Street, San Diego, California 92104 (the "Ancillary Facility"),
respectively. The Main Facility and the Ancillary Facility are sometimes
referred to herein as the "Facilities". Such Property and Equipment shall
include, but not be limited to, the list of property and equipment set forth on
Exhibit A. Certain components of the Property and Equipment set forth (and
indicated as such) are owned by Shannon, a principal shareholder of Seller, and
have been and are being used in the Business.
<PAGE> 2
(b) Claims. Any and all claims and rights against third
parties, if and to the extent they relate to the condition of the Assets
including, without limitation, all rights under manufacturers' and vendors'
warranties;
(c) Goodwill. All of Seller's goodwill in, and the going
concern value of, the Business and the name "CMC Ice";
(d) Accounts Receivable. All accounts receivable of the
Business as of the Closing Date (the "Accounts Receivable") which Accounts
Receivable shall be listed on Exhibit A-1 and updated as of the Closing Date.
(e) Other Property. All telephone numbers and directory
listings, telephone and mobile communications equipment, service contracts,
sales records, transferable licenses and permits, and normal business records
associated with the Business.
1.2 Excluded Assets. The Assets shall not include, and Seller shall
not sell to Buyer, any of the following items (collectively, the "Excluded
Assets"):
(a) Cash. All cash on hand or in bank accounts, and any other
cash equivalents, including without limitation certificates of deposit,
commercial paper, treasury bills, asset or money market accounts, marketable
securities and all such similar accounts or investments.
(b) Benefit Plan Assets. Pension, profit sharing and savings
plans and trusts and any assets thereof or any assets resulting from the
rollover by Seller's employees of any of the assets out of such plans.
(c) Personal Property Consumed. All tangible personal
property consumed by Seller in the ordinary course of business between the date
hereof and the Closing Date.
(d) Tax Refunds. All amounts due the Seller in connection
with any tax refunds, prepaid taxes, rights under any tax-sharing agreement, or
similar payments.
(e) Corporate Records. The corporate minute book, corporate
seals, tax return work papers, and similar corporate records of Seller.
(f) Licenses and Permits. All governmental licenses and
permits, or similar rights that cannot by their terms be assigned to Buyer.
(g) Rights Under Non Compete Agreement. Any rights associated
with the Permitted Activities described in Exhibit B hereof.
1.3 No Assumption of Liabilities by Buyer. Buyer shall not be deemed
to assume and shall not assume and shall not be responsible for, any
liabilities, debts or obligations of Seller or of the Business, of any kind or
nature whatsoever. Seller, Shannon and Shareholders shall be responsible for
and shall pay, discharge and satisfy all of the liabilities, debts and
obligations of
2
<PAGE> 3
Seller and the Business. Seller, Shannon and Shareholders shall indemnify,
defend and hold Buyer completely free and harmless from the same including but
not limited to attorneys' fees and litigation costs incurred in resisting and
defending against the assertion of any of the same against Buyer.
1.4 Purchase Price and Method of Payment. The total purchase price
to be paid by Buyer for the Assets (the "Purchase Price") shall consist of a
cash payment at the Closing (a) to Seller of (i) $415,000 and (ii) the net
amount of the Accounts Receivable as set forth on Exhibit A-1 and agreed to by
Buyer and Seller at Closing and (b) to Shannon the sum of $20,000.
1.5 Additional Consideration. At Closing, as additional consideration
hereunder, Buyer shall pay to Seller (i) an amount equal to 40% of the net
income shown on the Income Statements of Seller for the period ended July 31,
1997 but not to exceed $14,000 and (ii) the amount, if any, necessary to
purchase a right to lease termination for the Main Facility but not to exceed
$20,000. Seller shall use its best efforts to sublet all or a portion of the
Main Facility to Butch Feroni for the purposes of establishing a wholesale
customer for Buyer. Except as provided herein, or under the terms of the
Subleases, Buyer shall have no responsibility, liability or obligation under
any leases for the Facilities.
1.6 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Seller, Shannon and the Assets as provided in Exhibit A-2.
Each Party agrees that it shall not take any position that varies from or is
inconsistent with such allocation in any filing made by such party with the
United States Internal Revenue Service or with any other local, state or
federal regulatory authority.
1.7 Disbursement of Purchase Price. At the Closing, as an
accommodation to Seller and Shannon, the cash to be paid to Seller and Shannon
by Buyer pursuant to Section 1.4 shall be disbursed by check, wire transfer or
such other method as Buyer may elect to effect the Authorized Third Party
Payments and Section 1.9 Deposit set forth on and as provided in Exhibit A-3
hereof. Exhibit A-3 sets forth presently estimated amount(s) due to the
creditors of Seller and Shannon listed in said Exhibit.
1.8 Covenant Not to Compete. At the Closing, the Seller, the
principals of Seller and Shannon shall enter into Covenants Not to Compete with
Buyer (the "Non-Compete Agreement") substantially in the forms set forth in
Exhibits B and C.
1.9 Escrow Deposit. At the Closing, (i) the Seller, and the
Shareholders shall enter into a pledge and escrow agreement substantially in
the form attached as Exhibit D (the "Escrow Agreement") with Buyer, as escrow
agent (the "Escrow Agent"); (ii) Seller and Shannon shall deposit with Buyer
the total sum of the amounts paid by Buyer under Section 1.4 but less the
Authorized Third Party Payments set forth on and provided for in Exhibit A-3
(the "Escrow Fund"); (iii) Buyer', as Escrow Agent shall hold the Escrow Fund
pursuant to the terms of the Escrow Agreement.
1.10 Closing. The date of Closing (herein referred to as the "Closing
Date") shall be on or before September 3, 1997 with the actual day of Closing
on or before such date as mutually agreed
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to by the parties in writing; provided, Buyer may elect to postpone the Closing
to not later than September 15, 1997. Unless otherwise agreed, the Closing
shall take place at the offices of Luce, Forward, Hamilton & Scripps LLP, 600
West Broadway, Suite 2600, San Diego, California, at the hour of 4:00 p.m.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically disclosed by Seller to Buyer in this Agreement or
in Seller's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Seller),
Seller, Shannon and Shareholders, jointly and severally, each represents and
warrants to Buyer as follows:
2.1 Corporate Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. Seller only conducts its business in Southern California and is
not required to be qualified to do business in any other jurisdiction. Seller
has all necessary corporate powers to carry on the Business as it is now being
conducted. Seller has full right, power and authority to execute and deliver
this Agreement and consummate the transactions contemplated hereby.
2.2 Corporate Actions. All actions and proceedings necessary to be
taken by or on the part of the Seller and Shareholders in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, including, to the extent required
by its Articles of Incorporation, Bylaws and by law, the obtaining of votes,
and consents and approvals by the Shareholders and board of directors of
Seller, have been duly and validly taken and obtained, and this Agreement has
been duly and validly authorized, executed and delivered by Seller and
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with and subject to its terms.
2.3 Capitalization; No Subsidiaries. The authorized number of shares
of Seller is 100,000, all of one class, of which 100,000 are issued and
outstanding, and all of which are owned beneficially and of record by the
Shareholders. Seller has no subsidiaries.
2.4 No Defaults. Neither the execution, delivery or performance by
Seller of this Agreement nor the consummation by Seller of the transactions
contemplated hereby, itself or with the giving of notice or the passage of time
or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or the Bylaws of Seller;
(b) Violate or conflict with or result in any breach or in any
default under, result in any termination or modification of, or cause any
acceleration of any obligation of the Business under any contract, mortgage,
indenture, agreement, lease or other instrument to which Seller is a party or
by which it, the Business or any of the Assets is bound, or result in the
creation of any
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encumbrance upon any of the Assets such as would have a material adverse effect
on the Business or Assets taken as a whole; or
(c) Violate any judgment, decree, order, statute, law, rule or
regulation applicable to Seller.
2.5 Breach. Seller is not in violation or breach of any of the
terms, conditions or provisions of its Articles of Incorporation, as amended,
or Bylaws, or any indenture, mortgage or deed of trust or other contracts,
lease, instrument, court order, judgment, arbitration award, or decree
affecting the Business or the Assets, to which Seller is a party or by which it
is bound, and has received no notices of same, where the effect thereof would
have a material adverse effect on the Business or the Assets, taken as a whole.
Further, Seller is current on all rent obligations owing under the real
property leases of the Facilities and with regard to all maintenance and repair
expenses relating to equipment of the Business.
2.6 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Seller in connection with the consummation of the transactions
contemplated by this Agreement. No permit, license, consent, order, decree,
approval or authorization of, or filing with, any court, governmental
regulatory authority or agency is required in connection with the execution,
delivery and performance of this Agreement, or the consummation of the
transactions contemplated hereby.
2.7 Title to and Condition of Assets; Leases.
(a) Seller has good, valid and marketable title to all of the
Assets, free and clear of all liens, encumbrances and security interests of
every kind or character.
(b) Seller owns or leases all tangible assets necessary for
the conduct of its Business. Each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(c) Seller is not in breach of the lease for the Facility and
has the right to grant Buyer the right of occupancy under the subleases
referred to in Section 9.1g.
2.8 Balance Sheet of Seller. The Balance Sheets and Income
Statements of Seller for the end of its most recent fiscal year (the "Balance
Sheet") and for the period ended July 31, 1997, copies of which are contained
in Seller's Disclosure Memorandum:
(a) Present fairly in all material respects the financial
position of the Business as of the dates shown thereon;
(b) Have been prepared for use in the ordinary course of the
Business and in accordance with the books and records of Seller; and
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(c) Exhibit A-1 is a complete and accurate schedule of the
Accounts Receivable together with an accurate aging of the Accounts Receivable.
The Accounts Receivable set forth on Exhibit A-1, as the same is updated to the
Closing Date arose from valid sales in the ordinary course of business of
Seller, are not subject to any offset, and other than those which have been
collected as of the Closing Date shall be 100% collectible in their full amount
within one hundred twenty (120) days following the Closing Date.
(d) Exhibit A-3 is a complete and accurate schedule and
listing of all significant creditors of Seller, Shannon and the Shareholders,
related to the Business, and represents Seller's and Shannon's closest best
estimate of the amount due each such creditor.
2.9 Events Since Balance Sheet Date. Except as set forth in the
Balance Sheet, and except as disclosed in this Agreement or in Seller's
Disclosure Memorandum, there has not been since the Balance Sheet Date:
(a) Any material adverse change in the assets or liabilities
of the Business, other than changes in the ordinary course of business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Assets; or
(c) Any material transactions entered into or any material
liabilities or obligations incurred by the Business, other than in the ordinary
course of Business.
2.10 Liabilities. Except for those liabilities (i) reflected or
reserved against in the Balance Sheet, (ii) not yet due and payable or
obligations to be performed or satisfied after the date hereof under contracts
and agreements set forth in Seller's Disclosure Memorandum, (iii) disclosed in
this Agreement or Seller's Disclosure Memorandum, and (iv) incurred in the
ordinary course of business of the Business between the Balance Sheet Date and
the Closing, there are no liabilities or obligations of Seller relating to the
Business, known or unknown, due or not yet due, liquidated or unliquidated,
fixed, contingent or otherwise, where the effect thereof would have a material
adverse effect on the Business or the Assets taken as a whole.
2.11 Taxes. Seller has filed all applicable federal, state, local and
foreign tax returns required to be filed to date, in accordance with provisions
of law pertaining thereto, and has paid all taxes, interest, penalties and
assessments lawfully due (including without limitation income, withholding,
excise, unemployment, social security, occupation, transfer, franchise,
property, sales and use taxes, import, duties or charges, and all penalties and
interest in respect thereof) except where the failure to file such returns or
pay such taxes has no material adverse effect on the Business and the Assets
taken as a whole.
2.12 Compliance With Law and Regulations. Seller is in compliance
with all requirements of law, federal, state and local, and all requirements of
all governmental bodies or agencies having jurisdiction over it, the operation
of the Business and the use of the Assets. Seller and the Facility are in full
compliance with applicable environmental laws. Seller is not aware of any past
or current
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tenant of the Facility violating any law, including, but not limited to, any
environmental laws. Seller has properly filed all reports and other documents
required to be filed with federal, state, local, or foreign governments or
subdivisions or agencies thereof. Seller has not received any notice, not
heretofore complied with, from any federal, state or municipal authority or any
insurance or inspection body that any of its properties, facilities, equipment
or business procedures or practices fails to comply with any applicable law,
ordinance, regulation, or requirement of any public authority or body.
2.13 Employees: Labor Problems. Seller has not suffered or sustained
any labor disputes resulting in any work stoppage, and no such work stoppage is
threatened. Seller is not a party to a collective bargaining agreement. There
do not currently exist any written or oral contracts for long-term employment,
consulting agreements or agreements containing provisions for significant
severance or parachute payments. Seller is current in all of its salary
obligations to its employees who are employed in connection with the Business,
and each of such employees has been provided with an address and telephone
number of Seller.
2.14 Litigation. There are no suits, judgments, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations pending against, or to Seller's, Shannon's and the Shareholders'
knowledge, threatened against the Seller or the Business which will have a
material adverse effect on the Business or the Assets taken as a whole after
the Closing. There are no lawsuits, legal proceedings or investigations of any
nature pending or, to Seller's, Shannon's and Shareholders' knowledge,
threatened against or affecting it which would materially impair Seller's
ability to carry out the transactions contemplated by this Agreement.
2.15 No Broker or Finder. Seller has not employed or used the
services of any broker or finder in connection with this transaction and shall
hold Buyer completely free and harmless from the claims of any person claiming
to have so acted on behalf of Seller.
2.16 Operation in Ordinary Course. Since the Balance Sheet Date:
(a) Seller has operated the Business in the ordinary course of
business, consistent with past practice, except as related to the transactions
contemplated hereby; and
(b) Seller has maintained its books, accounts and records in
the usual, customary and ordinary manner.
2.17 Disclosure. Neither this Agreement nor Seller's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as specifically disclosed by Buyer to Seller in this Agreement or
in Buyer's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Buyer),
Buyer represents and warrants to Seller as follows:
3.1 Corporate Status. Buyer is a corporation which is duly
organized, validly existing, and in good standing under the laws of the State
of Texas. Buyer is duly qualified to do business in each jurisdiction in which
the character of and location of its assets or operations makes qualification
to do business as a foreign corporation necessary. Buyer has full corporate
power to carry on its business as it is now being conducted and as proposed to
be conducted and to own and operate its assets. Buyer has full corporate power
and authority to execute and deliver this Agreement and perform the
transactions contemplated hereby.
3.2 Corporate Actions. All corporate or other actions and
proceedings necessary to be taken by or on the part of Buyer in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly and validly taken,
and this Agreement has been duly and validly authorized, executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with and subject to its terms.
3.3 No Defaults. Neither the execution, delivery or performance by
Buyer of this Agreement nor the consummation by Buyer of the transactions
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or Bylaws of Buyer;
(b) Violate or conflict with or result in any breach of or any
default under, result in any termination or modification of, or cause any
acceleration of any obligation under, any contract, mortgage, indenture,
agreement, lease or other instrument to which Buyer is a party or by which it
is bound, or by which it may be affected, or result in the creation of any lien
or encumbrance upon any of Buyer's assets, except for agreements, indentures
and instruments related to the financing of the transactions contemplated by
this Agreement; or
(c) Violate any judgment, decree, order, statute, rule or
regulation applicable to Buyer.
3.4 Breach. Buyer is not in violation or breach of any of the terms,
conditions or provisions of its Articles of Incorporation, as amended, its
Bylaws, or any indenture, mortgage or deed of trust or other contracts, lease,
instrument, court order, judgment, arbitration award, or decree materially
affecting the business of the Buyer, to which Buyer is a party or by which it
is otherwise bound, where the effect thereof would have a material adverse
effect on the Buyer.
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3.5 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
3.6 Litigation. There are no lawsuits, judgments, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations pending against, or to Buyer's knowledge, threatened against the
Buyer relating to or affecting the execution, delivery or performance of this
Agreement or the ability of Buyer to perform its obligations under this
Agreement.
3.7 No Broker or Finder. There is no broker or finder or other
person who would have any valid claim against any of the parties for a
commission or brokerage fee or payment in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement of or action
taken by Buyer. Buyer shall hold Seller completely free and harmless from the
claims of any person claiming to have so acted on behalf of Buyer.
3.8 Disclosure. Neither this Agreement nor Buyer's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE IV
DISCLOSURE MEMORANDUM
Seller's Disclosure Memorandum (the "Seller's Disclosure Memorandum"),
is attached to this Agreement as Attachment I, shall be executed on behalf of
Seller, and shall contain accurate, true and correct information and data and,
to the extent expressly set forth herein, shall be accompanied by a copy of
each document referred to therein or otherwise identified as to its location to
the reasonable satisfaction of Buyer. Buyer's Disclosure Memorandum (the
"Buyer's Disclosure Memorandum") shall be executed on behalf of Buyer, and
shall contain accurate, true and correct information and data in all material
respects. Terms used and defined in this Agreement shall have the same
definition when used in the Seller's Disclosure Memorandum or Buyer's
Disclosure Memorandum, as the case may be, and any schedules or exhibits
attached thereto.
ARTICLE V
COVENANTS OF SELLER
5.1 Representations and Warranties. Seller shall give detailed
written notice to Buyer promptly upon learning of any fact which (i) would
render untrue in any material respect any of Seller's or Buyer's
representations or warranties contained in this Agreement or the information
contained in Seller's Disclosure Memorandum or Buyer's Disclosure Memorandum,
or (ii) would cause Seller or Buyer to fail to comply with its obligations
hereunder in any material respect between the Effective Date and the Closing
Date.
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5.2 Notice of Proceeding. Seller will promptly notify Buyer in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereby; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
5.3 Consummation of Agreement. Seller shall use its best efforts to
fulfill and perform all conditions and obligations on its part to be fulfilled
and performed under this Agreement, and cause the transactions contemplated by
this Agreement to be fully consummated.
5.4 Confidentiality. Seller agrees to keep confidential any
information obtained from Buyer concerning Buyer or the business of Buyer,
unless readily ascertainable from public or published information, or trade
sources.
5.5 Operations. Seller agrees, through the Closing Date, at Seller's
sole cost and expense to (i) keep all existing insurance policies affecting the
Assets in full force and effect; (ii) continue to provide all services and
maintain all of the fixed Assets in good working order in a responsible manner
consistent with past practice; and (iii) upon Closing, terminate all employees
and settle all employment contracts.
5.6 Operations Pending Closing. Subsequent to the date of this
Agreement and prior to the Closing Date, Seller shall cause the Business to be
operated in the ordinary course, consistent with past practice. Until and
including the Closing Date, Seller shall use its best efforts to cause the
Business to maintain its insurance coverage and its books, accounts and records
in the usual manner in a basis consistent with current practice and to comply
in all material respects with all laws, ordinances and regulations of
governmental authorities applicable to the Business.
5.7 Restrictions. Except as disclosed in this Agreement or in
Seller's Disclosure Memorandum, prior to the Closing Date, and without the
prior written consent of Buyer, Seller shall not:
(a) Encumber or grant any security interest in any Asset other
than in the ordinary course of business; or
(b) In the ordinary course of business, enter into any
Contract which obligates the Business to expend more than Ten Thousand Dollars
($10,000.00) following the Closing Date.
5.8 Consents. Notwithstanding any other provision of this Agreement,
to the extent that the consent or approval of any third person is required
under any Contract in order to assign any such Contract from Seller to Buyer or
otherwise by reason of the transactions provided for in this
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Agreement, except as set forth in the Seller's Disclosure Memorandum, Seller
shall use its reasonable efforts to obtain such consents and approvals. If any
such consent or approval is not obtained, then such Contract shall not be
assigned until such consent or approval is obtained and Seller will use
reasonable efforts to establish a mutually satisfactory arrangement to provide
to Buyer the benefits of such Contract after the Closing.
5.9 Access to Properties and Information. Following the Effective
Date, Buyer and its representatives shall be afforded full access to all of the
assets, properties, books, records, agreements, other documents and employees
of Seller relating to the Business, in all cases during normal business hours
and upon reasonable prior notice. Buyer and its representatives shall have the
right to make abstracts from or copies of any such books, records, agreements,
and commitments, and such Business shall furnish Buyer's representatives with
such information concerning such affairs and copies of such documents,
contacts, agreements and records as Buyer may reasonably request. All such
information provided to Buyer in written form by Seller to the knowledge of
Seller shall be true, complete and correct and shall be deemed represented as
such by Seller to Buyer. Any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Business.
Buyer shall not contact any of Seller's employees or visit any portion of
Seller's properties without Seller's prior knowledge. Buyer shall be
responsible for ensuring that its employees or representatives maintain the
confidentiality of any information learned during the investigation subject to
the terms of Section 6.4 hereto.
5.10 Termination of Employees. On the Closing Date, Seller will
terminate its employees, deliver final paychecks to them for unpaid wages,
accrued vacation, unused sick days and any other amounts owing to them. Seller
shall cooperate with Buyer in hiring and transitioning of those employees that
Buyer desires to hire. The Seller shall be solely responsible for all notices
required by federal or state law. Seller shall be solely responsible for and
shall pay any severance, termination payments, COBRA benefit, accrued vacation
pay and similar accrued benefit, or liabilities relating to any of the
employees or to which any employee is entitled, including claims related in any
way to the employment of an employee by Seller based upon events occurring
prior to the Closing Date, regardless of when any such claim or demand therefor
may be made. On and after the Closing Date, Seller shall have the sole
responsibility and obligation for complying with the health care continuation
coverage requirements of Internal Revenue Code ("Code") Section 4980B and
Section 601 et seq. of ERISA ("COBRA") that are applicable to the employees and
the spouses and dependents of said employees not hired by Buyer and retained in
Buyer's employ for at least six months. Seller shall be solely responsible for
providing COBRA continuation coverage to any person entitled to such coverage
in connection with any health plan sponsored by Seller. Seller shall
indemnify, defend and hold harmless Buyer and its employees, officers,
directors, successors, assigns, subsidiaries, shareholders, agents, attorneys,
representatives and affiliates from and against any and all losses,
liabilities, demands, claims, expenses, judgments, costs, attorneys' fees,
taxes and penalties arising under Code Section 4980B or ERISA Section 601 et
seq. with respect to any individual who was an employee (or a spouse or
dependent of such employee) of Seller prior to the Closing and who had or has a
"qualifying event" (within the meaning of Code Section 4980(B)(f)(3)) before,
on or after the Closing.
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5.11 No Solicitation of Other Offers. The Seller, Shannon and the
Shareholders agree that neither they nor any of their respective officers,
directors, employees, representatives, investment bankers, attorneys,
accountants or other agents or affiliates, shall, directly or indirectly, take
any action to encourage, solicit, initiate or participate in any way in
discussions or negotiations with or furnish any information to, or afford any
access to the properties, books or records of the Seller or any of its
subsidiaries to, or otherwise assist, facilitate or encourage, any person or
entity (other than Buyer, its officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger,
consolidation, business combination, liquidation, reorganization, sale or other
disposition of assets, sale of shares of capital stock or similar transactions
involving the Seller or any subsidiary or division of the Seller. The Seller
and the Shareholders will promptly communicate to Buyer the terms of any
proposal or inquiry that they (or any of them) may receive, and the identity of
the person(s) making the proposal or inquiry, in respect of any such
transaction, or of any such information requested from any of them or of any
such negotiations or discussions being sought to be initiated with any of them.
The Seller will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any other parties conducted
heretofore with respect to any of the foregoing.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees that from the date hereof until the
completion of the Closing:
6.1 Representations and Warranties. Buyer shall give detailed
written notice to Seller promptly upon learning of any fact which (i) would
render untrue in any material respect any of Buyer's or Seller's
representations or warranties contained in this Agreement or the information
contained in Buyer's Disclosure Memorandum or Seller's Disclosure Memorandum or
(ii) would cause Buyer or Seller to fail to comply with its obligations
hereunder in any material respect between the Effective Date and the Closing
Date.
6.2 Notice of Proceeding. Buyer will promptly notify Seller in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereunder; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
6.3 Consummation of Agreement. Buyer shall fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement, and cause the transactions contemplated by this Agreement to be
fully carried out.
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6.4 Confidentiality. Upon the termination of this Agreement prior to
Closing, Buyer shall keep confidential and shall not use in any manner any
information obtained from Seller concerning Seller or the Business which is not
in the public domain.
6.5 Offer of Employment. Buyer shall offer employment to certain
employees of the Business to who Buyer decides, in its sole discretion, to
offer employment. Seller shall offer employment to Carlos Shannon (without
relocation from the Business) on the terms and conditions set forth in the form
of agreement attached as Exhibit E. Any and all costs, expenses and
liabilities arising from or relating to the failure of Buyer to hire existing
employees of the Business shall be the sole responsibility of Seller.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
7.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall have been true and correct as of the
Effective Date and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except to the extent changes are permitted or contemplated pursuant to this
Agreement; and
(b) Buyer shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
7.2 Officer's Certificate. Buyer shall have furnished Seller with a
certificate, dated the Closing Date and duly executed by a duly authorized
manager of Buyer, in form and substance satisfactory to the Seller, certifying
that the conditions set forth in Sections 7.1(a) and (b) have been satisfied.
7.3 Deliveries. Buyer shall have complied with each and every one of
its obligations set forth in Section 9.2.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
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8.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Seller,
Shannon and Shareholders contained in this Agreement shall have been true and
correct as of the Effective Date and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date, except to the extent changes are permitted or contemplated
pursuant to this Agreement;
(b) Seller, Shannon and Shareholders shall have performed and
complied with each and every covenant and agreement required by this Agreement
to be performed or complied with by it prior to or on the Closing Date; and
8.2 Officer's Certificate. Seller shall have furnished Buyer with a
certificate, dated the Closing Date and duly executed by a duly authorized
executive officer of Seller, to the effect that the conditions set forth in
Sections 8.1 (a) and (b) have been satisfied.
8.3 Deliveries. Seller shall have complied with each and every one
of its obligations set forth in Section 9.1.
8.4 Consents. All of the consents required to be obtained and the
estoppel certificate referenced in Sections 5.8 shall have been obtained.
8.5 Legal Requirements. Buyer and its counsel shall be satisfied (i)
that the consummation of the transactions contemplated herein comply with
applicable state and federal legal requirements, laws, and procedures
applicable to Buyer, Seller, Shannon and the Shareholders pursuant to which any
of them may be subject or bound and (ii) that by following the procedures and
making the Authorized Third Party Payments, Buyer will not succeed to any
liability of Seller, Shannon or the Shareholders.
ARTICLE IX
ITEMS TO BE DELIVERED AT THE CLOSING
9.1 Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer duly executed by Seller or such other signatory as may be required by the
nature of the document:
(a) Such deeds, bills of sale, certificates of title,
endorsements, assignments and other good and sufficient instruments of sale,
conveyance and transfer and assignment in form and substance reasonably
satisfactory to Buyer sufficient to sell, convey, transfer and assign to Buyer
all right, title and interest of Seller in and to the Assets;
(b) Certified copies of resolutions, duly adopted by the
shareholders and board of directors of Seller which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby;
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(c) The certificate referred to in Section 8.2;
(d) The Non-Compete Agreements executed respectively by
Seller, Shannon and the principals of Seller;
(e) Certificates of Title to motor vehicles, if any, and
titles to titled equipment and a bill of sale;
(f) The employment agreement between Buyer and Carlos Shannon
in the form attached as Exhibit E;
(g) The subleases ("Subleases") in substantially the forms
attached as Exhibit F-1 and F-2;
(h) Uniform Commercial Code ("UCC") termination statements
terminating all UCC financing statements which cover any of the Assets or
portions thereof;
(i) Evidence that all liabilities of Seller to governmental
creditors have been released, paid, discharged or provided for to the
satisfaction of any governmental entity, agency or authority which claims
monies due from Seller or any affiliate of Seller;
(j) The Escrow Agreement; and
9.2 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller, duly executed by Buyer or other signatory as required by the nature of
the document:
(a) The Purchase Price;
(b) Certified copies of resolutions, duly adopted by the
directors of Buyer, which shall be in full force and effect at the time of the
Closing, authorizing the execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated hereby;
(c) The certificate referred to in Section 7.2;
(d) The employment agreement between Buyer and Carlos Shannon
in the form attached as Exhibit E;
(e) The Subleases; and
(f) The Escrow Agreement.
9.3 Transfer Sales and Use Tax. The Seller shall pay all sales, use,
transfer, recording or similar taxes (other than income taxes) arising out of
the sale and transfer of the Assets to Buyer.
15
<PAGE> 16
ARTICLE X
POST-CLOSING MATTERS
10.1 Collections. Seller will promptly remit to Buyer any payments
received by it on any of the Accounts Receivable. Buyer shall use reasonable
efforts to collect the Accounts Receivable. Buyer may endorse checks for
deposit, payable to Seller, received in payment of Accounts Receivable. Buyer
shall apply payments received by it on any Accounts Receivable which do not
specify an invoice number to the oldest, non-disputed invoice.
10.2 Name Change and Dissolution. Promptly after the Closing, Seller
shall change its corporate name and Shannon and Seller shall release and
transfer any fictitious business names containing the words "CMC Ice" or names
similar thereto to Buyer. The name change shall be coordinated with Buyer to
enable Buyer to secure such corporate name by name reservation or otherwise.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Seller, Shannon and Shareholders. Seller,
Shannon and Shareholders jointly and severally, shall indemnify, defend and
hold Buyer harmless from and against any and all liabilities or obligations
arising with respect to the Assets or the Business up to the Closing. Further,
Seller shall indemnify, defend and hold harmless Buyer from and against any and
all claims, demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries, and deficiencies, including reasonable attorney's fees and
costs (the "Losses") that Buyer may incur or suffer, which arise, result from,
or relate to: (i) any inaccuracy of Seller's, Shannon's or Shareholders'
representations and warranties contained in this Agreement or in any agreement,
instrument or document entered into pursuant hereto or in connection with the
Closing, (ii) any breach of or failure by Seller, Shannon or Shareholders to
perform any of its or their covenants or agreements contained in this Agreement
or in any agreement, instrument or document pursuant hereto or in connection
with the Closing, (iii) any violation of environmental or health and safety or
other laws (as in effect at the Closing) arising out of the ownership or
operation of the Business, including the real estate upon which the Facility is
located, based on conditions existing prior to the Closing, regardless of when
such claim, liability or loss is asserted, claimed or sustained, (iv) any
liability or obligation of Seller presently existing or determined to be due
after the Closing Date regardless of when any such liability actually arose or
accrued, or (v) any Account Receivable remains uncollected or uncollectible one
hundred twenty (120) days following the Closing Date. The liability of Seller,
Shannon and Shareholders hereunder is joint and several. Seller, Shannon and
Shareholders shall not have any liability under this Section 11.1(a) unless
Buyer gives written notice to Seller, Shannon and Shareholders asserting a
claim for such Losses, including reasonably detailed facts and circumstances
pertaining thereto, before the expiration of two (2) years from the Closing
Date, except for claims arising from breach of: (i) representations and
warranties as to taxes and environmental matters, which shall survive until the
expiration of the applicable statute of limitations.
16
<PAGE> 17
11.2 Indemnification by Buyer. Buyer shall indemnify, defend and hold
Seller, Shannon and Shareholders harmless from and against any and all
liabilities or obligations arising with respect to the Assets or the Business,
as conducted by Buyer, after the Closing Date, excepting claims asserted after
the Closing Date which relate to products sold or actions taken by Seller prior
to the Closing Date. Further, Buyer shall indemnify, defend and hold harmless
Seller, Shannon and Shareholders from and against any and all Losses that
Seller may incur or suffer, which arise, result from, or relate to: (i) any
inaccuracy of Buyer's representations and warranties contained in this
Agreement or in any agreement, instrument or document pursuant hereto or in
connection with the Closing, (ii) any breach of or failure by Buyer to perform
any of its covenants or agreements contained in this Agreement or in any
agreement, instrument or document pursuant hereto or in connection with the
Closing, (iii) or any act, omission or breach by Buyer relating to any of the
Assumed Liabilities. Buyer shall not have any liability under this Section
11.2 unless Seller gives written notice to Buyer asserting a claim for such
Losses, including reasonably detailed facts and circumstances pertaining
thereto, before the expiration of two (2) years from the Closing Date.
Notwithstanding the foregoing, nothing in this Section 11.2 shall limit
Seller's right to enforce Buyer's obligations pursuant to Section 1.4 at any
time after the Closing Date.
11.3 Defense of Third Party Actions.
(a) Promptly after receipt of notice of any written assertion
of a claim, or the commencement of any action, suit, or proceeding, by a third
party against a party to this Agreement ("Third Party Action"), the party in
receipt of such notice who believes that it is entitled to indemnification
under this Article XII (the "Indemnified Party") shall give notice to the other
party hereto (the "Indemnifying Party") of such action. The failure of the
Indemnified Party to give such notice to the Indemnifying Party will not
relieve the Indemnifying Party of any liability hereunder unless it was
prejudiced thereby, nor will it relieve it of any Liability which it may have
other than under this Article XI.
(b) Upon receipt of a notice of a Third Party Action, the
Indemnifying Party shall have the right, at its option and at its own expense,
to participate in and be present at the defense of such Third Party Action, but
not to control the defense, negotiation or settlement thereof, which control
shall remain with the Indemnified Party, unless the Indemnifying Party makes
the election provided in paragraph (c) below.
(c) By written notice within 20 days after receipt of a notice
of a Third Party Action, an Indemnifying Party may elect to assume control of
the defense, negotiation and settlement thereof, with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that the Indemnifying
Party agrees (a) to promptly indemnify the Indemnified Party for its expenses
to date, and (b) to hold the Indemnified Party harmless from and against any
and all Losses caused by or arising out of any settlement of the Third Party
Action approved by the Indemnifying Party or any judgment in connection with
that Third Party Action. The Indemnifying Party shall not in the defense of
the Third Party Action enter into any settlement which does not include as a
term thereof the giving by the third party claimant of an unconditional release
of the Indemnified Party, or consent to entry of any judgment except with the
consent of the Indemnified Party.
17
<PAGE> 18
(d) Upon assumption of control of the defense of a Third Party
Action under paragraph (iii) above, the Indemnifying Party will not be liable
to the Indemnified Party hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other than
reasonable expenses of investigation.
(e) If the Indemnifying Party does not elect to control the
defense of a Third Party Action under paragraph (c), the Indemnifying Party
shall promptly reimburse the Indemnified Party for expenses incurred by the
Indemnified Party in connection with defense of such Third Party Action, as and
when the same shall be incurred by the Indemnified Party.
(f) Any party who has not assumed control of the defense of
any Third Party Action shall have the duty to cooperate with the party which
assumed such defense.
11.4 Miscellaneous.
(a) Either party hereto shall be entitled to indemnification
hereunder notwithstanding the fact that the matter giving rise to the
applicable liability, payment, obligation or expense was previously disclosed
in writing to the Indemnified Party prior to the Closing Date.
(b) If any Loss is recoverable under more than one provision
hereof, the Indemnified Party shall be entitled to assert a claim for such Loss
until the expiration of the longest period of time within which to assert a
claim for Loss under any of the provisions which are applicable.
(c) Seller, Shannon and the shareholders shall have no
liability to Buyer under Section 11.1 until Losses exceed $25,000 in the
aggregate, at which time Seller, Shannon and the Shareholders shall be liable
and responsible for any and all Losses in excess of $25,000 in the aggregate.
ARTICLE XII
MISCELLANEOUS
12.1 Termination of Agreement. This Agreement may be terminated at
any time on or prior to the Closing Date: (a) by the mutual consent of Seller
and Buyer; (b) by either Buyer or Seller if the Closing has not occurred on or
before September 3, 1997, unless such date is extended by Buyer, in which case
the Closing shall not have occurred on or before September 15, 1997; or (c) by
Buyer at any time prior to five (5) days after Seller has supplied all of the
requested due diligence materials to Buyer if Buyer, prior to such date,
determines in its sole discretion that the results of its due diligence
investigation of Seller is in any way unsatisfactory. A termination pursuant
to this Section 12.1 shall not relieve any Party of any liability it otherwise
has for a breach of this Agreement. As a condition to any termination by Buyer
hereunder, all information and materials relating to the Business and to which
Buyer obtained access during the negotiations leading to, or following,
execution of this Agreement, and any other writings containing excerpts of such
materials or information, and any or all copies thereof, shall be delivered to
Seller.
18
<PAGE> 19
12.2 Expenses. Each party hereto shall bear all of its expenses
incurred in connection with the transactions contemplated by this Agreement,
including without limitation, accounting and legal fees incurred in connection
herewith.
12.3 Preservation of Records. Buyer shall preserve and make available
(including the right to inspect and copy) to Seller, its attorneys and
accountants, for a reasonable period of time from and after the Closing Date
(but in any event at least until all applicable statutes of limitation with
respect to audits by taxing authorities have expired) and during normal
business hours, such of the books, records, files, correspondence, memoranda
and other documents transferred pursuant to this Agreement as Seller may
reasonably require in connection with any legitimate purpose, including, but
not limited to, the preparation of tax reports and returns and the preparation
of financial statements and Buyer shall at its own expense cause its employees
to fully cooperate and to provide such reasonable assistance as may be
requested by Seller. Buyer shall notify Seller prior to the destruction of
such records and shall offer to return such records to the Seller.
12.4 Non-Assignable Contracts. Nothing contained in this Agreement
shall be construed as an assignment or an attempted assignment of any Contract
which is by law nonassignable without the consent of the other party or parties
thereto, unless such consent shall be given.
12.5 Further Assurances. From time to time prior to, on and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including without limitation the
execution and delivery of any and all confirmatory and other instruments in
addition to those to be delivered on the Closing Date, and any and all actions
which may reasonably be necessary or desirable to complete the transactions
contemplated hereby. The parties shall cooperate fully with each other and
with their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement.
12.6 Risk of Loss. The risk of loss, damage or destruction to any of
the Assets to be transferred to Buyer hereunder from fire or other casualty or
cause shall be borne by Seller at all times up to the time of the Closing, and,
subject to the provisions of this Section 12.6, it shall be the responsibility
of Seller to repair or cause to be repaired and to restore the property to its
condition prior to any such loss, damage, or destruction. In the event of any
such loss, damage or destruction in excess of $250,000, then Seller may elect
to terminate this Agreement without any liability to it, unless Buyer elects to
take the damaged property "as is" and an assignment of any insurance proceeds.
In the event of any such loss, damage, or destruction, the proceeds of any
claim for any loss, payable under any insurance policy with respect thereto,
shall be used to repair, replace, or restore any such property to its former
condition, subject to the conditions stated below. It is expressly understood
and agreed that, in the event of any loss or damage to any of the Assets to be
sold hereunder from fire, casualty or other causes prior to the close of
business on the day before the Closing Date, Seller shall notify Buyer of same
in writing immediately. Such notice shall specify with particularity the loss
or damage incurred, the cause thereof (if known or reasonably ascertainable),
and the insurance coverage. In the event that the property is damaged in an
amount
19
<PAGE> 20
estimated by the parties in good faith to exceed $250,000, and is not
completely repaired, replaced or restored on or before the Closing Date, the
Buyer at its sole option and with no other recourse against Seller in respect
of such loss, damage or destruction: (a) may elect, subject to Seller's right
to terminate as referred to above, to postpone Closing until such time as the
property has been completely repaired, replaced or restored to the reasonable
satisfaction of Buyer, (b) may elect to consummate the Closing and accept the
property in its then condition, in which event Seller shall pay to Buyer all
proceeds of insurance and assign to Buyer the right to any unpaid proceeds; or
(c) terminate this Agreement without liability to either party.
12.7 Survival of Representations and Warranties and Indemnities. All
covenants, agreements, representations and warranties of the parties under this
Agreement, in any Disclosure Memorandum, and any schedule or certificate or
other document delivered pursuant hereto shall survive the Closing.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 Direct Discussion. In the event of any dispute, claim, question,
or disagreement arising out of or relating to this Agreement (a "Dispute"), the
parties involved in such Dispute shall use their best efforts to settle such
Dispute. To this effect, senior management of the parties involved shall
consult and negotiate with each other in good faith to attempt to reach a just
and equitable solution satisfactory to both parties.
13.2 Arbitration. In the event that the Dispute cannot be settled
under Section 13.1 above, the Dispute shall be submitted to binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and the procedures set forth below. In the event of any
inconsistency between the Rules of the American Arbitration Association and the
procedures set forth below, the procedures set forth below shall control.
Judgment upon the award rendered by the arbitrators may be enforced in any
court having jurisdiction thereof.
(a) Location. The location of the arbitration shall be in San
Diego County, California.
(b) Selection of Arbitrators. The arbitration shall be
conducted by a panel of three neutral arbitrators who are independent and
disinterested with respect to the parties, this Agreement, and the outcome of
the arbitration. Each party shall appoint one neutral arbitrator, and these
two arbitrators so selected by the parties shall then select the third
arbitrator. If one party has given written notice to the other party as to the
identity of the arbitrator appointed by the party, and the party thereafter
makes a written demand on the other party to appoint its designated arbitrator
within the next thirty days, and the other party fails to appoint its
designated arbitrator within thirty-one days after receiving said written
demand, then the arbitrator who has already been designated shall appoint the
other two arbitrators.
20
<PAGE> 21
(c) Discovery. Unless the parties mutually agree in writing
to some additional and specific pre-hearing discovery, the only pre-hearing
discovery shall be (a) reasonably limited production of relevant and non-
privileged documents, and (b) the identification of witnesses to be called at
the hearing, which identification shall give the witness's name, general
qualifications and position, and a brief statement as to the general scope of
the testimony to be given by the witness. The arbitrators shall decide any
disputes and shall control the process concerning these pre-hearing discovery
matters. Pursuant to the Rules of the American Arbitration Association, the
parties may request the arbitrator or other person authorized by law to
subpoena witnesses and documents for presentation at the hearing.
(d) Case Management. Prompt resolution of any dispute is
important to the parties; and the parties hereto agree that the arbitration of
any dispute shall be conducted expeditiously. The arbitrators are instructed
and directed to assume case management initiative and control over the
arbitration process (including scheduling of events, pre-hearing discovery and
activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the Dispute.
(e) Legal Representation. Counsel to the parties in
connection with the negotiation of and consummation of the transactions under
this Agreement shall be entitled to represent their respective party in any and
all proceedings under this Section 13.2 or in any other proceeding. Seller and
Buyer, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such proceeding for any reason, including
but not limited to the fact such counsel or any member thereof may be a witness
in any such proceeding or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to
the party represented by such counsel in any such proceeding.
(f) Remedies. The arbitrators may grant any legal or
equitable remedy or relief that the arbitrators deem just and equitable, to the
same extent that remedies or relief could be granted by a state or federal
court, provided however, that no punitive damages may be awarded. The decision
of any two of the three arbitrators appointed shall be binding upon the
parties.
(g) Expenses. The expenses of the arbitration, including the
arbitrators' fees, expert witness fees, and attorney's fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.
(h) Confidentiality. Except as set forth below, the parties
shall keep confidential the fact of the arbitration, the dispute being
arbitrated, the decision of the arbitrators, and any documents produced by the
parties in the course of the arbitration. Notwithstanding the foregoing, the
parties may disclose information about the arbitration to persons who have a
need to know, such as directors, trustees, management employees, witnesses,
experts, investors, attorneys, lenders, insurers, and others who may be
directly affected. Once the arbitration award has become final, if the
arbitration award is not promptly satisfied, then the prevailing party may,
notwithstanding the
21
<PAGE> 22
foregoing, disclose information about the arbitration only to the extent
necessary to obtain judicial enforcement of the award.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective representative, successors and assigns.
No party hereto may assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the other party, and any such
attempted assignment or delegation without such consent shall be void. Seller
agrees not to unreasonably withhold its consent to any assignment by Buyer of
its rights hereunder prior to Closing to a corporation or other entity
controlled by Buyer, provided that (a) such assignee will assume all
obligations of Buyer hereunder, without Buyer being released, and (b) such
assignment will not, in Seller's reasonable judgment, delay in any material way
or make more doubtful the Closing.
14.2 Amendments; Waivers. The terms, covenants, representations,
warranties and conditions of this Agreement may be changed, amended, modified,
waived, discharged or terminated only by a written instrument executed by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right of such party at a later date to enforce the same. No waiver
by any party of any condition or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
14.3 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing (which shall
include notice by telex or facsimile transmission) and shall be deemed to have
been duly made and received when personally served, or when delivered by
Federal Express or a similar overnight courier service, expenses prepaid, or,
if sent by telex, graphic scanning or other facsimile communications equipment,
delivered by such equipment, addressed as set forth below:
(a) If to Buyer, then to:
Southwestern Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A. J. Lewis, III, President
Fax: (713) 464-4681
With a copy to:
Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, California 92101
Fax: (619) 645-5332
22
<PAGE> 23
and to:
Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Fax: (210) 224-2035
(b) If to Seller, then to:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
Fax: (___) _____________
(c) If to Shannon, then to:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
Fax: (___) _____________
(d) With a copy to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
Fax: (619) 238-0257
Any party may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 14.3 providing for the giving of notice.
14.4 Announcements. Neither party shall make any written or other
announcement regarding this Agreement or any of its terms without the prior
written consent of the other party.
14.5 Non-Disclosure of Purchase Price. Seller and Buyer shall keep
confidential the amount of and payment terms of the Purchase Price.
Notwithstanding the foregoing, either party may disclose the terms of the
Purchase Price to persons who have a need to know, such as directors, trustees,
management, investors, attorneys, lenders, accountants or insurers.
23
<PAGE> 24
14.6 Captions. The captions of Articles and Sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
14.7 Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of California.
14.8 Entire Agreement. This Agreement and the other documents
delivered hereunder constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof, and supersedes
all prior agreements, understandings, inducements or conditions, express or
implied, oral or written, relating to the subject matter hereof, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of trade inconsistent with any of the terms hereof.
14.9 Execution; Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized signatories, all as of the day and year first
above written.
SHAREHOLDERS: SOUTHWESTERN ICE, INC., a Texas corporation
/s/ Carlos Shannon
- ----------------------------
Carlos Shannon By: /s/ A. J. Lewis, III
---------------------------------------
A. J. Lewis, III, President
/s/ Linda Shannon
- ----------------------------
Linda Shannon CMC ICE, INC., a California corporation
By: /s/ Carlos Shannon
---------------------------------------
Carlos Shannon, President
/s/ Carlos Shannon
-------------------------------------------
Carlos Shannon
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<PAGE> 25
EXHIBIT A
Property and Equipment
(Separately Identifying that of Carlos Shannon)
EXHIBIT A
<PAGE> 26
EXHIBIT A-1
Accounts Receivable
EXHIBIT A-1
<PAGE> 27
EXHIBIT A-2
Purchase Price Allocation
<TABLE>
<S> <C>
CMC ICE, INC.
-------------
All Assets, Property and Equipment other than
Goodwill and the name "CMC Ice" $103,920
Goodwill and name "CMC Ice" $311,080
A/R $269,040.26
CARLOS SHANNON
--------------
Property and Equipment $20,000
</TABLE>
EXHIBIT A-2
<PAGE> 28
EXHIBIT A-3
Authorized Third Party Payments and Section 1.9 Deposit
(Procedures and Payees)
This Exhibit sets forth the creditors of Seller, Shannon and the
Shareholders, related to the Business ("Payees"), to whom direct payment of
funds (payable to Seller and Shannon as part of the Purchase Price) shall be
made at the Closing by Buyer. Buyer shall receive dollar for dollar credit on
the Purchase Price for every dollar disbursed to a Payee pursuant to the
Agreement and this Exhibit. Unless waived in writing by Buyer, it shall be a
condition of payment to any Payee by Buyer at Closing (other than the Section
1.9 Deposit) that such Payee release its claims and liens against the Business,
the Property and Equipment, and Seller, and acknowledge in writing payment
represents payment in full of all sums due it from Seller or Shannon. Nothing
contained in the Agreement or in this Exhibit is intended by a party to the
Agreement to create or confer a benefit on any person other than a party to the
Agreement, no such benefit shall be deemed to have been conferred on any person
other than a party to the Agreement and the Agreement and this Exhibit A-3
shall be so interpreted.
The amounts show due to Payees herein are Seller's and Shannon's
closest, best estimates of the amounts due said Payees as of the date hereof.
The actual amount to be directly disbursed by Buyer to a Payee shall be agreed
to by Buyer and Seller at the Closing and prior to disbursement. Disbursements
to Payees shall be an express condition to Buyer's obligation to close unless
waived in writing by Buyer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PAYEE AMOUNT METHOD OF PAYMENT
----- ------ -----------------
- -----------------------------------------------------------------------------------------
<S> <C> <C>
IRS DEMAND 209,740.49 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
IRS JULY 1997 941 9,354.90 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS AUGUST 1997 (EST) 941 9,400.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS FUTA 940 1ST QTR 1997 914.78 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS FUTA 940 2ND QTR 1997 593.64 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS FUTA 940 AUGUST 1997 (EST) 81.61 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS 1996 INDIVIDUAL TAX 21,424.50 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
IRS 1997 IND. ESTIMATE 12,000.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
</TABLE>
EXHIBIT A-3
Page 1 of 3
<PAGE> 29
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PAYEE AMOUNT METHOD OF PAYMENT
----- ------ -----------------
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FRANCHISE TAX BOARD 1996 2,212.80 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
FRANCHISE TAX BOARD 1997 845.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
FRANCHISE TAX BOARD INV 1996 8,448.16 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
FRANCHISE TAX BOARD INV 1997 4,000.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD STATEMENT DATED 8/15/97 65,631.59 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD 1996 DE7 22,862.50 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD 1997 1ST QTR 8,066.85 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD 1997 2ND QTR 5,820.65 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD JULY 1997 884.46 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
EDD AUGUST 1997 (EST) 875.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
ACCOUNTS PAYABLE (1) 164,764.34 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
RYDER 6,500.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
PAYROLL NET SEPT 4TH (2) 13,000.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
MARY BROWN (3) 20,714.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
CCC (4) 15,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
ICE LEASE 50,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
LEGAL
- -----------------------------------------------------------------------------------------
SCOTT BRUNELL (5) 15,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
DAVID WEISS 9,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
</TABLE>
EXHIBIT A-3
Page 2 of 3
<PAGE> 30
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PAYEE AMOUNT METHOD OF PAYMENT
----- ------ -----------------
- -----------------------------------------------------------------------------------------
<S> <C> <C>
UNION ICE (6) 5,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
PALOMAR ICE 58,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
JEFF SANTOS (7) 11,500.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
DRAKCO (7) 1,850.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
INDEX WEST (7) 3,923.24 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
MRS PENNEL (7) 10.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
SALES TAX DUE (8) 33,000.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
SALES TAX AUGUST 4,265.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
USE TAX ON SALE 15,425.00 CASHIERS CHECK
- -----------------------------------------------------------------------------------------
A ALASKA (9) 10,508.00 CLIENT TRUST CHECK
- -----------------------------------------------------------------------------------------
SECTION 1.9 DEPOSIT ANY BALANCE CLIENT TRUST CHECK
TO PACKAGED ICE, INC. AS "ESCROW AGENT"
- -----------------------------------------------------------------------------------------
</TABLE>
Notes:
1. Listing to be Provided.
2. Listing to be Provided.
3. Requires UCC-3 and Release.
4. Requires Release.
5. Requires Satisfaction of Judgment and Release.
6. Requires Release.
7. Requires Release.
8. Final Amount Open.
9. Listing to be Provided.
EXHIBIT A-3
Page 3 of 3
<PAGE> 31
EXHIBIT B
COVENANT NOT TO COMPETE
This COVENANT NOT TO COMPETE ("Covenant") is made and effective on
___________, 1997, by and between Southwestern Ice, Inc., a Texas corporation
("Company"), and CMC Ice, Inc., a California corporation ("CMC") and is made
with reference to the following facts:
A. The Company and CMC have entered into an Asset Purchase Agreement
(the "Agreement"), providing for the Company to purchase substantially all of
the assets relating to the ice business of CMC.
B. The Company is unwilling to enter into the Agreement unless CMC
agrees to execute this Covenant.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
representations and warranties contained herein and in the Agreement, the
parties agree as follows:
1. NON-COMPETITION.
(a) Covenant Not To Compete. CMC shall not at any time within
the five (5) year period immediately following the date of this Covenant
("Restricted Period), directly or indirectly, in any territory in the United
States or any foreign country in which the Company (collectively, the "Company
Entities") are doing business or have actually investigated doing business or
where their products are sold as of the date hereof:
(i) engage in, or have any interest in any person,
firm, corporation, or business (whether as a shareholder, creditor, partner,
consultant, holder of any beneficial interest or otherwise other than as a
beneficial holder of not more than 5 percent of the outstanding voting stock of
a company having at least 500 holders of voting stock) that engages in the
business of producing, selling or distributing ice, which on the date hereof is
conducted by the Company Entities (the "Business"), as long as the Company
Entities, or any transferee of all or substantially all of the assets or stock
of any of the Company Entities ("Transferee"), shall engage in the Business or
similar activity during such Restricted Period;
(ii) attempt to hire any person who is employed
by the Company Entities, assist in the hiring by any other entity or person of
any person who is at the time employed by the Company Entities or encourage any
such employee to terminate his or her relationship with the Company Entities;
or
(iii) solicit or encourage any customer of the
Company Entities to terminate its relationship with the Company Entities or to
conduct with any other person any business that such customer conducts with the
Company Entities.
EXHIBIT B
Page 1 of 4
<PAGE> 32
(b) Rights and Remedies Upon Breach. If CMC commits a breach
of, or threatens to commit a breach of, Section 1(a) the Company shall have the
following rights and remedies, each of which shall be independent of the other
and severally enforceable, and all of which shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law or in
equity:
(c) Specific Performance. CMC recognizes and agrees that any
violation of Section 1(a) may not be reasonably or adequately compensated in
damages and that, in addition to any other relief to which the Company may be
entitled by reason of such violation, the Company shall also be entitled to
permanent and temporary injunctive and equitable relief and, pending
determination of any dispute with respect to such violation, no bond or
security shall be required in connection therewith. Without limiting the
generality of the foregoing, CMC specifically acknowledges that a showing by
the Company of any breach of any provision of Section 1(a) shall constitute,
for the purposes of all judicial determinations of the issue of injunctive
relief, conclusive proof of all of the elements necessary to entitle the
Company to interim and permanent injunctive relief against CMC with respect to
such breach. If any dispute arises with respect to Section 1(a) without
limiting in any way any other rights or remedies to which the Company may be
entitled, CMC agrees that Section 1(a) shall be enforceable by a decree of
specific performance.
(d) Severability of Covenants. If any part of this Section 1
is held by a court of competent jurisdiction or any other governmental
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of such provision shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and such court or
authority shall be empowered to substitute, to the extent enforceable,
provisions similar thereto or other provisions so as to provide to the Company
the benefits intended by such provisions, to the fullest extent permitted by
applicable law.
2. PERMITTED ACTIVITIES. Provided one hundred percent (100%) of
his requirements for block ice are purchased from Company Entities at their
standard prices for block ice, CMC may engage in the following activities only
within the territories in which such activities are otherwise forbidden to CMC
under the introductory clause to Section 1(a) above:
(a) The fulfillment of supply contracts for block ice related
to pier construction at U.S. government facilities; and
(b) The manufacture of artificial snow utilizing block ice for
snowboarding ramps.
3. TERM. The term of this Covenant is to be five (5) years from the
date of this Covenant.
4. ASSIGNMENT. No rights under this Covenant shall be assignable
nor duties delegable by either party, except that the Company may assign and
delegate any of its rights and duties hereunder to a Transferee. Nothing
contained in this Covenant is intended to confer upon any person
EXHIBIT B
Page 2 of 4
<PAGE> 33
or entity, other than the parties hereto, their successors in interest and
Transferees, any rights or remedies under or by reason of this Covenant unless
expressly so stated to the contrary.
5. CONSTRUCTION. This Covenant shall be construed and enforced in
accordance with the laws of the State of California.
6. SUCCESSORS AND ASSIGNEES. All covenants, representations,
warranties and agreements of the parties contained herein shall be binding upon
and inure to the benefit of their respective heirs, executors, administrators,
personal representatives, successors, and Transferees.
7. UNENFORCEABILITY. It is the intention of the parties hereto that
the provisions of this Covenant shall be enforced to the fullest extent
permissible under all applicable laws and public policies, but that the
unenforceability or the modification to conform with such laws or public
policies of any provision hereof shall not render unenforceable or impair the
remainder of the Covenant. Accordingly, if any provision shall be determined
to be invalid or unenforceable either in whole or in part, this Covenant shall
be deemed amended to delete or modify, as necessary, the invalid or
unenforceable provisions to alter the balance of this Covenant in order to
render the same valid and enforceable.
8. COUNTERPARTS. This Covenant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
9. ATTORNEYS' FEES. If an action is instituted to enforce any of
the provisions of this Covenant, the prevailing party in such action shall be
entitled to recover from the losing party its or his reasonable attorneys' fees
and costs as set by the court.
10. NOTICES. Any notice required or permitted to be given under this
Covenant shall be sufficient if such notice is in writing, delivered personally
or sent by registered or certified mail, return receipt requested, addressed as
follows:
To CMC : CMC Ice Co.
Carlos Shannon
921 Windflower Way
San Diego, California 92108
With a copy to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
EXHIBIT B
Page 3 of 4
<PAGE> 34
To the Company:
Southwestern Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A.J. Lewis, III, President
With a copy to: Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
and to: Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Notice shall be deemed given on the date of personal delivery or the
date it is placed, postage prepaid, in a depository for United States Mail
located within the State of California.
11. ENTIRE AGREEMENT. This Covenant contains the entire agreement of
the parties with respect to CMC's non-competition. This Covenant supersedes
all other agreements whether oral or in writing, hereto before made or existing
between the Company and CMC relating to CMC's non-competition. This Covenant
may not be changed orally, but may be changed only by an agreement in writing
signed by the party against whom enforcement of any change, modification,
extension, waiver or discharge is sought.
12. WAIVER. The waiver by either party of a breach of any provision
of this Covenant shall not operate or be construed as a waiver of any
subsequent breach.
CMC:: COMPANY:
CMC ICE, INC., a California corporation SOUTHWESTERN ICE, INC., a Texas
corporation
By: By:
------------------------------------- ------------------------------
Carlos Shannon, President A. J. Lewis, III, President
EXHIBIT B
Page 4 of 4
<PAGE> 35
EXHIBIT C
COVENANT NOT TO COMPETE
This COVENANT NOT TO COMPETE ("Covenant") is made and effective on
_________, 1997, by and between Southwestern Ice, Inc., a Texas corporation
("Company"), and Carlos Shannon ("Shannon") and is made with reference to the
following facts:
A. The Company and CMC Ice, Inc. ("CMC") have entered into an Asset
Purchase Agreement (the "Agreement") providing for the Company to purchase
substantially all of the assets of CMC which are used to produce, store and
distribute ice in San Diego County, California.
B. Shannon is the principal shareholder of CMC.
C. The Company is unwilling to enter into the Agreement unless
Shannon agrees to execute this Covenant.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
representations and warranties contained herein and in the Asset Purchase
Agreement, the parties agree as follows:
1. NON-COMPETITION.
(a) Covenant Not To Compete. Except as an employee or consultant
of the Company, Shannon agrees that he will not at any time within the five (5)
year period immediately following the date of this Covenant ("Restricted
Period), directly or indirectly, in the California counties of San Diego, Los
Angeles, Orange, Riverside and Imperial:
(i) engage in, or have any interest in any person,
firm, corporation, or business (whether individually or as an employee,
officer, director, agent, shareholder of a corporation, creditor, partner,
consultant, holder of any beneficial interest or otherwise other than as a
beneficial holder of not more than 5 percent of the outstanding voting stock of
a company having at least 500 holders of voting stock) that engages in the
business of producing, selling or distributing ice, which on the date hereof is
conducted by the Company (the "Business"), as long as the Company, or any
transferee of all or substantially all of the assets or stock of the Company
("Transferee"), shall engage in the Business or similar activity during such
Restricted Period;
(ii) attempt to hire any person who is employed
by the Company, assist in the hiring by any other entity or person of any
person who is at the time employed by the Company or encourage any such
employee to terminate his or her relationship with the Company; or
EXHIBIT C
Page 1 of 4
<PAGE> 36
(iii) solicit or encourage any customer of the
Company to terminate its relationship with the Company or to conduct with any
other person any business that such customer conducts with the Company.
(b) Rights and Remedies Upon Breach. If Shannon commits a
breach of, or threatens to commit a breach of, Section 1(a) the Company shall
have the following rights and remedies, each of which shall be independent of
the other and severally enforceable, and all of which shall be in addition to,
and not in lieu of, any other rights and remedies available to the Company
under law or in equity:
(c) Specific Performance. Shannon recognizes and agrees that
any violation of Section 1(a) may not be reasonably or adequately compensated
in damages and that, in addition to any other relief to which the Company may
be entitled by reason of such violation, the Company shall also be entitled to
permanent and temporary injunctive and equitable relief and, pending
determination of any dispute with respect to such violation, no bond or
security shall be required in connection therewith. Without limiting the
generality of the foregoing, Shannon specifically acknowledges that a showing
by the Company of any breach of any provision of Section 1(a) shall constitute,
for the purposes of all judicial determinations of the issue of injunctive
relief, conclusive proof of all of the elements necessary to entitle the
Company to interim and permanent injunctive relief against Shannon with respect
to such breach. If any dispute arises with respect to Section 1(a) without
limiting in any way any other rights or remedies to which the Company may be
entitled, Shannon agrees that Section 1(a) shall be enforceable by a decree of
specific performance.
(d) Severability of Covenants. If any part of this Section 1
is held by a court of competent jurisdiction or any other governmental
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of such provision shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and such court or
authority shall be empowered to substitute, to the extent enforceable,
provisions similar thereto or other provisions so as to provide to the Company
the benefits intended by such provisions, to the fullest extent permitted by
applicable law.
2. PERMITTED ACTIVITIES. Provided one hundred percent (100%) of
his requirements for block ice are purchased from Company Entities at their
standard prices for block ice, Shannon may engage in the following activities
only within the territories in which such activities are otherwise forbidden to
Shannon under the introductory clause to Section 1(a) above:
(a) The fulfillment of supply contracts for block ice related
to pier construction at U.S. government facilities; and
(b) The manufacture of artificial snow utilizing block ice for
snowboarding ramps.
3. TERM. The term of this Covenant is to be five (5) years from the
date of this Covenant.
EXHIBIT C
Page 2 of 4
<PAGE> 37
4. ASSIGNMENT. No rights under this Covenant shall be assignable
nor duties delegable by either party, except that the Company may assign and
delegate any of its rights and duties hereunder to a Transferee. Nothing
contained in this Covenant is intended to confer upon any person or entity,
other than the parties hereto, their successors in interest and Transferees, any
rights or remedies under or by reason of this Covenant unless expressly so
stated to the contrary.
5. CONSTRUCTION. This Covenant shall be construed and enforced in
accordance with the laws of the State of California.
6. SUCCESSORS AND ASSIGNEES. All covenants, representations,
warranties and agreements of the parties contained herein shall be binding upon
and inure to the benefit of their respective heirs, executors, administrators,
personal representatives, successors, and Transferees.
7. UNENFORCEABILITY. It is the intention of the parties hereto that
the provisions of this Covenant shall be enforced to the fullest extent
permissible under all applicable laws and public policies, but that the
unenforceability or the modification to conform with such laws or public
policies of any provision hereof shall not render unenforceable or impair the
remainder of the Covenant. Accordingly, if any provision shall be determined to
be invalid or unenforceable either in whole or in part, this Covenant shall be
deemed amended to delete or modify, as necessary, the invalid or unenforceable
provisions to alter the balance of this Covenant in order to render the same
valid and enforceable.
8. COUNTERPARTS. This Covenant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
9. ATTORNEYS' FEES. If an action is instituted to enforce any of
the provisions of this Covenant, the prevailing party in such action shall be
entitled to recover from the losing party its or his reasonable attorneys' fees
and costs as set by the court.
10. NOTICES. Any notice required or permitted to be given under this
Covenant shall be sufficient if such notice is in writing, delivered personally
or sent by registered or certified mail, return receipt requested, addressed as
follows:
To Shannon:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
EXHIBIT C
Page 3 of 4
<PAGE> 38
With a copy to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
To the Company: Packaged Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A.J. Lewis, III, President
With a copy to: Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
and to: Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Notice shall be deemed given on the date of personal delivery or the
date it is placed, postage prepaid, in a depository for United States Mail
located within the State of California.
11. ENTIRE AGREEMENT. This Covenant contains the entire agreement
of the parties with respect to Shannon's non-competition. This Covenant
supersedes all other agreements whether oral or in writing, hereto before made
or existing between the Company and Shannon relating to Shannon's
non-competition. This Covenant may not be changed orally, but may be changed
only by an agreement in writing signed by the party against whom enforcement of
any change, modification, extension, waiver or discharge is sought.
12. WAIVER. The waiver by either party of a breach of any provision
of this Covenant shall not operate or be construed as a waiver of any subsequent
breach.
SHANNON: COMPANY:
SOUTHWESTERN ICE, INC., a Texas
corporation
- ------------------------------
Carlos Shannon
By:
-----------------------------------
A. J. Lewis, III, President
EXHIBIT C
Page 1 of 4
<PAGE> 39
EXHIBIT D
PLEDGE AND ESCROW AGREEMENT
This Pledge and Escrow Agreement (this "Escrow Agreement"), dated as of
_____________, 1997, is entered into by and among Packaged Ice, Inc., a Texas
corporation ("PI") and Southwestern Ice, Inc., a Texas corporation ("SWI"),
Carlos Shannon, an individual ("Shannon"), A-Alaska Ice, Inc., a California
corporation ("Alaska")and CMC Ice, Inc., a California corporation ("CMC") and
PI, as escrow agent and pledgeholder (the 'Escrow Agent'). PI and SWI are
respectively parent and wholly own subsidiary and are sometimes herein referred
to as the "Texas Parties". Shannon, Alaska and CMC are related parties and are
sometimes herein referred to as the "California Parties".
RECITALS:
A. PI and Alaska have entered into that certain Agreement and Plan
of Reorganization dated ___________, 1997 (the "Reorganization Agreement").
Pursuant to the Reorganization Agreement, PI will purchase substantially all of
the assets of Alaska and Alaska will receive shares of PI Common Stock, $0.01
par value per share (the "Shares").
B. SWI, CMC and Shannon have entered into that certain Asset
Purchase Agreement dated ____________, 1997, (the "Asset Agreement"). Pursuant
to the Asset Agreement, SWI will purchase the ice business assets of CMC
including assets owned by Shannon individually and used in the ice business of
CMC. Shannon and CMC will receive cash in such sales ("Asset Cash").
C. Pursuant to each of the Agreements referenced in Recitals A and
B, the California Parties and the Texas Parties, as the case may be, have
agreed that, at the closings held under each of such Agreements, which are
required to be concurrent under the terms of each of said Agreements,
(collectively the "Closing"), certain of the California Parties will cause to
be deposited into escrow a portion of the consideration received (Shares and
Asset Cash) to be received by said California Parties. The Shares and Asset
Cash shall be pledged to PI to secure the indemnification of PI, as Buyer under
the Reorganization Agreement and SWI, as Buyer under the Asset Agreement, which
is provided for in Articles XI of the Reorganization Agreement and Asset
Agreement.
D. It is a condition to the consummation of the transactions
contemplated by the Reorganization and Asset Agreements that at or prior to the
Closing, this Escrow Agreement be entered into by the parties hereto.
E. It is understood and agreed that the Shares and Asset Cash
pledged hereunder (the "Escrow Fund") to PI shall constitute security for the
payment, liquidation or direct satisfaction of indemnity claims ("Claims") for
which any of the Texas Parties is entitled to indemnity from and against any of
the California Parties under any of the Reorganization Agreement and Asset
Agreement, without regard to whether or not the source of the Escrow Fund was
received under or pursuant the Agreement under which a Claim is being asserted.
<PAGE> 40
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth and of other good and valuable
consideration, the parties hereto agree as follows:
1. Escrow and Pledge of Shares and Asset Cash; Legend.
a. Alaska has caused to be delivered to the Escrow Agent a
certificate representing 20,000 of Shares in accordance with the
Reorganization Agreement. Each Share has been deposited in
escrow (the "Escrow") with the Escrow Agent by Alaska and is
hereby pledged by Alaska to the Texas Parties. Alaska hereby
grants a security interest in such Shares to the Texas Parties
(the "Pledge"). On the date hereof Alaska also has delivered to
the Escrow Agent stock powers endorsed in blank with respect to
the Shares deposited with Escrow Agent. Alaska hereby grants to
the Texas Parties a security interest in any Proceeds as defined
in Section 2a (iii) below, any additional Shares of which Alaska
may acquire ownership by reason of a stock split, subdivision,
dividend or other recapitalization with respect to the Shares or
any securities which are issued in exchange for or in replacement
of the Shares, any and all of which shall be deposited in the
Escrow (together with stock powers with respect thereto endorsed
in blank), and which shall be subject to the terms hereof and
shall become part of the Escrow Fund hereunder.
b. Each certificate representing any Shares shall have the following
legend noted conspicuously thereon:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
LIEN IN FAVOR OF THE ISSUER PURSUANT TO THAT CERTAIN PLEDGE AND
ESCROW AGREEMENT DATED ______________________, 1997 BY AND AMONG
THE ISSUER, A ALASKA ICE, INC., THE SHAREHOLDERS OF A ALASKA ICE,
INC. AND THE ISSUER AS ESCROW AGENT AND PLEDGEHOLDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER IMPOSED BY THE ISSUER UNTIL RELEASED
FROM SUCH LIEN IN ACCORDANCE WITH THE TERMS OF SUCH PLEDGE AND
ESCROW AGREEMENT.
c. If blank stock powers with respect to Shares registered to Alaska
are delivered by the Escrow Agent to PI pursuant to Section 4.a
below, Alaska shall promptly deliver or cause to be delivered to
the Escrow Agent stock powers endorsed in blank with respect to
the remaining Shares pledged hereunder by Alaska (together with
stock powers with respect thereto endorsed in blank).
EXHIBIT D
Page 2 of 10
<PAGE> 41
d. CMC and Shannon have caused to be delivered to Escrow Agent the
Section 1.9 Deposit in accordance with the Asset Agreement
including Exhibit A-3 thereof. The aforesaid sum has been
deposited in the Escrow with the Escrow Agent and is hereby
pledged by CMC and Shannonto the Texas Parties. CMC and Shannon
hereby grant as security interest in said cash to the Texas
parties.
e. The deposit and Pledge of the Shares by Alaska and the Asset Cash
by CMC shall be referred to as the Escrow Fund. The Escrow Agent
shall hold the Escrow Fund not as the agent of any of the
California Parties, but as pledgeholder with respect to the
pledge of same pursuant to this Escrow Agreement. The Escrow
Fund shall include the property referred to in Section 1a above
and Proceeds as defined in Section 2a(iii) below. The Escrow
Fund shall serve to secure the indemnification obligations of the
California Parties to the Texas Parties under Article XI
respectively of the Reorganization Agreement and the Asset
Agreement and Recital E above with respect to a notice of claim
(a "Notice of Claim") delivered to any of the California Parties
under the Reorganization Agreement and Asset Agreement within one
(1) year from the date of the Closing. Any Notice of Claim shall
be deemed effective when delivered to the California parties and
the Escrow Agent within one (1) year from the date of the
Closing.
f. The deposit hereunder by the California Parties shall in no way
limit the indemnification obligations of said parties under the
Reorganization Agreement or Asset Agreement.
g. The Escrow Fund shall be available and used to satisfy Claims
arising under any of the Reorganization Agreement and Asset
Agreement notwithstanding the fact that any portion of the Escrow
Fund so used shall have been deposited by one of the California
Parties under one of said Agreements under which no
indemnification Claim has arisen or is then pending. The
California Parties hereby agree that with respect to the use and
application of the Escrow Fund, their liabilities and obligations
are joint and several and acknowledge that the deposit and Pledge
hereunder by them is made on that basis. The California Parties
shall have the right of contribution among themselves; however,
in pursuing any such right, the California Parties shall not
involve or join in any action any of the Texas Parties or seek in
any manner, through judicial action or otherwise, to attach, levy
or otherwise restrain the disbursement or application of the
Escrow Fund.
EXHIBIT D
Page 3 of 10
<PAGE> 42
2. Restriction on Transferability; Release From Pledge and Escrow;
Proceeds.
a. No part of the Escrow Fund shall be released from Escrow and the
Pledge except as follows:
(i) Upon the later of (a) 120 days from the date of the Closing or
(b) the date upon which all claims in respect of which a Texas Party has
submitted Notices of Claim prior to the end of the above-referenced 120 days
shall have been disposed of, the Escrow Agent shall release from the Escrow and
shall deliver to the order of the California Parties the balance of the Asset
Cash, if any, remaining in the Escrow and the Asset Cash shall thereupon cease
to be subject to the Pledge and this Escrow Agreement.
(ii) Upon the later of (a) the first annual anniversary of the date of
the Closing or (b) the date upon which all claims in respect of which a Texas
Party has submitted Notices of Claim shall have been disposed of, the Escrow
Agent shall release from the Escrow and shall deliver to the order of the
California Parties the balance of the Shares and Proceeds, if any, remaining in
the Escrow, and such Shares and Proceeds shall thereupon cease to be subject to
the Pledge and this Escrow Agreement.
(iii) Any Shares may at any time be released from Escrow and the
Pledge, and sold in accordance with applicable laws and subject to applicable
legal and contractual transfer restrictions in respect of such Shares if Alaska
delivers to the Escrow Agent a Notice to Sell (the "Notice to Sell"), addressed
to the Escrow Agent and executed by Alaska, instructing the Escrow Agent to
deliver such Shares to a designated broker-dealer with the Notice to Sell which
Notice to Sell shall be irrevocable, and a written instruction instructing the
designated broker-dealer to dispose of such Shares for the account of Alaska
and to return the net proceeds of such disposition ("Proceeds") to the Escrow
Agent to be held as part of the Escrow Fund under this Escrow Agreement. Such
Proceeds shall be subject to the Pledge and the Escrow Agent shall retain such
Proceeds, and if requested by Alaska, shall invest such Proceeds, net of any
transaction costs, in any "Cash Equivalent Investment" (as defined below)
identified and directed in writing by Alaska for the account of Alaska and all
interest or dividends earned thereon shall be paid quarterly to Alaska. The
Escrow Agent shall apply such Proceeds to the satisfaction of claims in
accordance with Section 4 for so long as the Shares from which such Proceeds
derived would have been a part of the Escrow Fund and subject to this Escrow
Agreement and, at the time that such Shares would have ceased to be subject to
the Pledge and this Escrow Agreement, the Escrow Agent shall disburse such
Proceeds to the order of the Alaska. "Cash Equivalent Investment" shall mean
(a) United States dollars; (b) any evidence of indebtedness, maturing in not
more than one year, insured or guaranteed by the government of the United
States; (c) commercial paper, maturing not more than nine months from the date
of issue and rated at least A-1 by the Standard & Poor's Corporation or P-1 by
Moody's Investor Services, Inc., issued by a corporation organized under the
laws of any State of the United States of America or the District of Columbia;
and (d) any certificate of deposit or acceptance, maturing in not more than one
year, issued by a commercial banking institution which is a member of the
Federal Reserve System and which has a combined capital and surplus and
undivided profits of not less than $100,000,000.
EXHIBIT D
Page 4 of 10
<PAGE> 43
(iv) With the prior approval of the Texas Parties, upon the written
request of the California Parties, the Escrow Fund may be disbursed to pay
claims, debts and obligations of any of the California Parties.
b. With respect to all Shares released from the Pledge and Escrow,
PI shall promptly (or shall cause the transfer agent for its
common stock to) issue replacement certificates representing such
released Shares, not bearing the legend set forth in Section 1.b
above, in exchange for the legended certificates representing
such released Shares.
3. Requirements for Notice of Claim.
a. Details of Claim. Any Notice of Claim filed by a Texas Party
shall specify in reasonable detail the facts and circumstances of
the claim; the basis on which a California Party is believed to
have liability therefor; and the estimated amount of loss alleged
to have been suffered or liability incurred by the Texas Party as
a result thereof. Such estimates of loss or liability (while not
binding on the Texas Party) shall be prepared by the Texas Party
on a reasoned basis consistent with the facts and circumstances
out of which the claim arose.
b. Holding of Dividends on Certain Shares. From the date of receipt
of a Notice of Claim until resolution thereof pursuant to Section
4.7, all cash dividends declared and paid on the Shares shall be
deposited in Escrow and shall be retained in the Escrow until
resolution of such Claim.
4. Satisfaction of Claims.
a. Claims for Indemnification. The following procedures shall
prevail as to satisfaction of a Claim for indemnification in
favor of the Texas Parties:
(i) Uncontested Claims. If the Escrow Agent is furnished by the
Texas Party with a Notice of Claim, and no notice of objection to such claim (a
"Notice of Objection") is furnished by the California Parties to the Escrow
Agent within 30 days of the date of receipt of the Notice of Claim by the
Escrow Agent (which the Escrow Agent may assume to be the same as the date of
receipt of the Notice of Claim by the California Parties); or
(ii) Agreed Claims. If the Escrow Agent shall have been furnished by
the California Parties with a timely Notice of Objection, upon receipt by the
Escrow Agent of a notice (a "Notice of Resolution") that the parties have
subsequently agreed upon, resolved or compromised the claim specified in the
Notice of Claim (which Notice of Resolution shall be executed by the Texas
Parties and acknowledged by the California Parties); or
EXHIBIT D
Page 5 of 10
<PAGE> 44
(iii) Judicial Awards. If the Escrow Agent shall have been furnished
by the California Parties with a timely Notice of Objection and shall
subsequently be furnished with a copy of an award (an "Award") made by an
arbitrator or court of competent jurisdiction with respect to the Claim
specified in the Notice of Claim, and upon receipt by the Escrow Agent of an
opinion of counsel for Texas Parties to the effect that the time for filing an
appeal, an application for correction of the Award or a petition to vacate or
correct the Award has passed, and that no such appeal, application or petition
has been filed, or that the parties have waived such rights;
thereupon, unless instructed to the contrary by Alaska pursuant to Section 4.b
below, the Escrow Agent shall deliver to the Texas Parties that amount of the
Escrow Fund which is equal to the amount specified in (i) the Notice of Claim,
(ii) the Notice of Resolution or (iii) the Award, as the case may be.
The Escrow Agent may deliver cash and/or Shares to the Texas Parties in
satisfaction of a Claim. If Shares are to be used to satisfy a Claim, the
number of Shares to be delivered shall be that number of Shares, valued at
$10.00 per share, which are equal in value to the amount specified in (i) the
Notice of Claim, (ii) the Notice of Resolution or (iii) the Award as the case
may be.
b. Alternate Cash Satisfaction of Claim. Alaska may, in its sole
discretion, (i) furnish to the Escrow Agent an amount of cash to
be applied in partial or full satisfaction of a Claim in respect
of which the Escrow Agent is otherwise prepared to satisfy in
whole or in part using Shares.
c. Government Creditor. Notwithstanding Section 4a and b hereof,
Escrow Agent is irrevocably authorized and instructed hereby to
pay directly the claims of any Government Creditor of any of the
California Parties. Escrow Agent shall be entitled to disburse
any such payment at any time three (3) business days following
the date Escrow Agent is instructed in writing to make such
payment by PI, which shall concurrently provide the California
Parties with a copy of any such written instruction.
d. Advance. In the event cash held in the Escrow Fund is
insufficient to pay a Claim, PI may, but shall not be obligated
to advance the amount of cash necessary to pay any such Claim in
full by delivery of cash to Escrow Agent. Thereafter, upon
written demand from PI, Escrow Agent shall promptly deliver to PI
Shares (up to all Shares) having a value (determined as provided
above) equal to the cash so advanced by PI.
5. Cash Dividends and Voting Rights. Subject to Section 3.b, Alaska shall
receive all cash dividends declared and paid on Shares throughout the
period that Shares are held in the Escrow in the same manner as any
other shareholder of PI, which dividends shall at no time be a part of
the Escrow or subject to the Pledge. All other distributions in respect
of the Shares that are taxable as dividends for Federal income tax
purposes shall also be paid directly to Alaska. Alaska shall also
retain all voting rights with respect to his Shares during such period.
EXHIBIT D
Page 6 of 10
<PAGE> 45
6. Concerning the Escrow Agent.
a. Under no circumstances shall the Escrow Agent be liable to the
California Parties for any act it may take in its capacity as
Escrow Agent, or for the failure to take any action, or for any
damage, loss or expenses suffered or incurred resulting therefrom
or in acting hereunder, except only for acts of gross negligence
or willful misconduct.
b. The Escrow Agent may consult with counsel of its choice and may
rely in good faith on advice of such counsel.
c. The California Parties each shall indemnify and hold the Escrow
Agent harmless in respect of any and all losses, costs, expenses,
liabilities, judgments, assessments, penalties, damages,
deficiencies, suits, actions, proceedings or demands, and
attorneys fees and expenses incident thereto resulting from any
action or refusal to act by the Escrow Agent in accordance with
the instructions of any of the California Parties. The Escrow
Agent shall promptly notify the California Parties of any
asserted liability for which the Escrow Agent would be entitled
to indemnification by the California Parties, and the California
Parties and their legal representatives shall have, at the
election of the California Parties, a right to compromise or
defend any such matter involving asserted liability, through
counsel of their own choosing, at their expense; provided,
however, that the California Parties shall indemnify the Escrow
Agent, its officers, employees and agents, against any damage
resulting from the failure to pay any claims on all such
litigation pending. In the event any of the California Parties
undertakes to compromise or defend any such liability, the
California Parties shall notify the Escrow Agent in writing
promptly of their intention to do so, and the Escrow Agent shall
cooperate with the California Parties and their counsel in the
compromising of or the defending against any such liabilities or
claims, at the expense of the California Parties.
d. The Escrow Agent may resign from its duties and obligations
hereunder by giving at least 30 days advance notice in writing of
when such resignation shall take effect. Upon any resignation or
discharge of the Escrow Agent, the Texas Parties and California
Parties shall jointly designate a new Escrow Agent. If the Texas
Parties and California Parties cannot promptly agree upon a new
Escrow Agent, a new Escrow Agent shall be appointed by the
Presiding Judge of the Superior Court for the County of San Diego
upon petition by PI. If the Escrow Agent is served with
conflicting demands which cannot be promptly resolved, the Escrow
Agent shall interplead the matter by petition in the Superior
Court for the County of San Diego, which shall resolve such
matter. The parties hereto consent to such proceeding being
commenced and shall indemnify and hold the Escrow Agent harmless
from any expense or cost including attorneys' fees, incurred in
such action.
EXHIBIT D
Page 7 of 10
<PAGE> 46
7. Fees of the Escrow Agent. The Escrow Agent shall charge no fees for its
services in acting hereunder.
8. Miscellaneous.
a. Successors. This Escrow Agreement shall be binding upon and
shall inure to the benefit of the parties herein and their
respective heirs, executors, successors and assigns.
b. Amendment, Etc. This Escrow Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except
by an instrument in writing signed on behalf of each of the
parties hereto by their duly authorized officers or
representatives. The failure of any party hereto to enforce at
any time any provision of this Escrow Agreement shall in no way
be construed to be a waiver of such provision, nor in any way to
affect the validity of this Escrow Agreement or any part thereof
or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Escrow Agreement
shall be held to be a waiver of any other or subsequent breach.
c. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if
delivered personally, mailed by certified mail (return receipt
requested) or sent by telecopier (confirmed thereafter by such
certified mail) to the parties at the following addresses or at
such other addresses as shall be specified by the parties by like
notice:
(a) if to the Texas Parties or Escrow Agent:
Packaged Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A.J. Lewis, III, President
Fax: (713) 464-4681
With a copy to:
Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, CA 92101
Fax: (619) 645-5332
EXHIBIT D
Page 8 of 10
<PAGE> 47
and to:
Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Fax: (210) 224-2035
(b) if to the California Parties:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
Fax: (___) ______________
and to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
Fax: (619) 238-0257
Notice so given shall (in the case of notice so given by mail) be deemed to be
given and received on the fifth calendar day after posting and (in the case of
notice so given by telecopier or personal delivery) on the date of actual
transmission or (as the case may be) personal delivery.
d. Defined Terms. The Capitalized terms used herein without
definition and which are defined in the Reorganization Agreement
or Asset Agreement shall have the respective meanings, herein as
defined in said agreements.
e. Captions. The captions appearing in this Escrow Agreement are
inserted only as a matter of convenience and as a reference and
in no way define, limit or describe the scope or intent of this
Escrow Agreement or any of the provisions hereof.
f. Governing Law. This Escrow Agreement shall be construed and the
rights of the parties hereafter shall be governed by the laws of
the State of California.
g. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
EXHIBIT D
Page 9 of 10
<PAGE> 48
h. Fractional Shares. No fractional shares of the Shares shall be
issued or delivered pursuant to any provision of this Escrow
Agreement. In making delivery of the Shares to PI or Alaska, the
Escrow Agent shall round off any fractional share resulting from
any calculation hereunder to the nearer whole share.
i. Distribution by Consent. Any other provision of this Escrow
Agreement to the contrary notwithstanding, the Escrow Agent shall
distribute any assets held in Escrow in such manner at such time
or times as the Texas and California Parties may, in writing,
jointly direct.
j. Security Agreement. This Escrow Agreement shall constitute a
Security Agreement within the meaning of the California
Commercial Codes.
k. Termination. This Escrow Agreement shall terminate when the
Escrow Fund has ceased to be subject to this Escrow Agreement.
l. Tax Identification Number. Each party hereto, except the Escrow
Agent, shall provide the Escrow Agent with its Tax Identification
Number ("T.I.N.") as assigned by the IRS. All interest and other
income earned under the Escrow Agreement shall be allocated and
paid as provided hereunder and reported by the recipient to the
IRS as having been so allocated and paid.
IN WITNESS WHEREOF, the parties have executed this Reorganization
Agreement as of the date set forth herein.
A ALASKA ICE, INC. SOUTHWESTERN ICE, INC.
By: By:
------------------------------ --------------------------------
Its: Its:
----------------------------- -------------------------------
CMC ICE, INC. PACKAGED ICE, INC.
By: By:
------------------------------ --------------------------------
Its: Its:
----------------------------- -------------------------------
PACKAGED ICE, INC., as Escrow Agent
--------------------------------
Carlos Shannon By:
--------------------------------
Its:
-------------------------------- -------------------------------
Linda Shannon
EXHIBIT D
Page 10 of 10
<PAGE> 49
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into and becomes
effective as of ___________, 1997 by and between Southwestern Ice, Inc., a
Texas corporation ("Employer"), and Carlos Shannon ("Shannon").
RECITALS
A. Employer is a corporation authorized to do and is doing business
in the State of California.
B. Employer has recently purchased substantially all of the assets
of the ice business of Employee's former employer. Employee has terminated his
employment with his former employer. Both Employer and Employee desire that
Employee become an employee on a full-time basis for Employer.
AGREEMENT
IN CONSIDERATION of the promises and of the mutual covenants contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
1. Employment. Employer hereby engages Employee to serve as a
General Manager of the Company's CMC ice division (the "CMC Ice Division") and
Employee hereby accepts such an engagement upon the terms and conditions set
forth herein.
2. Effective Date and Term. The effective date of this Agreement
shall be ________________, 1997, and the term of this Agreement shall begin on
the effective date and shall remain in effect until _____________________,
1998, unless terminated earlier pursuant to Paragraph 12.
3. Duties. Employee is employed to serve as a General Manager and
shall perform such duties as are customarily performed by a General Manager and
such duties as Employer makes from time to time. As part of Employee's duties,
Employee acknowledges and understands that: (a) Employee will devote utmost
knowledge and best skill to the performance of his duties; (b) Employee shall
devote not less than 150 hours per month to the rendition of such services,
subject to absences for customary vacations and for temporary illness; and (c)
Employee will not engage in any other gainful occupation which requires his
personal attention without the prior written consent of Employer, with the
exception that Employee may personally trade in stock, bonds, securities,
commodities or real estate investments for his own benefit. Notwithstanding
the above, Employee
EXHIBIT E
Page 2 of 5
<PAGE> 50
may devote reasonable time to engage in the Permitted Activities set forth in
his Covenant Not to Compete with Employer of even date herewith.
4. Confidentiality. Employee shall not disclose any information
relating to the Employer, its employees or customers, and information regarding
the affairs or operations of Employer, including Employer's proprietary
information, trade secrets, patents and customer lists, to any third party or
parties during or after the term of this Agreement, without the prior written
consent of Employer.
5. Patents and Inventions. Employee agrees that all patents,
designs, plans and inventions which Employee discovers, develops, or
participates in during the time he is employed by Employer become the exclusive
property of Employer.
6. Limitations on Authority. Without the express written consent
from Employer, Employee shall have no apparent or implied authority to:
a. Pledge the credit of Employer;
b. Bind the Employer under any contract, agreement, note,
mortgage or otherwise for any obligation;
c. Release or discharge any debt due to Employer unless the
Employer has received the full amount thereof; and,
d. Sell, mortgage, transfer or otherwise dispose of any
assets of the Employer.
7. Personnel Policies and Procedures. The Employer shall have the
authority to establish from time to time personnel policies and procedures to
be followed by its employees. Employee agrees to comply with the policies and
procedures of the Employer. To the extent any provisions in Employer's
personnel policies and procedures differ with the terms of this Agreement, the
terms of this Agreement shall apply.
8. Base Compensation. During the term of this Agreement, Employee
shall be paid an annual base salary of $60,000 in twenty-six (26) equal bi-
weekly installments.
9. Fringe Benefits.
a. Life Insurance. The Employer shall pay for and provide
term life insurance during the term of the Agreement for the benefit of
Employee under the company's group life insurance plan.
b. Health Insurance. The Employer shall provide health
insurance pursuant to the existing company health insurance plan.
EXHIBIT E
Page 3 of 5
<PAGE> 51
10. Expenses. The Employer shall reimburse Employee for reasonable
and necessary expenses (including a car or mileage allowance for vehicle
expense) incurred by Employee in the ordinary course of business for the
Employer, as may be approved from time to time by Employer.
11. Termination. This Agreement and the employment of Employee shall
terminate prior to its expiration date under the following conditions:
a. The death of Employee;
b. The permanent disability of Employee (permanent disability
shall exist when Employee suffers from a condition of mind or body that
indefinitely prevents him from further performance of his essential job
duties); or,
c. Upon receipt by Employee of written notice from Employer
that Employee's employment is being discharged for "good cause". The Employer
has "good cause" to discharge Employee if:
1. Employee fails or refuses to faithfully and
diligently perform the usual and customary duties of his employment which
failure or refusal is not cured within 30 days after written notice thereof is
given to Employee;
2. Employee fails or refuses to comply with the
policies, standards and regulations of the Employer which from time to time may
be established, which failure or refusal is not cured within 15 days after
written notice thereof is given to Employee;
3. Employee violates any term or condition of this
Agreement and fails to cure the same promptly following written notice from
Employer; or
4. It is determined that the Employee has conducted
himself in an unprofessional, unethical or fraudulent manner, or has acted in a
manner detrimental to the reputation, character or standing of Employer.
12. Compensation Upon Termination. In the event Employee is
terminated for good cause, Employee shall be terminated immediately upon notice
from Employer of such termination and Employee shall be entitled to receive
compensation in the amount equal to two weeks of base compensation. Employee
is entitled to no other severance compensation when he is terminated for good
cause as defined in paragraph 11(c).
13. Arbitration/Sole Remedy for Breach of Agreement. In the event of
any dispute between Employer and Employee concerning any aspect of the
employment relationship, including any disputes upon termination, all such
disputes shall be resolved by binding arbitration before a single neutral
arbitrator. The arbitrator shall be selected from the American Arbitration
Association through its procedures. All rules governing the arbitration shall
be the rules as set forth by the American Arbitration Association's Employment
Dispute Resolution Rules. The arbitrator is bound
EXHIBIT E
Page 4 of 5
<PAGE> 52
to rule only on whether or not there has been a violation of the terms of this
Agreement and to render an award, if any, that is consistent with the terms of
this Agreement. Neither party to this Agreement is entitled to any legal
recourse or rights or remedies other than those provided within this Agreement.
The Employee's sole remedies for claims arising out of his employment, with the
exception of Workers' Compensation and state unemployment remedies, are those
set forth in this Agreement. In the event of a termination of employment, the
arbitrator is limited to a determination of whether or not the discharge was
for good cause or for other than good cause. The arbitrator may apportion the
costs of the arbitration, including arbitrator's fees, among the parties, but
shall have no power to award attorneys' fees. Each party shall be responsible
for its own attorneys' fees.
14. Successors and Assigns. The rights and obligations of the
Employer under this Agreement shall enure to the benefit of and shall be
binding upon the successors and assigns of Employer. Employee shall not be
entitled to assign any of his rights or obligations under this Agreement.
15. Governing Law. This Agreement shall be interpreted, construed,
governed and enforced in accordance to the laws of the State of California.
16. Amendments. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by the
parties hereto.
17. Separate Terms. Each term, condition, covenant or provision of
this Agreement shall be viewed as separate and distinct, and in the event that
any such term, covenant or provision shall be held by a court of competent
jurisdiction to be invalid, the remaining provisions shall continue in full
force and effect.
18. Waiver. A waiver by either party of a breach of provision or
provisions of this Agreement shall not constitute a general waiver, or
prejudice the other party's right otherwise to demand strict compliance with
that provision or any other provisions in this Agreement.
19. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing, sent by mail to his residence in
the case of Employee, or hand delivered to the Employee, or to its principal
office in the case of the Employer.
20. Entire Agreement; Counterparts. Employee acknowledges receipt of
this Agreement and agrees that this Agreement represents the entire Agreement
with Employer concerning the subject matter hereof, and supersedes any previous
oral or written communications, representations, understandings or Agreements
with Employer or any agent thereof. Employee understands that no
representative of the Employer has been authorized to enter into any Agreement
or commitment with Employee which is inconsistent in any way with the terms of
this Agreement. This Agreement may
EXHIBIT E
Page 5 of 5
<PAGE> 53
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
Agreement.
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date set forth above.
Employer:
SOUTHWESTERN ICE, INC., a Texas corporation
By:
-----------------------------------------
A. J. Lewis, III, President
Employee:
--------------------------------------------
Carlos Shannon
EXHIBIT E
Page 6 of 5
<PAGE> 54
EXHIBIT F-1
SUBLEASE
1. Parties. This Sublease, dated for reference purposes only
__________, 1997, is made by and between CMC Ice, Inc. (herein called
"Sublessor"), and Southwestern Ice, Inc. (herein called "Sublessee").
2. Premises. Sublessor hereby subleases to Sublessee, and Sublessee
hereby subleases from Sublessor, for the term, at the rental and upon all of
the conditions set forth herein, that certain property described as follows:
3417 30th Street, San Diego, California 92104 (herein called the "Premises").
3. Term. The term of this sublease shall commence on the date first
written above and end on February 28, 1998 unless sooner terminated by
Sublessee upon thirty (30) days prior written notice to Sublessor from
Sublessee.
4. Rent. Sublessee shall pay to Sublessor as rent for the Premises
equal to the rent due under the Master Lease referred to below plus $1000 as
one month's rental for parking on property adjacent to the Premises.
5. Master Lease. Sublessor is a lessee of the Premises by virtue of
a lease, hereinafter referred to as the "Master Lease", a copy of which is
attached hereto. This sublease is subject and subordinate to the Master Lease.
Sublessor agrees to maintain the Master Lease in effect during the entire term
of this sublease.
6. Sublessee's Rights and Duties. Sublessor and Sublessee are
parties to an Asset Purchase Agreement, dated September __, 1997, (the
"Agreement"). The parties acknowledge that the capitalized terms in this
Section 6 shall have the meanings set forth in the Agreement.
Following the date hereof but prior to February 28, 1998,
Sublessee intends to remove the Assets from the Main Facility. In connection
with Sublessee's preparation, disassembly, packing, loading and transporting of
the Assets from the Main Facility (the "Removal"), Sublessee shall use
reasonable care and shall conduct the Removal in a reasonably orderly manner.
Except as otherwise provided below, Sublessee shall be solely responsible for
all costs incurred in connection with the Removal, including, but not limited
to, all costs associated with the destruction or demolition of any interior
and/or exterior walls or other structures which are necessary for efficient
Removal.
In connection with the Removal, Sublessor shall; (i) provide the
Sublessee with physical access to the Main Facility necessary for the Removal;
(ii) cooperate with Sublessee to obtain all necessary governmental consents,
permits and licenses to permit the Removal (including the right to remove
walls, etc. to the extent reasonably necessary to accomplish the Removal), and
EXHIBIT F-1
Page 1 of 2
<PAGE> 55
(iii) maintain public liability insurance during the course of the Removal in
such amounts as have been historically maintained by Sublessor.
7. Attorneys' Fees. If either party brings an action to enforce the
terms hereof, or to declare rights hereunder, the prevailing party in any such
action, on trial and appeal, shall be entitled to reasonable attorneys' fees to
be paid by the losing party as fixed by the court.
Executed at San Diego, California on _______________, 1997.
CMC Ice, Inc. Southwestern Ice, Inc. a Texas corporation
By: By:
----------------------------- ---------------------------------
Sublessor Sublessee
EXHIBIT F-1
Page 2 of 2
<PAGE> 56
EXHIBIT F-2
SUBLEASE
1. Parties. This Sublease, dated for reference purposes only
__________, 1997, is made by and between CMC Ice, Inc. (herein called
"Sublessor"), and Southwestern Ice, Inc. (herein called "Sublessee").
2. Premises. Sublessor hereby subleases to Sublessee, and Sublessee
hereby subleases from Sublessor, for the term, at the rental and upon all of
the conditions set forth herein, that certain property described as follows:
3302 32nd Street, San Diego, California 92104 -(herein called the "Premises").
3. Term. The term of this sublease shall commence on the date first
above written and end on February 28, 1998 unless sooner terminated by
Sublessee upon thirty (30) days prior written notice to Sublessor from
Sublessee..
4. Rent. Sublessee shall pay to Sublessor as rent for the Premises
equal to the rental due under the Master Lease referred to below.
5. Master Lease. Sublessor is a lessee of the Premises by virtue of
a lease, hereinafter referred to as the "Master Lease", a copy of which is
attached hereto. This sublease is subject and subordinate to the Master Lease.
Sublessor agrees to maintain the Master Lease in effect during the entire term
of this sublease.
6. Sublessee's Rights and Duties. Sublessor and Sublessee are
parties to an Asset Purchase Agreement, dated September __, 1997, (the
"Agreement"). The parties acknowledge that the capitalized terms in this
Section 6 shall have the meanings set forth in the Agreement.
Following the date hereof but prior to February 28, 1998,
Sublessee intends to remove the Assets from the Ancillary Facility. In
connection with Sublessee's preparation, disassembly, packing, loading and
transporting of the Assets from the Ancillary Facility (the "Removal"),
Sublessee shall use reasonable care and shall conduct the Removal in a
reasonably orderly manner. Except as otherwise provided below, Sublessee shall
be solely responsible for all costs incurred in connection with the Removal,
including, but not limited to, all costs associated with the destruction or
demolition of any interior and/or exterior walls or other structures which are
necessary for efficient Removal.
In connection with the Removal, Sublessor shall; (i) provide the
Sublessee with physical access to the Ancillary Facility necessary for the
Removal; (ii) cooperate with Sublessee to obtain all necessary governmental
consents, permits and licenses to permit the Removal (including the right to
remove walls, etc. to the extent reasonably necessary to accomplish the
Removal), and
EXHIBIT F-1
Page 1 of 2
<PAGE> 57
(iii) maintain public liability insurance during the course of the Removal in
such amounts as have been historically maintained by Sublessor.
7. Attorneys' Fees. If either party brings an action to enforce the
terms hereof, or to declare rights hereunder, the prevailing party in any such
action, on trial and appeal, shall be entitled to reasonable attorneys' fees to
be paid by the losing party as fixed by the court.
Executed at San Diego, California on _______________, 1997.
CMC Ice, Inc. Southwestern Ice, Inc. a Texas corporation
By: By:
--------------------------------- ---------------------------------
Sublessor Sublessee
EXHIBIT F-1
Page 2 of 2
<PAGE> 1
EXHIBIT 10.44
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of September 4, 1997 ("Effective Date"), by and between Southwestern Ice,
Inc., a Texas corporation (the "Buyer"), a wholly-owned subsidiary of Packaged
Ice, Inc., a Texas corporation, or Buyer's nominee, and CJC, Inc., a Nevada
corporation (the "Seller"), with respect to the following facts:
RECITALS
A. Seller owns written data and information concerning businesses
and persons located in San Diego County, California which purchase commercial
quantities of ice, including customer identification requirements and credit
histories (the "Customer List").
B. Seller desires to sell the Customer List to Buyer upon the
conditions set forth in this Agreement.
C. Buyer desires to purchase the Customer List from Seller, upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter contained, the parties hereto hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Purchase and Sell Customer List. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
will sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
will purchase or acquire from the Seller, all right, title and interest of the
Seller in and to the Customer List in every form in which such information is
recorded including physical documents and in machine readable form.
1.2 Excluded Assets. Customer List is the only asset of Seller being
purchased by Buyer.
1.3 Liabilities. Buyer shall not assume (and shall not be deemed to
assume) and shall not be responsible for, any liabilities, debts or obligations
of Seller, of any kind or nature whatsoever. Seller shall be responsible for
and shall pay, discharge and satisfy all of the liabilities, debts and
obligations of Seller. Seller shall indemnify, defend and hold Buyer
completely free and harmless from the same including but not limited to
attorneys' fees and litigation costs incurred in resisting and defending
against the assertion of any of the same against Buyer.
1.4 Purchase Price and Method of Payment. The total purchase price
to be paid by Buyer for the Customer List (the "Purchase Price") shall consist
of a cash payment at the Closing to Seller of One Million Thirty Thousand
Dollars ($1,030,000). The cash payment to Seller at the Closing shall be paid
by wire transfer or cashier's check.
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1.5 Covenant Not to Compete. At the Closing, the Seller shall enter
into a Covenant Not to Compete with Buyer (the "Non-Compete Agreement") in
substantially the form set forth in Exhibit A.
1.6 Escrow Deposit. At the Closing, (i) the Seller shall enter into
a pledge and escrow agreement substantially in the form attached as Exhibit B
(the "Escrow Agreement") with Buyer, as escrow agent (the "Escrow Agent"); (ii)
Seller shall deposit with Buyer $260,000; and (iii) Buyer, as Escrow Agent
shall hold said $260,000 pursuant to the terms of the Escrow Agreement (the
"Escrow Fund").
1.7 Closing. The date of Closing (herein referred to as the "Closing
Date") shall be on or before September 3, 1997 with the actual day of Closing
on or before such date as mutually agreed to by the parties in writing;
provided, Buyer may elect to postpone the Closing to not later than September
15, 1997. Unless otherwise agreed, the Closing shall take place at the offices
of Luce, Forward, Hamilton & Scripps LLP, 600 West Broadway, Suite 2600, San
Diego, California, at the hour of 4:00 p.m.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically disclosed by Seller to Buyer in this Agreement or
in Seller's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Seller),
Seller represents and warrants to Buyer as follows:
2.1 Corporate Status. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. Seller only conducts its business in San Diego County and is not
required to be qualified to do business in any other jurisdiction. Seller has
all necessary corporate powers to carry on the Business as it is now being
conducted. Seller has full right, power and authority to execute and deliver
this Agreement and consummate the transactions contemplated hereby.
2.2 Corporate Actions. All actions and proceedings necessary to be
taken by or on the part of the Seller in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement, including, to the extent required by its
Articles of Incorporation, Bylaws and by law, the obtaining of votes, and
consents and approvals by the shareholders and board of directors of Seller,
have been duly and validly taken and obtained, and this Agreement has been duly
and validly authorized, executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with and subject to its terms.
2.3 Capitalization; No Subsidiaries. The authorized number of shares
of Seller is 85,000, all of one class, of which 1000 are issued and
outstanding, of which 480 shares are owned by Carlos Shannon and 420 shares are
owned by Mark Ehmke. Seller has no subsidiaries.
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2.4 No Defaults. Neither the execution, delivery or performance by
Seller of this Agreement nor the consummation by Seller of the transactions
contemplated hereby, itself or with the giving of notice or the passage of time
or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or the Bylaws of Seller;
(b) Violate or conflict with or result in any breach or in any
default under, result in any termination or modification of, or cause any
acceleration of any obligation of its business under any contract, mortgage,
indenture, agreement, lease or other instrument to which Seller is a party or
by which it, its business or any of its assets is bound, or result in the
creation of any encumbrance upon any of its assets such as would have a
material adverse effect on its business or is assets taken as a whole; or
(c) Violate any judgment, decree, order, statute, law, rule or
regulation applicable to Seller.
2.5 Breach. Seller is not in violation or breach of any of the
terms, conditions or provisions of its Articles of Incorporation, as amended,
or Bylaws, or any indenture, mortgage or deed of trust or other contracts,
lease, instrument, court order, judgment, arbitration award, or decree
affecting its business or its assets, to which Seller is a party or by which it
is bound, and has received no notices of same, where the effect thereof would
have a material adverse effect on its business or its assets, taken as a whole.
2.6 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Seller in connection with the consummation of the transactions
contemplated by this Agreement. No permit, license, consent, approval or
authorization of, or filing with, any governmental regulatory authority or
agency is required in connection with the execution, delivery and performance
of this Agreement, or the consummation of the transactions contemplated hereby.
2.7 Title to and Condition of Assets; Leases.
(a) Seller has good, valid and marketable title to all the
Customer List, free and clear of all liens, encumbrances and security interests
of every kind or character.
(b) Seller has the full right, power and authority to transfer
to Buyer the Customer List. Such transfer to Buyer shall not violate or
conflict with the right of any other person.
2.8 Liabilities. Except for those liabilities disclosed in this
Agreement or Seller's Disclosure Memorandum, there are no liabilities or
obligations of Seller relating to its business, known or unknown, due or not
yet due, liquidated or unliquidated, fixed, contingent or otherwise.
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2.9 Taxes. Seller has filed all applicable federal, state, local and
foreign tax returns required to be filed to date, in accordance with provisions
of law pertaining thereto, and has paid all taxes, interest, penalties and
assessments lawfully due (including without limitation income, withholding,
excise, unemployment, social security, occupation, transfer, franchise,
property, sales and use taxes, import, duties or charges, and all penalties and
interest in respect thereof) except where the failure to file such returns or
pay such taxes has no material adverse effect on the Business and the Assets
taken as a whole.
2.10 Compliance With Law and Regulations. Seller is in compliance
with all requirements of law, federal, state and local, and all requirements of
all governmental bodies or agencies having jurisdiction over it, the operation
of its business and the use of its assets, except where the failure to be in
such compliance would not have a material adverse effect on its business or its
assets taken as a whole. Seller is in full compliance with applicable
environmental laws. Seller has properly filed all reports and other documents
required to be filed with federal, state, local, or foreign governments or
subdivisions or agencies thereof. Seller has not received any notice, not
heretofore complied with, from any federal, state or municipal authority or any
insurance or inspection body that any of its properties, facilities, equipment
or business procedures or practices fails to comply with any applicable law,
ordinance, regulation, or requirement of any public authority or body.
2.11 Litigation. There are no lawsuits, legal proceedings or
investigations of any nature pending or, to Seller's knowledge, threatened
against or affecting it which would materially impair Seller's ability to carry
out the transactions contemplated by this Agreement or which asserts a claim
adverse to Seller with respect to the ownership of the Customer List.
2.12 No Broker or Finder. Seller has not employed or used the
services of any broker or finder in connection with this transaction and shall
hold Buyer completely free and harmless from the claims of any person claiming
to have so acted on behalf of Seller.
2.13 Operation in Ordinary Course.
(a) Seller has operated its business in the ordinary course of
business, consistent with past practice, except as related to the transactions
contemplated hereby; and
(b) Seller has maintained its books, accounts and records in
the usual, customary and ordinary manner.
2.14 Disclosure. Neither this Agreement nor Seller's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as specifically disclosed by Buyer to Seller in this Agreement or
in Buyer's Disclosure Memorandum (which disclosures shall be deemed to modify
and qualify each of the following representations and warranties of Buyer),
Buyer represents and warrants to Seller as follows:
3.1 Corporate Status. Buyer is a corporation which is duly
organized, validly existing, and in good standing under the laws of the State
of Texas. Buyer is duly qualified to do business in each jurisdiction in which
the character of and location of its assets or operations makes qualification
to do business as a foreign corporation necessary. Buyer has full corporate
power to carry on its business as it is now being conducted and as proposed to
be conducted and to own and operate its assets. Buyer has full corporate power
and authority to execute and deliver this Agreement and perform the
transactions contemplated hereby.
3.2 Corporate Actions. All corporate or other actions and
proceedings necessary to be taken by or on the part of Buyer in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly and validly taken,
and this Agreement has been duly and validly authorized, executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with and subject to its terms.
3.3 No Defaults. Neither the execution, delivery or performance by
Buyer of this Agreement nor the consummation by Buyer of the transactions
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will:
(a) Violate or conflict with the provisions of the Articles of
Incorporation or Bylaws of Buyer;
(b) Violate or conflict with or result in any breach of or any
default under, result in any termination or modification of, or cause any
acceleration of any obligation under, any contract, mortgage, indenture,
agreement, lease or other instrument to which Buyer is a party or by which it
is bound, or by which it may be affected, or result in the creation of any lien
or encumbrance upon any of Buyer's assets, except for agreements, indentures
and instruments related to the financing of the transactions contemplated by
this Agreement; or
(c) Violate any judgment, decree, order, statute, rule or
regulation applicable to Buyer.
3.4 Breach. Buyer is not in violation or breach of any of the terms,
conditions or provisions of its Articles of Incorporation, as amended, its
Bylaws, or any indenture, mortgage or deed of trust or other contracts, lease,
instrument, court order, judgment, arbitration award, or decree materially
affecting the business of the Buyer, to which Buyer is a party or by which it
is otherwise bound, where the effect thereof would have a material adverse
effect on the Buyer.
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3.5 Approvals and Consents. No approvals or consents of persons or
entities not a party to this Agreement are legally or contractually required to
be obtained by Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
3.6 Litigation. There are no lawsuits, judgments, arbitrations,
administrative charges or other legal proceedings, claims or governmental
investigations pending against, or to Buyer's knowledge, threatened against the
Buyer relating to or affecting the execution, delivery or performance of this
Agreement or the ability of Buyer to perform its obligations under this
Agreement.
3.7 No Broker or Finder. There is no broker or finder or other
person who would have any valid claim against any of the parties for a
commission or brokerage fee or payment in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement of or action
taken by Buyer. Buyer shall hold Seller completely free and harmless from the
claims of any person claiming to have so acted on behalf of Buyer.
3.8 Disclosure. Neither this Agreement nor Buyer's Disclosure
Memorandum contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE IV
DISCLOSURE MEMORANDUM
Seller's Disclosure Memorandum (the "Seller's Disclosure Memorandum"),
is attached to this Agreement as Attachment I, shall be executed on behalf of
Seller, and shall contain accurate, true and correct information and data and,
to the extent expressly set forth herein, shall be accompanied by a copy of
each document referred to therein or otherwise identified as to its location to
the reasonable satisfaction of Buyer. Buyer's Disclosure Memorandum (the
"Buyer's Disclosure Memorandum") shall be executed on behalf of Buyer, and
shall contain accurate, true and correct information and data in all material
respects. Terms used and defined in this Agreement shall have the same
definition when used in the Seller's Disclosure Memorandum or Buyer's
Disclosure Memorandum, as the case may be, and any schedules or exhibits
attached thereto.
ARTICLE V
COVENANTS OF SELLER
5.1 Representations and Warranties. Seller shall give detailed
written notice to Buyer promptly upon learning of any fact which (i) would
render untrue in any material respect any of Seller's or Buyer's
representations or warranties contained in this Agreement or the information
contained in Seller's Disclosure Memorandum or Buyer's Disclosure Memorandum,
or (ii) would cause Seller or Buyer to fail to comply with its obligations
hereunder in any material respect between the Effective Date and the Closing
Date.
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5.2 Notice of Proceeding. Seller will promptly notify Buyer in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereby; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
5.3 Consummation of Agreement. Seller shall use its best efforts to
fulfill and perform all conditions and obligations on its part to be fulfilled
and performed under this Agreement, and cause the transactions contemplated by
this Agreement to be fully consummated.
5.4 Confidentiality. Seller agrees to keep confidential any
information obtained from Buyer concerning Buyer or the business of Buyer,
unless readily ascertainable from public or published information, or trade
sources.
5.5 Operations. Seller agrees, through the Closing Date, at Seller's
sole cost and expense to (i) keep all existing insurance policies affecting the
Assets in full force and effect; (ii) continue to provide all services and
maintain all of the fixed Assets in good working order in a responsible manner
consistent with past practice; and (iii) upon Closing, terminate all employees
and settle all employment contracts.
5.6 Operations Pending Closing. Subsequent to the date of this
Agreement and prior to the Closing Date, Seller shall cause its business to be
operated in the ordinary course, consistent with past practice. Until and
including the Closing Date, Seller shall use its best efforts to cause its
business to maintain its insurance coverage and its books, accounts and records
in the usual manner in a basis consistent with current practice and to comply
in all material respects with all laws, ordinances and regulations of
governmental authorities applicable to its business.
5.7 Restrictions. Except as disclosed in this Agreement or in
Seller's Disclosure Memorandum, prior to the Closing Date, and without the
prior written consent of Buyer, Seller shall not:
(a) Encumber or grant any security interest in any asset or
its business; or
(b) In the ordinary course of business, enter into any
contract which obligates the Seller of its business to expend more than Ten
Thousand Dollars ($10,000.00) following the Closing Date.
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5.8 Access to Properties and Information. Following the Effective
Date, Buyer and its representatives shall be afforded full access to all of the
assets, properties, books, records, agreements, other documents and employees
of Seller relating to its business, in all cases during normal business hours
and upon reasonable prior notice. Buyer and its representatives shall have the
right to make abstracts from or copies of any such books, records, agreements,
and commitments, and Seller shall furnish Buyer's representatives with such
information concerning such affairs and copies of such documents, contacts,
agreements and records as Buyer may reasonably request. All such information
provided to Buyer in written form by Seller to the knowledge of Seller shall be
true, complete and correct and shall be deemed represented as such by Seller to
Buyer. Any such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operation of the business of Seller. Buyer
shall not contact any of Seller's employees or visit any portion of Seller's
properties without Seller's prior knowledge. Buyer shall be responsible for
ensuring that its employees or representatives maintain the confidentiality of
any information learned during the investigation subject to the terms of
Section 6.4 hereto.
5.9 Employees. Buyer will not employee any employees (the
"Employees") of Seller. If Seller elects to terminate any Employees, the
Seller shall be solely responsible for and shall pay any severance, termination
payments, COBRA benefit, accrued vacation pay and similar accrued benefit, or
liabilities relating to any of the employees or to which any employee is
entitled, including claims related in any way to the employment of an Employee
by Seller based upon events occurring prior to the Closing Date, regardless of
when any such claim or demand therefor may be made.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees that from the date hereof until the
completion of the Closing:
6.1 Representations and Warranties. Buyer shall give detailed
written notice to Seller promptly upon learning of any fact which (i) would
render untrue in any material respect any of Buyer's or Seller's
representations or warranties contained in this Agreement or the information
contained in Buyer's Disclosure Memorandum or Seller's Disclosure Memorandum or
(ii) would cause Buyer or Seller to fail to comply with its obligations
hereunder in any material respect between the Effective Date and the Closing
Date.
6.2 Notice of Proceeding. Buyer will promptly notify Seller in
writing upon:
(a) Becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereunder; or
(b) Receiving any notice from any governmental department,
court, agency or commission of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin, the consummation
of this Agreement or such transactions, or (ii) to nullify or render
ineffective this Agreement or such transactions if consummated.
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6.3 Consummation of Agreement. Buyer shall fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement, and cause the transactions contemplated by this Agreement to be
fully carried out.
6.4 Confidentiality. Upon the termination of this Agreement prior to
Closing, Buyer shall keep confidential and shall not use in any manner any
information obtained from Seller concerning Seller or the Business.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
7.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Buyer
contained in this Agreement shall have been true and correct as of the
Effective Date and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except to the extent changes are permitted or contemplated pursuant to this
Agreement; and
(b) Buyer shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
7.2 Officer's Certificate. Buyer shall have furnished Seller with a
certificate, dated the Closing Date and duly executed by a duly authorized
manager of Buyer, in form and substance satisfactory to the Seller, certifying
that the conditions set forth in Sections 7.1(a) and (b) have been satisfied.
7.3 Deliveries. Buyer shall have complied with each and every one of
its obligations set forth in Section 9.2.
7.4 Consents. All of the consents required to be obtained pursuant
to Section 5.8 shall have been obtained.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are, at its option,
subject to the fulfillment of the following conditions prior to or on the
Closing Date:
8.1 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of Seller
contained in this Agreement shall have been true and correct as of the
Effective Date and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except to the extent changes are permitted or contemplated pursuant to this
Agreement;
(b) Seller shall have performed and complied with each and
every covenant and agreement required by this Agreement to be performed or
complied with by it prior to or on the Closing Date; and
8.2 Officer's Certificate. Seller shall have furnished Buyer with a
certificate, dated the Closing Date and duly executed by a duly authorized
executive officer of Seller, to the effect that the conditions set forth in
Sections 8.1 (a) and (b) have been satisfied.
8.3 Deliveries. Seller shall have complied with each and every one
of its obligations set forth in Section 9.1.
8.4 Legal Requirements. Buyer and its counsel shall be satisfied (i)
that the consummation of the transactions contemplated herein comply with
applicable state and federal legal requirements, laws, and procedures
applicable to Buyer and Seller or the shareholders pursuant to which any of
them may be subject or bound and (ii) that by following the procedures and
making the Authorized Third Party Payments, Buyer will not succeed to any
liability of Seller.
ARTICLE IX
ITEMS TO BE DELIVERED AT THE CLOSING
9.1 Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer duly executed by Seller or such other signatory as may be required by the
nature of the document:
(a) Such bill of sale, assignment and other good and
sufficient instruments of sale, conveyance and transfer and assignment in form
and substance reasonably satisfactory to Buyer sufficient to sell, convey,
transfer and assign to Buyer all right, title and interest of Seller in and to
the Customer List;
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(b) Certified copies of resolutions, duly adopted by the
shareholders and board of directors of Seller which shall be in full force and
effect at the time of the Closing, authorizing the execution, delivery and
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby;
(c) The Customer List in every embodiment of same together
with written certification confirmation by Seller that is retains no copy,
embodiment or other record of the date and information comprising the Customer
List in any form;
(d) The certificate referred to in Section 8.2;
(e) The Non-Compete Agreement executed by Seller; and
(f) The Escrow Agreement.
9.2 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller, duly executed by Buyer or other signatory as required by the nature of
the document:
(a) The Purchase Price;
(b) Certified copies of resolutions, duly adopted by the
directors of Buyer, which shall be in full force and effect at the time of the
Closing, authorizing the execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated hereby; and
(c) The certificate referred to in Section 7.2.
9.3 Transfer Sales Tax. The Seller shall pay all the sales, use
transfer, recording or similar taxes (other than income taxes), if any, arising
out of the sale and transfer of the Customer List.
ARTICLE X
[RESERVED]
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by Seller. Seller shall indemnify, defend and
hold harmless Buyer from and against any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including reasonable attorney's fees and costs (the "Losses")
that Buyer may incur or suffer, which arise, result from, or relate to: (i) any
inaccuracy of Seller's representations and warranties contained in this
Agreement or in any agreement, instrument or document entered into pursuant
hereto or in connection with the Closing, (ii) any breach of or failure by
Seller to perform any of its covenants or agreements contained in this
Agreement or in any
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agreement, instrument or document pursuant hereto or in connection with the
Closing, (iii) any violation of environmental or health and safety or other
laws (as in effect at the Closing) arising out of the ownership or operation of
Seller's business, including the real estate upon the business is located,
based on conditions existing prior to the Closing, regardless of when such
claim, liability or loss is asserted, claimed or sustained, or (iv) any other
liability or obligation of Seller presently existing or determined to be due
after the Closing Date regardless of when such liability actually arose or was
accrued. Seller shall not have any liability under this Section 11.1(a) unless
Buyer gives written notice to Seller asserting a claim for such Losses,
including reasonably detailed facts and circumstances pertaining thereto,
before the expiration of two (2) years from the Closing Date, except for claims
arising from breach of: (i) representations and warranties as to taxes and
environmental matters, which shall survive until the expiration of the
applicable statute of limitations.
11.2 Defense of Third Party Actions.
(a) Promptly after receipt of notice of any written assertion
of a claim, or the commencement of any action, suit, or proceeding, by a third
party against a party to this Agreement ("Third Party Action"), the party in
receipt of such notice who believes that it is entitled to indemnification
under this Article XI (the "Indemnified Party") shall give notice to the other
party hereto (the "Indemnifying Party") of such action. The failure of the
Indemnified Party to give such notice to the Indemnifying Party will not
relieve the Indemnifying Party of any liability hereunder unless it was
prejudiced thereby, nor will it relieve it of any Liability which it may have
other than under this Article XI.
(b) Upon receipt of a notice of a Third Party Action, the
Indemnifying Party shall have the right, at its option and at its own expense,
to participate in and be present at the defense of such Third Party Action, but
not to control the defense, negotiation or settlement thereof, which control
shall remain with the Indemnified Party, unless the Indemnifying Party makes
the election provided in paragraph (c) below.
(c) By written notice within 20 days after receipt of a notice
of a Third Party Action, an Indemnifying Party may elect to assume control of
the defense, negotiation and settlement thereof, with counsel reasonably
satisfactory to the Indemnified Party; provided, however, that the Indemnifying
Party agrees (a) to promptly indemnify the Indemnified Party for its expenses
to date, and (b) to hold the Indemnified Party harmless from and against any
and all Losses caused by or arising out of any settlement of the Third Party
Action approved by the Indemnifying Party or any judgment in connection with
that Third Party Action. The Indemnifying Party shall not in the defense of
the Third Party Action enter into any settlement which does not include as a
term thereof the giving by the third party claimant of an unconditional release
of the Indemnified Party, or consent to entry of any judgment except with the
consent of the Indemnified Party.
(d) Upon assumption of control of the defense of a Third Party
Action under paragraph (iii) above, the Indemnifying Party will not be liable
to the Indemnified Party hereunder for any legal or other expenses subsequently
incurred in connection with the defense of the Third Party Action, other than
reasonable expenses of investigation.
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(e) If the Indemnifying Party does not elect to control the
defense of a Third Party Action under paragraph (c), the Indemnifying Party
shall promptly reimburse the Indemnified Party for expenses incurred by the
Indemnified Party in connection with defense of such Third Party Action, as and
when the same shall be incurred by the Indemnified Party.
(f) Any party who has not assumed control of the defense of
any Third Party Action shall have the duty to cooperate with the party which
assumed such defense.
11.3 Miscellaneous.
(a) Buyer shall be entitled to indemnification hereunder
whether or not the matter giving rise to the applicable liability, payment,
obligation or expense was previously disclosed in writing to the Buyer prior to
the Closing Date.
(b) If any Loss is recoverable under more than one provision
hereof, the Indemnified Party shall be entitled to assert a claim for such Loss
until the expiration of the longest period of time within which to assert a
claim for Loss under any of the provisions which are applicable.
ARTICLE XII
MISCELLANEOUS
12.1 Termination of Agreement. This Agreement may be terminated at
any time on or prior to the Closing Date: (a) by the mutual consent of Seller
and Buyer; (b) by either Buyer or Seller if the Closing has not occurred on or
before September 3, 1997 unless such date is extended by Buyer, in which case,
the Closing shall not have occurred on or before September 15, 1997; or (c) by
Buyer at any time prior to five (5) days after Seller has supplied all of the
requested due diligence materials to Buyer if Buyer, prior to such date,
determines in its sole discretion that the results of its due diligence
investigation of Seller is in any way unsatisfactory. A termination pursuant
to this Section 12.1 shall not relieve any Party of any liability it otherwise
has for a breach of this Agreement. As a condition to any termination by Buyer
hereunder, all information and materials relating to the Business and to which
Buyer obtained access during the negotiations leading to, or following,
execution of this Agreement, and any other writings containing excerpts of such
materials or information, and any or all copies thereof, shall be delivered to
Seller.
12.2 Expenses. Each party hereto shall bear all of its expenses
incurred in connection with the transactions contemplated by this Agreement,
including without limitation, accounting and legal fees incurred in connection
herewith.
12.3 Further Assurances. From time to time prior to, on and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request, without payment of further consideration, in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including without limitation the
execution and delivery of any and
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all confirmatory and other instruments in addition to those to be delivered on
the Closing Date, and any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby. The parties shall
cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as part of their
respective obligations under this Agreement.
12.4 Survival of Representations and Warranties and Indemnities. All
covenants, agreements, representations and warranties of the parties under this
Agreement, in any Disclosure Memorandum, and any schedule or certificate or
other document delivered pursuant hereto shall survive the Closing.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 Direct Discussion. In the event of any dispute, claim, question,
or disagreement arising out of or relating to this Agreement (a "Dispute"), the
parties involved in such Dispute shall use their best efforts to settle such
Dispute. To this effect, senior management of the parties involved shall
consult and negotiate with each other in good faith to attempt to reach a just
and equitable solution satisfactory to both parties.
13.2 Arbitration. In the event that the Dispute cannot be settled
under Section 13.1 above, the Dispute shall be submitted to binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and the procedures set forth below. In the event of any
inconsistency between the Rules of the American Arbitration Association and the
procedures set forth below, the procedures set forth below shall control.
Judgment upon the award rendered by the arbitrators may be enforced in any
court having jurisdiction thereof.
(a) Location. The location of the arbitration shall be in San
Diego County, California.
(b) Selection of Arbitrators. The arbitration shall be
conducted by a panel of three neutral arbitrators who are independent and
disinterested with respect to the parties, this Agreement, and the outcome of
the arbitration. Each party shall appoint one neutral arbitrator, and these
two arbitrators so selected by the parties shall then select the third
arbitrator. If one party has given written notice to the other party as to the
identity of the arbitrator appointed by the party, and the party thereafter
makes a written demand on the other party to appoint its designated arbitrator
within the next thirty days, and the other party fails to appoint its
designated arbitrator within thirty-one days after receiving said written
demand, then the arbitrator who has already been designated shall appoint the
other two arbitrators.
(c) Discovery. Unless the parties mutually agree in writing
to some additional and specific pre-hearing discovery, the only pre-hearing
discovery shall be (a) reasonably limited production of relevant and non-
privileged documents, and (b) the identification of witnesses to be called at
the hearing, which identification shall give the witness's name, general
qualifications and position, and a brief statement as to the general scope of
the testimony to be given by the witness.
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The arbitrators shall decide any disputes and shall control the process
concerning these pre-hearing discovery matters. Pursuant to the Rules of the
American Arbitration Association, the parties may request the arbitrator or
other person authorized by law to subpoena witnesses and documents for
presentation at the hearing.
(d) Case Management. Prompt resolution of any dispute is
important to the parties; and the parties hereto agree that the arbitration of
any dispute shall be conducted expeditiously. The arbitrators are instructed
and directed to assume case management initiative and control over the
arbitration process (including scheduling of events, pre-hearing discovery and
activities, and the conduct of the hearing), in order to complete the
arbitration as expeditiously as is reasonably practical for obtaining a just
resolution of the Dispute.
(e) Legal Representation. Counsel to the parties in
connection with the negotiation of and consummation of the transactions under
this Agreement shall be entitled to represent their respective party in any and
all proceedings under this Section 13.2 or in any other proceeding. Seller and
Buyer, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such proceeding for any reason, including
but not limited to the fact such counsel or any member thereof may be a witness
in any such proceeding or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to
the party represented by such counsel in any such proceeding.
(f) Remedies. The arbitrators may grant any legal or
equitable remedy or relief that the arbitrators deem just and equitable, to the
same extent that remedies or relief could be granted by a state or federal
court, provided however, that no punitive damages may be awarded. The decision
of any two of the three arbitrators appointed shall be binding upon the
parties.
(g) Expenses. The expenses of the arbitration, including the
arbitrators' fees, expert witness fees, and attorney's fees, may be awarded to
the prevailing party, in the discretion of the arbitrators, or may be
apportioned between the parties in any manner deemed appropriate by the
arbitrators. Unless and until the arbitrators decide that one party is to pay
for all (or a share) of such expenses, both parties shall share equally in the
payment of the arbitrators' fees as and when billed by the arbitrators.
(h) Confidentiality. Except as set forth below, the parties
shall keep confidential the fact of the arbitration, the dispute being
arbitrated, the decision of the arbitrators, and any documents produced by the
parties in the course of the arbitration. Notwithstanding the foregoing, the
parties may disclose information about the arbitration to persons who have a
need to know, such as directors, trustees, management employees, witnesses,
experts, investors, attorneys, lenders, insurers, and others who may be
directly affected. Once the arbitration award has become final, if the
arbitration award is not promptly satisfied, then the prevailing party may,
notwithstanding the foregoing, disclose information about the arbitration only
to the extent necessary to obtain judicial enforcement of the award.
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<PAGE> 16
ARTICLE XIV
GENERAL PROVISIONS
14.1 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective representative, successors and assigns.
No party hereto may assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the other party, and any such
attempted assignment or delegation without such consent shall be void. Seller
agrees not to unreasonably withhold its consent to any assignment by Buyer of
its rights hereunder prior to Closing to a corporation or other entity
controlled by Buyer, provided that (a) such assignee will assume all
obligations of Buyer hereunder, without Buyer being released, and (b) such
assignment will not, in Seller's reasonable judgment, delay in any material way
or make more doubtful the Closing.
14.2 Amendments; Waivers. The terms, covenants, representations,
warranties and conditions of this Agreement may be changed, amended, modified,
waived, discharged or terminated only by a written instrument executed by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right of such party at a later date to enforce the same. No waiver
by any party of any condition or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
14.3 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing (which shall
include notice by telex or facsimile transmission) and shall be deemed to have
been duly made and received when personally served, or when delivered by
Federal Express or a similar overnight courier service, expenses prepaid, or,
if sent by telex, graphic scanning or other facsimile communications equipment,
delivered by such equipment, addressed as set forth below:
(a) If to Buyer, then to:
Southwestern Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A. J. Lewis, III, President
Fax: (713) 464-4681
With a copy to:
Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, California 92101
Fax: (619) 645-5332
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<PAGE> 17
and to:
Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Fax: (210) 224-2035
(b) If to Seller, then to:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
Fax: (___) _____________
(c) With a copy to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
Fax: (619) 238-0257
(d) With a copy to:
Victor Mosso
10439 Don Pico Road
Spring Valley, CA 91978
Any party may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 14.3 providing for the giving of notice.
14.4 Announcements. Neither party shall make any written or other
announcement regarding this Agreement or any of its terms without the prior
written consent of the other party.
14.5 Non-Disclosure of Purchase Price. Seller and Buyer shall keep
confidential the amount of and payment terms of the Purchase Price.
Notwithstanding the foregoing, either party may disclose the terms of the
Purchase Price to persons who have a need to know, such as directors, trustees,
management, investors, attorneys, lenders, accountants or insurers.
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<PAGE> 18
14.6 Captions. The captions of Articles and Sections of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
14.7 Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of California.
14.8 Entire Agreement. This Agreement and the other documents
delivered hereunder constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof, and supersedes
all prior agreements, understandings, inducements or conditions, express or
implied, oral or written, relating to the subject matter hereof, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of trade inconsistent with any of the terms hereof.
14.9 Execution; Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized signatories, all as of the day and year first
above written.
SOUTHWESTERN ICE, INC., a Texas corporation
By: /s/ A. J. Lewis, III
-----------------------------------------
A. J. Lewis, III, President
CJC, INC., a California corporation
By: /s/ Victor J. Mosso
-----------------------------------------
Victor J. Mosso, President
<PAGE> 19
EXHIBIT A
COVENANT NOT TO COMPETE
This COVENANT NOT TO COMPETE ("Covenant") is made and effective on
______________, 1997, by and between Southwestern Ice, Inc., a Texas
corporation ("Company"), and CJC, Inc., a California corporation ("CJC") and is
made with reference to the following facts:
A. The Company and CJC have entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement"), providing for the Company to purchase certain
assets of CJC.
B. The Company is unwilling to enter into the Asset Purchase
Agreement unless CJC agrees to enter this Covenant.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
representations and warranties contained herein and in the Asset Purchase
Agreement, the parties agree as follows:
1. NON-COMPETITION.
(a) Covenant Not To Compete.
(i) CJC shall not at any time within the five (5) year
period immediately following the date of this Covenant ("Restricted Period),
directly or indirectly, in any territory in the United States or any foreign
country in which the Company, any subsidiary of the Company, Packaged Ice,
Inc., a Texas corporation, or any subsidiary of Packaged Ice, Inc.
(collectively, the "Company Entities") are doing business or have actually
investigated doing business or where their products are sold as of the date
hereof:
(a) engage in, or have any interest in any person,
firm, corporation, or business (whether as a shareholder, creditor, partner,
consultant, holder of any beneficial interest or otherwise other than as a
beneficial holder of not more than 5 percent of the outstanding voting stock of
a company having at least 500 holders of voting stock) that engages in the
business of producing, selling or distributing ice, which on the date hereof is
conducted by the Company Entities (the "Business"), as long as the Company
Entities, or any transferee of all or substantially all of the assets or stock
of any of the Company Entities ("Transferee"), shall engage in the Business or
similar activity during such Restricted Period;
(b) attempt to hire any person who is employed
by the Company Entities, assist in the hiring by any other entity or person of
any person who is at the time employed by the Company Entities or encourage any
such employee to terminate his or her relationship with the Company Entities;
or
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<PAGE> 20
(c) solicit or encourage any customer of the
Company Entities to terminate its relationship with the Company Entities or to
conduct with any other person any business that such customer conducts with the
Company Entities.
(b) Rights and Remedies Upon Breach. If CJC commits a breach
of, or threatens to commit a breach of, Section 1(a) the Company shall have the
following rights and remedies, each of which shall be independent of the other
and severally enforceable, and all of which shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law or in
equity:
(c) Specific Performance. CJC recognizes and agrees that any
violation of Section 1(a) may not be reasonably or adequately compensated in
damages and that, in addition to any other relief to which the Company may be
entitled by reason of such violation, the Company shall also be entitled to
permanent and temporary injunctive and equitable relief and, pending
determination of any dispute with respect to such violation, no bond or
security shall be required in connection therewith. Without limiting the
generality of the foregoing, CJC specifically acknowledges that a showing by
the Company of any breach of any provision of Section 1(a) shall constitute,
for the purposes of all judicial determinations of the issue of injunctive
relief, conclusive proof of all of the elements necessary to entitle the
Company to interim and permanent injunctive relief against CJC with respect to
such breach. If any dispute arises with respect to Section 1(a) without
limiting in any way any other rights or remedies to which the Company may be
entitled, CJC agrees that Section 1(a) shall be enforceable by a decree of
specific performance.
(d) Severability of Covenants. If any part of this Section 1 is
held by a court of competent jurisdiction or any other governmental authority
to be invalid, void, unenforceable or against public policy for any reason, the
remainder of such provision shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and such court or authority shall
be empowered to substitute, to the extent enforceable, provisions similar
thereto or other provisions so as to provide to the Company the benefits
intended by such provisions, to the fullest extent permitted by applicable law.
2. PERMITTED ACTIVITIES. Provided one hundred percent (100%) of
its requirements for block ice are purchased from Company Entities at their
standard prices for block ice, CJC may engage in the following activities only
within the territories in which such activities are otherwise forbidden to CJC
under the introductory clause to Section 1(a) above:
(a) The fulfillment of supply contracts for block ice related
to pier construction at U.S. government facilities; and
(b) The manufacture of artificial snow utilizing block ice for
snowboarding ramps.
3. TERM. The term of this Covenant is to be five (5) years from the
date of this Covenant.
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<PAGE> 21
4. ASSIGNMENT. No rights under this Covenant shall be assignable
nor duties delegable by either party, except that the Company may assign and
delegate any of its rights and duties hereunder to a Transferee. Nothing
contained in this Covenant is intended to confer upon any person or entity,
other than the parties hereto, their successors in interest and Transferees,
any rights or remedies under or by reason of this Covenant unless expressly so
stated to the contrary.
5. CONSTRUCTION. This Covenant shall be construed and enforced in
accordance with the laws of the State of California.
6. SUCCESSORS AND ASSIGNEES. All covenants, representations,
warranties and agreements of the parties contained herein shall be binding upon
and inure to the benefit of their respective heirs, executors, administrators,
personal representatives, successors, and Transferees.
7. UNENFORCEABILITY. It is the intention of the parties hereto that
the provisions of this Covenant shall be enforced to the fullest extent
permissible under all applicable laws and public policies, but that the
unenforceability or the modification to conform with such laws or public
policies of any provision hereof shall not render unenforceable or impair the
remainder of the Covenant. Accordingly, if any provision shall be determined
to be invalid or unenforceable either in whole or in part, this Covenant shall
be deemed amended to delete or modify, as necessary, the invalid or
unenforceable provisions to alter the balance of this Covenant in order to
render the same valid and enforceable.
8. COUNTERPARTS. This Covenant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
9. ATTORNEYS' FEES. If an action is instituted to enforce any of
the provisions of this Covenant, the prevailing party in such action shall be
entitled to recover from the losing party its or his reasonable attorneys' fees
and costs as set by the court.
10. NOTICES. Any notice required or permitted to be given under this
Covenant shall be sufficient if such notice is in writing, delivered personally
or sent by registered or certified mail, return receipt requested, addressed as
follows:
To CJC : CJC, Inc.
Carlos Shannon
921 Windflower Way
San Diego, California 92108
With a copy to: Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
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<PAGE> 22
To the Company: Southwestern Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A. J. Lewis, III, President
With a copy to: Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
and to: Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Notice shall be deemed given on the date of personal delivery or the date it is
placed, postage prepaid, in a depository for United States Mail located within
the State of California.
11. ENTIRE AGREEMENT. This Covenant contains the entire agreement of
the parties with respect to CJC's non-competition. This Covenant supersedes
all other agreements whether oral or in writing, hereto before made or existing
between the Company and CJC relating to CJC's non-competition. This Covenant
may not be changed orally, but may be changed only by an agreement in writing
signed by the party against whom enforcement of any change, modification,
extension, waiver or discharge is sought.
12. WAIVER. The waiver by either party of a breach of any provision
of this Covenant shall not operate or be construed as a waiver of any
subsequent breach.
CJC: COMPANY:
CJC, INC., a California corporation SOUTHWESTERN ICE, INC., a Texas
corporation
By:
--------------------------------
Victor J. Mosso, President By:
--------------------------------
A. J. Lewis, III, President
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<PAGE> 23
EXHIBIT B
PLEDGE AND ESCROW AGREEMENT
This Pledge and Escrow Agreement (this "Escrow Agreement"), dated as of
_____________, 1997, is entered into by and among Packaged Ice, Inc., a Texas
corporation ("PI") and Southwestern Ice, Inc., a Texas corporation ("SWI"),
Carlos Shannon, an individual ("Shannon") and CJC, Inc., a Nevada corporation
("CJC") and PI, as escrow agent and pledgeholder (the 'Escrow Agent'). PI and
SWI are respectively parent and wholly own subsidiary and are sometimes herein
referred to as the "Texas Parties". Shannon and CJC are related parties and
are sometimes herein referred to as the "California Parties".
RECITALS:
A. PI and A Alaska Ice, Inc., a California corporation, ("Alaska")
have entered into that certain Agreement and Plan of Reorganization dated
___________, 1997 (the "Reorganization Agreement"). Pursuant to the
Reorganization Agreement, PI will purchase substantially all of the assets of
Alaska and Alaska will receive shares of PI Common Stock, $0.01 par value per
share (the "Shares").
B. SWI, CMC Ice, Inc. a California corporation ("CMC") and Shannon
have entered into that certain Asset Purchase Agreement dated ____________,
1997, (the "Asset Agreement"). Pursuant to the Asset Agreement, SWI will
purchase the ice business assets of CMC including assets owned by Shannon
individually and used in the ice business of CMC. Shannon and CMC will receive
cash in such sales ("Asset Cash").
C. SWI and CJC, Inc., a California corporation, ("CJC") have entered
into that certain Asset Purchase Agreement, dated _________, 1997 (the "List
Agreement"). Pursuant to the List Agreement, SWI will purchase an ice business
customer list from CJC and CJC will receive cash in such sale ("List Cash").
D. Pursuant to each of the Agreements referenced in Recitals A and
B, the California Parties and the Texas Parties, as the case may be, have
agreed that, at the closings held under each of such Agreements, (collectively
the "Closing"), the California Parties will cause to be deposited into escrow a
portion of the consideration received (Shares and Asset Cash ) to be received
by said California Parties. The Shares and Asset Cash shall be pledged to PI
to secure the indemnification of PI, as Buyer under the Reorganization
Agreement and SWI, as Buyer under the Asset Agreement, which is provided for in
Articles XI of the Reorganization Agreement and Asset Agreement. such deposit
and pledge of Shares and Asset Cash shall be made, held and disbursed as
provided in the Pledge and Escrow Agreement (the "Share/Asset Cash Pledge
Agreement"), the form of which is attached to the Reorganization Agreement and
Asset Agreement as Exhibit D to said agreements.
EXHIBIT B
Page 1 of 9
<PAGE> 24
The Share/Asset Pledge Agreement shall be delivered by Alaska, CMC, Shannon and
the Texas Parties at the Closings under the Reorganization Agreement and Asset
Agreement.
E. It is a condition to the consummation of the transactions
contemplated by the List Agreement that at or prior to the Closing, this Escrow
Agreement be entered into by the parties hereto.
F. It is understood and agreed that the List Cash pledged
hereunder (the "Escrow Fund") to PI shall constitute security for the payment,
liquidation or direct satisfaction of indemnity claims ("Claims") for which any
of the Texas Parties is entitled to indemnity from and against any of the
Sellers, Shareholders and California Parties under any of the Reorganization
Agreement , Asset Agreement and List Agreement, without regard to whether or
not the source of the Escrow Fund was received under or pursuant the Agreement
under which a Claim is being asserted.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth and of other good and valuable
consideration, the parties hereto agree as follows:
1. Escrow and Pledge of List Cash.
a. CJC has caused to be delivered to Escrow Agent the
aggregate sum of $260,000 in accordance with the List Agreement. The aforesaid
sum has been deposited in the Escrow with the Escrow Agent and is hereby
pledged by CJC to the Texas Parties. CJC hereby grants a security interest in
said cash to the Texas parties.
b. The deposit and Pledge of the List Cash by CJC shall be
referred to as the Escrow Fund. The Escrow Agent shall hold the Escrow Fund
not as the agent of any of the California Parties, but as pledgeholder with
respect to the pledge of same pursuant to this Escrow Agreement. The Escrow
Fund shall include the property referred to in Section 1a above. The Escrow
Fund shall serve to secure the indemnification obligations of the California
Parties to the Texas Parties under Article XI respectively of the
Reorganization Agreement and the Asset Agreement and Recital E above with
respect to a notice of claim (a "Notice of Claim") delivered to any of the
California Parties under the Reorganization Agreement and Asset Agreement
within one (1) year from the date of the Closing. Any Notice of Claim shall be
deemed effective when delivered to the California parties and the Escrow Agent
within one (1) year from the date of the Closing. The Escrow Fund may be held
and commingled with the escrow fund held under the agreements referred to in
Recitals A and B hereof.
c. The deposit hereunder by the California Parties shall in
no way limit the indemnification obligations of said parties under the
Reorganization Agreement, Asset Agreement or List Agreement.
d. The Escrow Fund shall be available and used to satisfy
Claims arising under any of the Reorganization Agreement and Asset Agreement
notwithstanding the fact that any portion of the
EXHIBIT B
Page 2 of 9
<PAGE> 25
Escrow Fund so used shall have been deposited by one of the California Parties
under one of said Agreements under which no indemnification Claim has arisen or
is then pending. The California Parties hereby agree that with respect to the
use and application of the Escrow Fund, their liabilities and obligations are
joint and several and acknowledge that the deposit and Pledge hereunder by them
is made on that basis. The California Parties shall have the right of
contribution among themselves; however, in pursuing any such right, the
California Parties shall not involve or join in any action any of the Texas
Parties or seek in any manner, through judicial action or otherwise, to attach,
levy or otherwise restrain the disbursement or application of the Escrow Fund.
2. Restriction on Transferability; Release From Pledge and
Escrow; Proceeds.
a. No part of the Escrow Fund shall be released from Escrow
and the Pledge except as follows upon the later of (a) 120 days from the date
of the Closing or (b) the date upon which all claims in respect of which a
Texas Party has submitted Notices of Claim prior to the end of the above-
referenced 120 days shall have been disposed of, the Escrow Agent shall release
from the Escrow and shall deliver to the order of the California Parties the
balance of the List Cash, if any, remaining in the Escrow and the List Cash
shall thereupon cease to be subject to the Pledge and this Escrow Agreement.
b. With the prior approval of the Texas Parties, upon the
request of a seller under the Reorganization Agreement or under the Asset
Agreement, the Escrow Fund may be disbursed to pay claims, debts and
obligations of any of said sellers or of the California Parties.
3. Requirements for Notice of Claim. Any Notice of Claim
filed by a Texas Party shall specify in reasonable detail the facts and
circumstances of the claim; the basis on which a California Party is believed
to have liability therefor; and the estimated amount of loss alleged to have
been suffered or liability incurred by the Texas Party as a result thereof.
Such estimates of loss or liability (while not binding on the Texas Party)
shall be prepared by the Texas Party on a reasoned basis consistent with the
facts and circumstances out of which the claim arose.
4. Satisfaction of Claims.
a. Claims for Indemnification. The following procedures
shall prevail as to satisfaction of a Claim for indemnification in favor of the
Texas Parties:
(i) Uncontested Claims. If the Escrow Agent is
furnished by the Texas Party with a Notice of Claim, and no notice of objection
to such claim (a "Notice of Objection") is furnished by the California Parties
to the Escrow Agent within 30 days of the date of receipt of the Notice of
Claim by the Escrow Agent (which the Escrow Agent may assume to be the same as
the date of receipt of the Notice of Claim by the California Parties); or
(ii) Agreed Claims. If the Escrow Agent shall have been
furnished by the California Parties with a timely Notice of Objection, upon
receipt by the Escrow Agent of a notice (a "Notice of Resolution") that the
parties have subsequently agreed upon, resolved or compromised
EXHIBIT B
Page 3 of 9
<PAGE> 26
the claim specified in the Notice of Claim (which Notice of Resolution shall be
executed by the Texas Parties and acknowledged by the California Parties); or
(iii) Judicial Awards. If the Escrow Agent shall have
been furnished by the California Parties with a timely Notice of Objection and
shall subsequently be furnished with a copy of an award (an "Award") made by an
arbitrator or court of competent jurisdiction with respect to the Claim
specified in the Notice of Claim, and upon receipt by the Escrow Agent of an
opinion of counsel for Texas Parties to the effect that the time for filing an
appeal, an application for correction of the Award or a petition to vacate or
correct the Award has passed, and that no such appeal, application or petition
has been filed, or that the parties have waived such rights; thereupon, the
Escrow Agent shall deliver to the Texas Parties that amount of the Escrow Fund
which is equal to the amount specified in (i) the Notice of Claim, (ii) the
Notice of Resolution or (iii) the Award, as the case may be.
The Escrow Agent may deliver cash to the Texas Parties in satisfaction
of a Claim.
b. Government Creditors. Notwithstanding Section 4a hereof,
Escrow Agent is irrevocably authorized and instructed hereby to pay directly
the claims of any Government Creditor of any of the California Parties. Escrow
Agent shall be entitled to disburse any such payment at any time three (3)
business days following the date Escrow Agent is instructed in writing to make
such payment by PI, which shall concurrently provide the California Parties
with a copy of any such written instruction.
5. Concerning the Escrow Agent.
a. Under no circumstances shall the Escrow Agent be liable to
the California Parties for any act it may take in its capacity as Escrow Agent,
or for the failure to take any action, or for any damage, loss or expenses
suffered or incurred resulting therefrom or in acting hereunder, except only
for acts of gross negligence or willful misconduct.
b. The Escrow Agent may consult with counsel of its choice
and may rely in good faith on advice of such counsel.
c. The California Parties each shall indemnify and hold the
Escrow Agent harmless in respect of any and all losses, costs, expenses,
liabilities, judgments, assessments, penalties, damages, deficiencies, suits,
actions, proceedings or demands, and attorneys fees and expenses incident
thereto resulting from any action or refusal to act by the Escrow Agent in
accordance with the instructions of any of the California Parties. The Escrow
Agent shall promptly notify the California Parties of any asserted liability
for which the Escrow Agent would be entitled to indemnification by the
California Parties, and the California Parties and their legal representatives
shall have, at the election of the California Parties, a right to compromise or
defend any such matter involving asserted liability, through counsel of their
own choosing, at their expense; provided, however, that the California Parties
shall indemnify the Escrow Agent, its officers, employees and agents, against
any damage resulting from the failure to pay any claims on all such litigation
pending. In the event any
EXHIBIT B
Page 4 of 9
<PAGE> 27
of the California Parties undertakes to compromise or defend any such
liability, the California Parties shall notify the Escrow Agent in writing
promptly of their intention to do so, and the Escrow Agent shall cooperate with
the California Parties and their counsel in the compromising of or the
defending against any such liabilities or claims, at the expense of the
California Parties.
d. The Escrow Agent may resign from its duties and
obligations hereunder by giving at least 30 days advance notice in writing of
when such resignation shall take effect. Upon any resignation or discharge of
the Escrow Agent, the Texas Parties and California Parties shall jointly
designate a new Escrow Agent. If the Texas Parties and California Parties
cannot promptly agree upon a new Escrow Agent, a new Escrow Agent shall be
appointed by the Presiding Judge of the Superior Court for the County of San
Diego upon petition by PI. If the Escrow Agent is served with conflicting
demands which cannot be promptly resolved, the Escrow Agent shall interplead
the matter by petition in the Superior Court for the County of San Diego, which
shall resolve such matter. The parties hereto consent to such proceeding being
commenced and shall indemnify and hold the Escrow Agent harmless from any
expense or cost including attorneys' fees, incurred in such action.
6. Fees of the Escrow Agent. The Escrow Agent shall charge
no fees for its services in acting hereunder.
7. Miscellaneous.
a. Successors. This Escrow Agreement shall be binding upon
and shall inure to the benefit of the parties herein and their respective
heirs, executors, successors and assigns.
b. Amendment, Etc. This Escrow Agreement may not be
released, discharged, abandoned, changed or modified in any manner, except by
an instrument in writing signed on behalf of each of the parties hereto by
their duly authorized officers or representatives. The failure of any party
hereto to enforce at any time any provision of this Escrow Agreement shall in
no way be construed to be a waiver of such provision, nor in any way to affect
the validity of this Escrow Agreement or any part thereof or the right of any
party thereafter to enforce each and every such provision. No waiver of any
breach of this Escrow Agreement shall be held to be a waiver of any other or
subsequent breach.
c. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by
telecopier (confirmed thereafter by such certified mail) to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice:
EXHIBIT B
Page 5 of 9
<PAGE> 28
(a) if to the Texas Parties or Escrow Agent:
Packaged Ice, Inc.
8572 Katy Freeway
Houston, Texas 77024
Attn: A.J. Lewis, III, President
Fax: (713) 464-4681
With a copy to:
Robert G. Copeland, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, CA 92101
Fax: (619) 645-5332
and to:
Alan Schoenbaum, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 Nations Bank Plaza
300 Convent Street
San Antonio, Texas 78205
Fax: (210) 224-2035
(b) if to the California Parties:
Carlos Shannon
921 Windflower Way
San Diego, California 92108
Fax: (___) ______________
and to:
Barry Ruderman, Esq.
Weeks, Rathbone, Robertson & Johnson
225 Broadway, Suite 1515
San Diego, California 92101
Fax: (619) 238-0257
Notice so given shall (in the case of notice so given by mail) be deemed to be
given and received on the fifth calendar day after posting and (in the case of
notice so given by telecopier or personal delivery) on the date of actual
transmission or (as the case may be) personal delivery.
EXHIBIT B
Page 6 of 9
<PAGE> 29
d. Defined Terms. The Capitalized terms used herein without
definition and which are defined in the Reorganization Agreement, Asset
Agreement or List Agreement shall have the respective meanings herein as
defined in said agreements.
e. Captions. The captions appearing in this Escrow Agreement
are inserted only as a matter of convenience and as a reference and in no way
define, limit or describe the scope or intent of this Escrow Agreement or any
of the provisions hereof.
f. Governing Law. This Escrow Agreement shall be construed
and the rights of the parties hereafter shall be governed by the laws of the
State of California.
g. Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
h. Fractional Shares. No fractional shares of the Shares
shall be issued or delivered pursuant to any provision of this Escrow
Agreement. In making delivery of the Shares to PI or Alaska, the Escrow Agent
shall round off any fractional share resulting from any calculation hereunder
to the nearer whole share.
i. Distribution by Consent. Any other provision of this
Escrow Agreement to the contrary notwithstanding, the Escrow Agent shall
distribute any assets held in Escrow in such manner at such time or times as
the Texas and California Parties may, in writing, jointly direct.
j. Security Agreement. This Escrow Agreement shall
constitute a Security Agreement within the meaning of the California Commercial
Codes.
k. Termination. This Escrow Agreement shall terminate when
the Escrow Fund has ceased to be subject to this Escrow Agreement.
l. Tax Identification Number. Each party hereto, except the
Escrow Agent, shall provide the Escrow Agent with its Tax Identification Number
("T.I.N.") as assigned by the IRS. All interest and other income earned under
the Escrow Agreement shall be allocated and paid as provided hereunder and
reported by the recipient to the IRS as having been so allocated and paid.
EXHIBIT B
Page 7 of 9
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Reorganization
Agreement as of the date set forth herein.
CJC, INC. SOUTHWESTERN ICE, INC.
By: By:
------------------------------- ------------------------------
Its: Its:
------------------------------- ------------------------------
PACKAGED ICE, INC., as Escrow Agent
PACKAGED ICE, INC.
By: By:
------------------------------- ------------------------------
Its: Its:
------------------------------- ------------------------------
------------------------------------
Carlos Shannon
EXHIBIT B
Page 8 of 9
<PAGE> 31
The undersigned, A Alaska Ice, Inc., CMC Ice, Inc., Carlos Shannon and Linda
Shannon for valuable consideration, the adequacy and receipt of which is hereby
acknowledged, hereby undertake, agree and confirm to the Texas Parties that the
Shares and the Asset Cash, defined in, deposited under and pledged by the
undersigned pursuant to the Share/Asset Cash Pledge Agreement to PI to secure
the indemnification of PI, as Buyer under the Reorganization Agreement and SWI,
as Buyer under the Asset Agreement, which indemnification is provided for in
Articles XI of the Reorganization Agreement and Asset Agreement, shall be
deemed pledged hereunder and under the Share/Asset Cash Pledge Agreement to
secure the indemnification of SWI, as Buyer under the List Agreement, which
indemnification is provided for in Article XI of the List Agreement. The
Share/Asset Cash Pledge Agreement shall be deemed and is hereby amended to so
provide.
This Escrow Agreement and the Share/Asset Cash Pledge Agreements shall operate
and be interpreted to so provide.
Upon terminating of this Escrow Agreement the Escrow Fund, if any, shall be
disbursed as follows: (a) Up to 100% of the original sum deposited by CJC with
Escrow Agent hereunder shall be disbursed by CJC and (b) the balance, if any,
to CMC Ice, Inc. and A Alaska Ice, Inc. as they shall instruct PI in writing.
A Alaska Ice, Inc. CMC Ice, Inc.
By: By:
------------------------------- ------------------------------
- -------------------------------------
Carlos Shannon CJC, Inc.
- -------------------------------------
Linda Shannon By:
------------------------------
Agreed:
Packaged Ice, Inc.
By:
----------------------------------
A.J. Lewis III
(As a California Party, Buyer and Esrow Agent)
Southwestern Ice, Inc.
By:
----------------------------------
A.J. Lewis III
EXHIBIT B
Page 9 of 9
<PAGE> 1
EXHIBIT 10.45
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
the 12th day of September 1997, by and among Packaged Ice, Inc., a Texas
corporation ("Buyer"), and Warren F. Kruger and Julie S. Kruger, the
(collectively, "Seller").
R E C I T A L S
A. Seller owns 100% of the outstanding shares of capital stock of
Century Ice of Tulsa, Inc. and Ice Cold Enterprises, Inc., each an Oklahoma
corporation (collectively, the "Company"), such shares hereinafter referred to
as the "Stock";
B. The Company is engaged in the manufacture and sale of packaged
ice products (such business being herein referred to as the "Business").
C. Seller is desirous of selling to Buyer, and Buyer is desirous of
purchasing from Seller, all of the Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section
I shall have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined.
"Assets" shall mean all of Company's properties and assets, tangible and
intangible.
"Business" shall have the meaning set forth in Recital B of this
Agreement.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of packaged ice products which equipment will be conveyed
to Buyer at the Closing, free and clear of the Capital Leases, liens, claims
and encumbrances.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
<PAGE> 2
"Encumbrance" shall mean any mortgage lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction or transfer of any nature whatsoever other than those held by Buyer
or granted by the Company at Buyer's instance and request under the authority
granted Buyer under the Management Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Escrow Agent" shall mean the escrow agent under the Escrow Agreement.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Inventory" shall have the meaning as set forth in Section 2.3(a) of
this Agreement.
"Investment Letter" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(c) of this
Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section 5.12
of this Agreement.
"PI Stock" shall have the meaning set forth in Section 2.2.
"Personal Property" shall have the meaning set forth in Section 3.13 of
this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Real Property" shall have the meaning as set forth in Section 3.12 of
this Agreement.
"Seller's Disclosure Memorandum" shall mean that schedule attached
hereto and incorporated herein by reference that lists and describes all
disclosures by Seller concerning the Assets and the Business which are the
subject of this Agreement.
<PAGE> 3
"Stock" shall mean all of the capital stock of the Company outstanding
on the Closing Date.
"Surveys" shall have the meaning as set forth in Section 5.12 of this
Agreement.
"Taxes" shall have the meaning as set forth in Section 11.1 hereof.
"UCC Reports" shall have the meaning as set forth in Section 5.12 of
this Agreement.
II. PURCHASE AND SALE
2.1. STOCK PURCHASE. At the Closing, subject to the terms, covenants
and conditions contained herein, Seller shall sell to Buyer, and Buyer shall
purchase from Seller, all of the Stock.
2.2 PURCHASE PRICE.
(a) The purchase price for the Stock shall be Five Million One
Hundred Thousand Dollars ($5,100,000) (the "Purchase Price").
(b) $4,590,000 of the Purchase Price, less the Escrow Amount
(hereinafter defined) shall be paid to Seller in cash, by wire transfer,
or by discharge of indebtedness owed to Buyer by Seller at Closing. The
remaining $510,000 shall be paid in the form of 51,000 shares of the
$.01 par value common stock of Packaged Ice, Inc. ("PI Stock"), valued
at $10 per share, provided that 12,750 shares of such PI Stock shall be
placed in escrow (the "Escrow Amount") with the Escrow Agent pursuant to
the escrow agreement in the form attached hereto as Exhibit 2.2(b) (the
"Escrow Agreement") for disbursement in accordance with the Escrow
Agreement.
(c) The Purchase Price that is paid in cash shall first be
used to pay and discharge all of the Company's debts, obligations and
other liabilities including, without limitation, all current
liabilities, all long term liabilities, all Encumbrances against the
Assets of the Company and all leases of any personal property, save and
except certain excluded liabilities described on Schedule 2.2(c)
(collectively, the "Liabilities") which are estimated to exist as of the
Closing Date. The cash portion of the Purchase Price remaining after the
estimated Liabilities have been paid and discharged shall be paid
directly to the Seller in exchange for all of the Stock owned by the
Seller. In addition, all cash and accounts receivable as of the Closing
Date will be distributed to the Seller at the Closing. The intent and
effect of this Section 2.2(c) is to convey all of the outstanding Stock
of the Company to Buyer with there being no cash, Liabilities or
Encumbrances immediately after Closing. Sellers hereby agree all
Liabilities which are not discharged at Closing shall be assumed by the
Seller through an Undertaking Agreement in the form attached hereto as
Exhibit 2.2(c).
<PAGE> 4
(d) The Buyer agrees to collect the accounts receivable that
are distributed to Seller on Seller's behalf, and to use normal
collection efforts. Any accounts receivable over 90 days will be turned
over to Seller for collection and Buyer will cease collection efforts
therefor.
2.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
subject to the following adjustments:
(a) The Purchase Price shall be increased to reflect the value
of the Inventory on hand at Closing. For the purposes of this Agreement,
the term "Inventory" shall mean useable plastic bags at cost. The amount
of increase to the Purchase Price shall be determined by the parties at
Closing and shall be added to the Purchase Price as a whole, subject to
terms and provisions governing payment of the Purchase Price as set
forth in this Agreement.
(b) On or before October 10, 1997, Seller shall deliver to
Buyer a copy of the balance sheet of the Company as of the Closing Date
(the "Closing Date Balance Sheet") certified by Seller to the best of
their knowledge and belief to be true and correct. The Closing Date
Balance Sheet shall (i) fairly present the financial position of the
Company as at the close of business on the Closing Date in accordance
with the accounting methods consistently utilized by the Company, and
(ii) include a detailed schedule of Liabilities. The Closing Date
Balance Sheet shall be used to calculate any post closing adjustments to
the Purchase Price and distributions of cash and accounts receivable
accrued as of the Closing Date and the amount of any Liabilities to be
paid by Seller, all in accordance with the terms and conditions set
forth in this Agreement.
2.4 PRORATION. The parties shall prorate at the Closing the current
year's ad valorem taxes and prepaid expenses, based on the latest available
statements from taxing authorities, whether for the current tax year or the
preceding tax year. Seller's pro rata share of such taxes shall be the portion
attributable to the period through the day preceding the Effective Date,
prorated by days. The prorated amounts shall be payable in the manner set
forth below:
(a) If a prorated amount is payable by Buyer and determinable
at the Closing, it shall be added to the amount payable by Buyer at the
Closing.
(b) If a prorated amount is payable by Buyer and not
determinable at the Closing, it shall be billed by Seller when
determinable and promptly paid by Buyer to Seller.
(c) If a prorated amount is payable by Seller and determinable
at the Closing, it shall be deducted from the amount otherwise payable
by Buyer at the Closing.
(d) If a prorated amount is payable by Seller and not
determinable at the Closing, it shall be billed by Buyer when
determinable and promptly paid by Seller to Buyer.
<PAGE> 5
III. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oklahoma
and has all requisite power and authority to own, lease and operate the
Business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. All
shares of Stock owned by Seller are validly issued, fully paid and
nonassessable. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery, repurchase or transfer by Seller or the Company (including any right
of conversion or exchange under any outstanding security or other instrument)
of any of its capital stock or other securities. Seller owns good and
marketable title to the Stock, free and clear of all Encumbrances. Upon the
sale of the Stock to Buyer at Closing, Seller will transfer to Buyer the entire
legal and beneficial interest in all Stock, free and clear of any Encumbrances
by or through Seller. Seller is not a party to and are not aware of any voting
trusts, proxies or any other agreements or understandings with respect to the
voting of the Stock.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This Agreement
has been duly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller, enforceable against them in accordance with its
terms. Except as set forth on Section 3.2 of Seller's Disclosure Memorandum,
the execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not require the
consent, approval or authorization of any person or governmental authority, and
will not, with or without the giving of notice, the passage of time, or both,
violate, conflict with, result in a default, breach or loss of rights under, or
result in the creation of any lien, claim or encumbrance pursuant to, any lien,
encumbrance, instrument, agreement, or understanding, or any law, regulation,
rule, order, judgment or decree, to which Seller is a party or by which he is
bound or affected.
3.3 FINANCIAL STATEMENTS. Seller has previously caused to be
furnished to Buyer the Company's unaudited balance sheet as of December 31,
1996, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the unaudited balance sheet of Seller as of July
31, 1997 and the related unaudited statement of income and statement of cash
flow for the 7-month period ending July 31, 1997 (such balance sheets and
related statements are collectively referred to herein as the "Financial
Statements"). The Financial Statements taken as a whole present fairly the
financial position of the Business as of December 31, 1996, and July 31, 1997,
respectively, all of which have been compiled and maintained utilizing
consistently applied methods.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Seller in Seller's Disclosure
Memorandum and except for liabilities arising in the ordinary course of
business and consistent with past practice since the date of Seller's July 31,
<PAGE> 6
1997 Balance Sheet, Seller has operated the Business in the ordinary course and
has incurred no material liabilities which would be required to be reflected in
accordance with the consistent methods of accounting used by Seller on a
balance sheet as of the date hereof or disclosed in the notes thereto. Since
July 31, 1997 there has not been any material adverse change in the business,
operations, properties, prospects, assets or condition of the Business, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.4 SHAREHOLDER DEBT. Seller warrants that there are no Encumbrances
held by Seller whatsoever against the Company or the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition, unless expressly
disclosed to the contrary by Seller in Section 3.5 of Seller's Disclosure
Memorandum.
3.6 TITLE TO PERSONAL PROPERTY. Except as set forth in Section 3.6
of Seller's Disclosure Memorandum, the Company has good, legal and marketable
title to all of the personal property comprising the Assets, free and clear of
Encumbrances.
3.7 LITIGATION. Except as set forth on Section 3.7 of Seller's
Disclosure Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect, or, to the knowledge of Seller, threatened, against or
relating to Seller, the Company or the Assets, or the transactions contemplated
by this Agreement.
3.8 COMPLIANCE WITH LAWS. Seller and the Company have complied with
all laws, rules, regulations, ordinances, orders, judgments and decrees
relating to the Company, the Stock and the Assets. The ownership and use of
the Assets and the conduct of the Business as it specifically relates to the
Assets does not conflict with the rights of any other person.
3.9 TAXES. Except as set forth in Section 3.9 of Seller's Disclosure
Memorandum, the Company has, within the time and manner prescribed by law,
filed all material returns, declarations, reports and statements required to be
filed by it (together, "Returns") in respect of any Taxes and each such Return
has been prepared in compliance in all material respects with all applicable
laws and regulations and is true and correct in all material respects, and the
Company has, within the time and in the manner prescribed by applicable law,
paid all Taxes that are shown to be due and payable with respect to the periods
covered thereby. The Company is an "S-corporation" under the Code, has had in
effect since its corporate inception, or such other date as set forth in
Section 3.9 of Seller's Disclosure Memorandum, a valid, binding, timely filed
election to be taxed pursuant to Subchapter S of the Code, and is not liable
for any federal income taxes as a "C-corporation" under the Code. Except as
set forth in Section 3.9 of Seller's Disclosure Memorandum (i) the Company has
not requested or been granted an extension of the time for filing any Return
which has not yet been filed; (ii) the Company has not consented to extend to a
date later than the date hereof the time in which any Tax may be assessed or
collected by any taxing authority; (iii) no deficiency or proposed adjustment
which has not been settled or
<PAGE> 7
otherwise resolved for any amount of Tax has been proposed, asserted or
assessed by any taxing authority against the Company; (iv) there is no action,
suit, taxing authority proceeding, or audit now in progress, pending or, to
Seller's knowledge, threatened against or with respect to the Company; (v) no
claim has been made by a taxing authority in a jurisdiction where the Company
does not file Tax Returns that one or more the Companies are subject to Taxes
assessed by such jurisdiction; (vi) there are no liens for Taxes (other than
for current Taxes not yet due and payable) upon the Assets; (vii) none of the
Companies will be required to include any amount in taxable income or exclude
any item of deduction or loss from taxable income for any taxable period (or a
portion thereof) ending after the Closing Date as a result of any of the
following: (A) a change in method of accounting for a taxable period ending on
or prior to the Closing Date, (B) any "closing agreement," as described in Code
Section 7121 (or any corresponding provision of state, local or foreign income
Tax law) entered into on or prior to the Closing Date, (C) any sale reported on
the installment method where such sale occurred on or prior to the Closing
Date, and (D) any prepaid amount received on or prior to the Closing Date; and
(viii) none of the Companies has any obligation or liability for the payment of
Taxes of any other person as a result from any expressed obligation to
indemnify another person, or as a result of such Company assuming or succeeding
to the Tax liability of any other person as successor, transferee or otherwise.
3.10 ENVIRONMENTAL. The Company has complied in all material respects
with all laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) which have
jurisdiction over the Company concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Company has obtained and been in material compliance
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied, in all material
respects, with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in such laws.
3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
cancelled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of Seller's Disclosure Memorandum lists all claims, which
(including related claims which in the aggregate) exceed
<PAGE> 8
$25,000 which have been made by the Company in the last three years under any
workers' compensation, general liability, property or other insurance policy
applicable to Seller or any of the Assets. Except as set forth on Section 3.11
of Seller's Disclosure Memorandum, there are no pending or threatened claims
under any insurance policy. Such claim information includes the following
information with respect to each accident, loss, or other event: (a) the
identity of the claimant; (b) the nature of the claim; (c) the date of the
occurrence; (d) the status as of the report date and (e) the amounts paid or
expected to be paid or recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Seller's Disclosure Memorandum contains
(i) a complete and accurate legal description of each parcel of real
property owned by, leased to or used by the Company (the "Real
Property") and (ii) a complete and accurate list of all current leases,
lease amendments, subleases, assignments, licenses and other agreements
to which the Real Property is subject (the "Leases"). Seller has
delivered to Buyer true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Seller's Disclosure
Memorandum (i) each of the Leases is in full force and effect and has
not been amended or modified; (ii) neither the Company, nor any other
party thereto, is in default thereunder, nor is there any event which
with notice or lapse of time, or both, would constitute a default
thereunder; (iii) Seller has received no notice that any party to any
Lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder;
and (iv) no rental under the Leases has been paid more than one month in
advance.
(c) Except as disclosed in Section 3.12 of Seller's Disclosure
Memorandum, (i) there are no tanks on or below the surface of the Real
Property, (ii) there is no hazardous or toxic waste, substance or
material or other contaminant or pollutant (as determined under federal,
state or local law) present on or below the surface of the Real Property
including, without limitation, in the soil, subsoil, groundwater or
surface water, which constitutes a violation of any law, ordinance, rule
or regulation of any governmental entity having jurisdiction thereof or
subjects or could subject Buyer to any liability to third parties, and
(iii) the Real Property has never been used by the Company or by any
previous owners or operators to generate, manufacture, refine, produce,
store, handle, transfer, process or transport any hazardous or toxic
waste, substance or material or other contaminant or pollutant.
(d) The zoning of each parcel of the Real Property permits the
improvements located thereon and the continuation of business presently
being conducted thereon. The Real Property is served by utilities and
services necessary for the normal and continued operation of the
business presently conducted thereon.
3.13 PERSONAL PROPERTY.
<PAGE> 9
(a) Section 3.13 of Seller's Disclosure Memorandum is a
complete and accurate schedule as of July 31, 1997 describing, and
specifying the location of, all inventory, motor vehicles, machinery,
fixtures, equipment, furniture, supplies, tools, Intangible Assets, and
all other tangible or intangible personal property owned by, in the
possession of, or used by Seller other than the Excluded Assets (the
"Personal Property").
(b) Each lease, license, rental agreement, contract of sale or
other agreement applicable to any Personal Property is listed in Section
3.14 of Seller's Disclosure Memorandum and is in full force and effect;
neither Seller nor any other party thereto is in default thereunder, nor
is there any event which with notice or lapse of time, or both, would
constitute a default thereunder. The Company has received no notice
that any party to any such lease, license, rental agreement, contract of
sale or other agreement intends to cancel, terminate or refuse to renew
the same or to exercise or decline to exercise any option or other right
thereunder. No Personal Property is subject to any lease, license,
contract of sale or other agreement that is adverse to the business,
properties or financial condition of the Company.
(c) The inventory of the Company as reflected by the Financial
Statements and as described in Section 3.13 of Seller's Disclosure
Memorandum consisted and consists of items substantially all of which
were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or
salable within a reasonable period of time in the ordinary course of
business of the Company, except items of inventory which have been
written down to realizable market value or written off completely, and
damaged or broken items in an amount which does not materially affect
the value of the inventory as reflected on the Financial Statements.
With respect to inventory in the hands of suppliers for which the
Company is committed as of the date hereof, such inventory is reasonably
expected to be usable in the ordinary course of business of the Seller
as presently being conducted.
3.14 CONTRACTS. Section 3.14 of Seller's Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other agreements ("Contracts") to which the Company is a party and
which affect or are applicable to the Assets or the Company, true and complete
copies (or summaries in the case of oral contracts) of each of which have been
delivered to Buyer by Seller, including, without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other instrument
relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person, firm,
corporation or unincorporated association doing business either within
or outside the United States relating to sharing of present or future
commissions, fees or other income or profits;
<PAGE> 10
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of Seller's Disclosure Memorandum,
each of the Contracts is in full force and effect and has not been amended or
modified and neither the Company, nor any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party intends to cancel, terminate or refuse to renew any such Contract or
to exercise or decline to exercise any option or other right thereunder.
3.15 LABOR MATTERS. There are no controversies pending or, to the
best knowledge of Seller, threatened between the Company and any employees of
the Company. The Company has complied with all laws relating to the employment
of labor, including any provisions thereof relating to wages, hours, collective
bargaining, immigration, safety and the payment of withholding and social
security and similar taxes, and the Company has no liability for any arrears of
wages or taxes or penalties for failure to comply with any of the foregoing.
3.16 ABSENCE OF SENSITIVE PAYMENTS. To the best knowledge of the
Company and Seller, neither the Company nor Seller has made or maintained (i)
any contributions, payments or gifts of its funds or property to any
governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal under the laws
of the United States or any state thereof, or any other jurisdiction (foreign
or domestic); or (ii) any contribution, or reimbursement of any political gift
or contribution made by any other person, to candidates for public office,
whether federal, state, local or foreign, where such contributions by Seller or
Shareholder were or would be a violation of applicable law.
3.17 EMPLOYEE BENEFITS. The Company is not a party to and does not
participate in or have any liability or contingent liability with respect to
any "employee welfare benefit plan" or "employee pension benefit plan" as those
terms are respectively defined in sections 3(1) and 3(2) of ERISA.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Seller's Disclosure
Memorandum describes all of the capital improvements or purchases or other
capital expenditures (as determined in accordance with GAAP) which the Company
has committed to or contracted for
<PAGE> 11
which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
3.19 COMPLETE AND ACCURATE DISCLOSURE. No representation or warranty
made to Buyer in this Agreement or in connection with this transaction contains
or will contain an untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make such representation or warranty not
misleading or necessary to enable Buyer to make a fully informed decision with
respect to its purchase of the Stock. All documents and information which have
been or will be delivered to Buyer or its representatives by or on behalf of
the Company are and will be true, correct and complete copies of the documents
they purport to represent.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power and
authority, and has been duly authorized, to enter into this Agreement and to
perform all of its obligations hereunder. Buyer represents and warrants to
Seller that this Agreement has been duly executed and delivered by Buyer, and
constitutes a valid and binding obligation in accordance with its terms.
V. COVENANTS OF SELLER
Seller hereby covenants and agree as follows:
5.1 CONDUCT OF BUSINESS. Prior to the Effective Date, Seller shall
cause the Company to operate the Business in the ordinary course and continue
normal capital expenditures and maintenance prior to the Closing Date, except
(i) as may be permitted by this Agreement, (ii) as necessary to consummate the
transactions contemplated hereby, or (iii) disclosed to Buyer in Seller's
Disclosure Memorandum.
5.2 INVESTIGATION BY BUYER. Prior to the Closing Date, Seller shall
(i) give Buyer and its authorized representatives and advisors access, at
reasonable times and on reasonable notice, to all items of Personal Property,
books and records, personnel, offices, and other facilities of the Company,
(ii) permit Buyer to make such inspections thereof as Buyer may reasonably
require, and (iii) cause its employees, and its advisors to furnish to Buyer
and its authorized representatives and advisors such financial and operating
data and other information with respect to the Business prepared in the
ordinary course of the Business as Buyer or its agent shall from time to time
reasonably request.
5.3 CLOSING CONDITIONS. Seller will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.1
to be satisfied by the Closing Date.
<PAGE> 12
5.4 CONFIDENTIALITY. From and after the date hereof, Seller will,
and will cause the Company and its officers, employees, representatives,
consultants and advisors to, hold in confidence all confidential information in
the possession of Seller or the Company, its affiliates or its financial
advisor concerning the Company. Seller will not release or disclose any such
information to any person other than Buyer and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
shall not apply to information:
(a) which Seller or the Company is compelled to disclose by
judicial or administrative process, or, in the reasonable opinion of
counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available to the
public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Seller or the
Company by a third party who obtained such information other than as a
result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Seller and Buyer will cooperate in the
public announcement of the transactions contemplated by this Agreement, and,
other than as may be required by applicable law, no such announcement will be
made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the Closing
or the termination of this Agreement, whichever is the first to occur, neither
Seller nor the Company shall (and Seller and the Company shall cause their
respective affiliates, officers, directors, employees, representatives and
agents not to) directly or indirectly, solicit, initiate or participate in
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Buyer or
an affiliate or an associate of Buyer) concerning, or enter into any agreement
providing for, any merger, sale of material assets, sale of stock or similar
transactions involving the Company or the Assets.
5.7 FURTHER ASSURANCES. Seller will use its best efforts to
implement the provisions of this Agreement, and for such purpose Seller, at the
request of Buyer, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Buyer such deeds, assignments, bills of sale, consents, documents
evidencing title and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
deem necessary or desirable to implement any provision of this Agreement.
5.8 INSURANCE. The Company shall continue to maintain insurance
through the Closing Date with financially sound and reputable insurers
unaffiliated with Seller in such amounts and against such risks as are adequate
in the judgment of Seller to protect the Assets and the Business.
<PAGE> 13
5.9 NONCOMPETITION AGREEMENT. At the Closing, Seller will enter into
a noncompetition agreement in the form attached hereto as Exhibit 5.9 (the
"Noncompetition Agreement").
5.10 INVESTMENT LETTER. At the Closing, Shareholder shall execute and
deliver to Buyer the investment letter in the form attached hereto as Exhibit
5.10 (the "Investment Letter").
5.11 ESCROW AGREEMENT. At the Closing, Seller shall execute and
deliver to Buyer the Escrow Agreement.
5.12 TITLE REPORTS. Within ten (10) days after the date hereof,
Seller, at Seller's sole cost and expense, shall provide a title report(s) for
all real property owned by the Company ("Owned Real Property") and current
reports of searches made of the Uniform Commercial Code Records of the County
and State where each parcel of Owned Real Property is located (the "UCC
Reports") setting forth the state of liens affecting the tile to the personal
property and real property to be conveyed hereunder. At the Closing, the Owned
Real Property shall be subject to no liens, charges, encumbrances, exceptions,
or reservations of any kind or character other than those specifically approved
by Buyer in writing (the "Permitted Exceptions").
VI. COVENANTS OF BUYER
6.1 CLOSING CONDITIONS. Buyer will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.2
to be satisfied by the Closing Date.
6.2 ANCILLARY AGREEMENTS. At the Closing, Buyer will enter into the
Noncompetition Agreement and the Escrow Agreement.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of the
Stock and the execution of the Noncompetition Agreement (the "Closing") shall
take place at a mutually agreeable time and place on or before September 15,
1997. The date of the Closing shall herein be referred to as the "Closing
Date."
7.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall
execute, acknowledge (where appropriate) and deliver, or cause to be delivered,
to Buyer in form reasonably satisfactory to Buyer:
(a) Stock certificates representing the Stock, duly endorsed
for transfer or accompanied by stock powers duly executed in blank, and
any other documents that are necessary to transfer to Buyer good and
marketable to the Stock;
(b) The written approvals, consents and certificates referred
to in Section 3.2 of Seller's Disclosure Memorandum.
<PAGE> 14
(c) The opinion of Hall, Estill, Hardwick, Gable, Golden &
Nelson referred to in Section 8.1(f).
(d) Letters of resignation of the officers and directors of
the Company.
(e) All other documents and certificates required to be
delivered to Buyer pursuant to this Agreement, including without
limitation, the Noncompetition Agreement and the Escrow Agreement.
From time to time following Closing, Seller will execute and
deliver such instruments and take such action as Buyer may reasonably request
in order to more effectively transfer, convey, assign and deliver to Buyer, and
to put Buyer in actual possession and operating control of, the Assets.
7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) pay the cash portion of the Purchase Price;
(b) deliver to Seller certificates evidencing 38,250 shares of
Packaged Ice, Inc. common stock;
(c) deliver 12,750 shares of Packaged Ice, Inc. common stock
to the Escrow Agent;
(d) deliver to Seller executed counterparts of the
Noncompetition Agreement and the Escrow Agreement.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
complete the transactions contemplated at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Seller to
be performed or complied with on or before the Closing Date shall have
been duly performed or complied with in all material respects and Seller
shall deliver to Buyer a certificate signed by an officer of Seller to
such effect.
(b) Representations and Warranties True; No Material Adverse
Change. The representations and warranties of Seller contained herein
shall be true and correct on the Closing Date with the same force and
effect as though such representations and warranties had been made on
the Closing Date, and since the date hereof there shall have occurred no
material adverse change in the Business, and Seller shall deliver to
Buyer a certificate signed by an officer of Seller to such effect.
<PAGE> 15
(c) No Violation of Statutes, Orders, etc. There shall not be
in effect any decree or judgment enjoining Buyer from consummating the
transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of the
Business will be paid in full, and all Encumbrances against the Stock or
Assets will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in full
and the personal property subject thereto shall be conveyed to the
Company free and clear of Encumbrances.
(f) Opinion of Counsel for Shareholder and Seller. Buyer shall
have received the opinion of Hall, Estill, Hardwick, Gable, Golden &
Nelson dated as of the Closing Date, in form and substance satisfactory
to Buyer and Buyer's counsel, subject to reasonable qualifications and
exceptions, as set forth on Exhibit 8.1(f).
8.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to
complete the transactions contemplated at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Buyer to be
performed or complied with on or before the Closing Date shall have been
duly performed or complied with in all material respects and Buyer shall
deliver to Seller a certificate signed by an officer of Buyer to such
effect.
(b) Representations and Warranties True; No Material Adverse
Change. The representations and warranties of Buyer contained herein
shall be true and correct on the Closing Date with the same force and
effect as though such representations and covenants had been made on the
Closing Date, and Buyer shall deliver to Seller a certificate signed by
an officer of Buyer to such effect.
(c) No Violation of Statutes, Orders, etc. There shall not be
in effect any decree or judgment enjoining Seller from consummating the
transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SELLER. Seller agrees to indemnify,
defend and hold harmless Buyer and Buyer's employees, agents, heirs, legal
representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of the Company assumed by Seller at the Effective Date hereunder
pursuant to the Undertaking Agreement, (ii) the conduct of, or conditions
existing with respect to, the Business prior to the
<PAGE> 16
Closing, (iii) any inaccuracy of any representation or warranty set forth in
this Agreement or the breach of any covenant made by Seller in or pursuant to
this Agreement.
9.2 INDEMNIFICATION OF SELLER BY BUYER. Buyer agrees to indemnify,
defend and hold harmless Seller from and against any and all Damages arising
out of or relating to any inaccuracy or any representation or warranty set
forth in this Agreement or the breach of any covenant made by Buyer in or
pursuant to this Agreement.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Buyer shall have the right to make a
claim against the Escrow Amount for any of Buyer's Damages. Any claim with
respect to Section 3.10 must be made on or before March 1, 1998. All other
claims, other than those assumed by Seller under the Undertaking Agreement must
be made by August 30, 1998.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim for
indemnification involve any actual or threatened claim or demand by any third
party against the Indemnified Party, the Indemnifying Party shall be entitled
(without prejudice to the right of the Indemnified Party to participate in the
defense of such claim or demand at its expense through counsel of its own
choosing) to assume the defense of such claim or demand in the name of the
Indemnified Party at the Indemnifying Party's expense and through counsel of
its own choosing, which counsel shall be reasonably satisfactory to the
Indemnified Party, if it gives written notice to the Indemnified Party within
forty-five (45) days after receipt of the Notice of Claim that the Indemnifying
Party intends to assume the defense of such claim and acknowledges its
liability to indemnify the Indemnified Party for any losses resulting from such
claim; provided, however, that if the Indemnifying Party does not elect to
assume the defense of any claim, then (a) the Indemnifying Party shall have the
right to participate in the defense of such claim or demand at its expense
through counsel of its own choosing, provided the Indemnified Party shall
control the defense of such claim, (b) the Indemnified Party may settle any
such claim without the consent of the Indemnifying Party, however, the
Indemnifying Party may not settle any such claim without the prior written
consent of the Indemnified Party; and (c) Section 9.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent Seller is the Indemnified Party for any
actual or threatened claim or demand by any third party, Seller shall have the
right to control the prosecution of any counterclaim
<PAGE> 17
or right related to such a claim or demand, provided that Seller agrees to
reasonably cooperate with Shareholder with respect to the prosecution of such
counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of Seller and
Buyer;
(b) Misrepresentation or Breach. By Seller or Buyer, if there
has been a material misrepresentation or a material breach of a warranty
or covenant herein or in any agreement required to be delivered pursuant
hereto on the part of the other party hereto;
(c) Failure of Condition to Buyer's Obligations. By Buyer, if
all of the conditions set forth in Section 8.1 have not been satisfied;
(d) Failure of Condition to Seller's Obligations. By Seller,
if all of the conditions set forth in Section 8.2 have not been
satisfied;
(e) Court Order. By Seller or Buyer if consummation of the
transactions contemplated hereby shall violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction;
(f) Material Adverse Change. By Buyer if any event has
occurred after the date hereof which is, or will result in a material
adverse change in the prospects, business or condition of the Assets.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 10.1(a), all further obligations of Seller and Buyer under this
Agreement shall terminate without further liability of Seller or Buyer. If
Seller fails to consummate the transactions contemplated on its part to occur
on the scheduled Closing Date, in circumstances whereby all conditions of
<PAGE> 18
the Closing set forth in Section 8.2 have been satisfied in all material
respects or waived, Buyer's sole remedy shall be to (i) to require Seller to
consummate and specifically perform the transactions contemplated hereby, in
accordance with the terms of this Agreement, and to obtain from Seller any
attorney fees incurred in connection with procuring such specific performance
or (ii) terminate this Agreement and obtain reimbursement of its out-of-pocket
expenses incurred directly in connection with the negotiation, preparation and
performance of this Agreement. If Buyer fails to consummate the transactions
contemplated on its part to occur on the Closing Date, in circumstances whereby
all conditions of the Closing set forth in Section 8.1 have been satisfied in
all material respects or waived, Seller's sole remedy shall be to (i) to
require Buyer to consummate and specifically perform the transactions
contemplated hereby, in accordance with the terms of this Agreement, and to
obtain from Buyer any attorney fees incurred in connection with procuring such
specific performance or (ii) terminate this Agreement and obtain reimbursement
of its out-of-pocket expenses incurred directly in connection with the
negotiation, preparation and performance of this Agreement.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement to
the contrary, if any condition specified in Section 8.1 or Section 8.2 has not
been satisfied, Seller or Buyer, in addition to any other rights which may be
available to it, shall have the right to waive any such condition that is for
its benefit and to require the other party hereto to proceed with the Closing.
XI.TAX MATTERS.
11.1. TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Seller, whichever are responsible for payment of such Tax under
applicable law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that such responsible party determines that no action
should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
<PAGE> 19
"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax, any Pre-
Closing Tax Period of the Company.
11.2 SECTION 338(H)(10) ELECTION. Seller and the Company will join
with Buyer in making an election under Section 338(h)(10) of the Code and
Section 1.338(h)(10)-1 of the Treasury Regulations promulgated under the Code,
and any corresponding election under state, local and foreign tax laws, with
respect to the purchase and sale of the Stock hereunder (a "Section 338(h)(10)
Election"). Seller will include any income, gain, loss, education or other tax
item resulting from the Section 338(h)(10) Election on his Tax returns to the
extent permitted by applicable laws. Seller will also pay any Tax imposed on
the Company attributable to the making of the Section 338(h)(10) Election,
including, but not limited to, (i) any Tax imposed under Code Section 1374,
(ii) any tax imposed under Reg. Section 1.338(h)(10)-1(e)(5), or (iii) any
state, local or foreign Tax imposed on the Company's gain, and Seller will
indemnify Buyer and the Company against any liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys fees and expenses), losses, damages, settlements, assessments or
judgments arising out of any failure to pay any such Taxes. The Company and
Seller will not revoke the Company's election to be taxed as an S corporation
within the meaning of Code Section 1361 and 1362. The Company and Seller will
not take or allow any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of Code
Sections 1361 and 1362. Buyer and Seller agree to jointly execute Form 8023-A
and all attachments required to be filed therewith, and to take such further
action as is necessary to make the Section 338(h)(10) Election.
11.3 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that the
purchase price paid to Seller hereunder and the liabilities of the Company
(plus other relevant items) will be allocated to the assets of the Company for
all purposes (including Tax and financial accounting purposes) as mutually
determined by Buyer and Seller in accordance with applicable income tax laws
and regulations, which allocation shall be set forth on Schedule 11.3 attached
hereto. Buyer and Seller will file, and will cause the Company to file, all
Tax Returns and information reports in a manner consistent with such
allocations.
11.4 FILING OF SHORT PERIOD RETURNS. Buyer and Seller shall treat and
cause the Company to treat the Closing Date as the last day of the taxable
period in which the Company is an S corporation, as defined under the Code.
All Tax returns of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
<PAGE> 20
Year Returns"), shall be filed accordingly. In accordance with Section
1362(e)(6)(D) and related regulations of the Code, the books of the Company
shall be closed effective the Closing Date. Seller will cause its accounting
firm to prepare, at Seller's expense, the S Short Year Returns.
11.5. COVENANTS.
(a) Without the prior written consent of Buyer, Seller shall
not cause the Company to make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file any
amended Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period applicable to any Tax claim or assessment
or take or omit to take any other action, if any such action or omission would
have the effect of increasing the Tax liability of the Company or Buyer.
(b) All Returns not required to be filed on or before the date
hereof (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in connection
with this Agreement (including any real property transfer Tax and any similar
Tax) shall be accrued by the Company on the Effective Date Balance Sheet and be
paid by the Company when due (including any applicable extensions), and the
Company will, at Seller' expense, file all necessary Tax returns and other
documentation with respect to all such Taxes and fees.
11.6. COOPERATION ON TAX MATTERS.
(a) Buyer and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of any Tax return, statement, report or form (including
any report required pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding. Buyer
and Stockholders shall cause the Company to: (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
Pre-Closing Tax Period, and to abide by all record retention requirements of
any Taxing Authority or any record retention agreements entered into with any
Taxing Authority, and (ii) to give Seller reasonable written notice prior to
destroying or discarding any such books and records and, if Seller so request,
Buyer shall allow Seller to take possession of such books and records.
(b) Buyer and Seller further agree, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
<PAGE> 21
11.7. TAX INDEMNIFICATION. Seller hereby jointly and severally
indemnify Buyer against and agree to hold Buyer harmless from any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Section 11.5, and (iii) any liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss"). Buyer shall
give Seller ten days notice of any claim of Loss, and Seller shall have the
opportunity to defend Buyer in accordance with Section 9.4 hereof.
11.8 PURCHASE PRICE ADJUSTMENT. Any amount paid by Seller, Buyer or
the Company under Section 11.7 will be treated as an adjustment to the relevant
purchase price for all Tax purposes unless a Final Determination causes any
such amount not to constitute an adjustment to the relevant purchase price. In
the event of such a Final Determination, Buyer, the Company or Seller, as the
case may be, shall pay an amount that reflects the hypothetical Tax
consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an item that affects more than one
Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment
required to be made by Buyer or Seller under Section 9 that is not made when
due shall bear interest at the rate per annum determined, from time to time,
under the provision of Section 6621(a)(2) of the Code for each day until paid.
11.9. SURVIVAL. The provisions of this Article 11 with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in or made in connection with this Agreement shall
survive the Closing.
12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
<PAGE> 22
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules and
Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is invalid,
unenforceable or illegal in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such invalidity, unenforceability or
illegality without affecting the remaining provisions hereof and without
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection cross-
references are to articles, sections and subsections within this Agreement. As
used herein, the term "person" shall mean any corporation, limited liability
company, partnership, venture, proprietorship, trust, benefit plan or other
entity or enterprise.
12.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to Seller: Warren F. Kruger
Julie S. Kruger
2100 S. Utica, Suite 310
Tulsa, Oklahoma 74114
with a copy to: William W. Pritchard, Esq.
Hall, Estill, Hardwick, Gable, Golden
& Nelson
320 South Boston Ave., Suite 400
Tulsa, Oklahoma 74103
<PAGE> 23
to Buyer: A.J. Lewis III, President
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
with a copy to: Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. Seller and Buyer mutually represent and agree
with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, including without limitation any
alleged violations of securities laws, shall be settled by binding arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association in Tulsa, Oklahoma, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof, and shall
not be appealable. Judicial proceedings may be commenced only to enforce this
arbitration agreement or to enforce the results of arbitration; provided that
such prohibition shall not apply in the event that a court ordered injunction
is an appropriate remedy for a breach of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
(STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS)
<PAGE> 24
[STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By: /s/ James F. Stuart
JAMES F. STUART, Chief Executive
Officer
SELLER:
/s/ Warren F. Kruger
WARREN F. KRUGER
/s/ Julie S. Kruger
JULIE S. KRUGER
<PAGE> 25
LIST OF SCHEDULES AND EXHIBITS
Exhibit 2.2(b) Escrow Agreement
Schedule 2.2(c) Certain Excluded Liabilities
Exhibit 2.2(c) Undertaking Agreement
Exhibit 5.9 Noncompetition Agreement
Exhibit 5.10 Investment Letter
Exhibit 8.1(f) Opinion of Counsel
Schedule 11.3 Allocation Schedule
Seller's Disclosure Memorandum
<PAGE> 26
EXHIBIT 2.2(b)
ESCROW AGREEMENT
This Escrow Agreement, dated as of September 12, 1997 (the "Closing
Date"), is entered into by and among Warren F. Kruger and Julie S. Kruger
(collectively, "Seller"), Packaged Ice, Inc., a Texas corporation ("Buyer") and
F&M Bank & Trust, as escrow agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Stock Purchase Agreement
by and among Buyer and Seller dated September 12, 1997 (the "Stock Purchase
Agreement"). Capitalized terms used in this Escrow Agreement without
definition shall have the respective meanings given to them in the Stock
Purchase Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Seller is depositing with Escrow Agent 12,750 shares of the $.01
par value common stock of Packaged Ice, Inc. ("Common Stock")(such Common Stock
being the "Escrow Fund"), for purpose of providing for indemnification claims
for Buyer's Damages under the Agreement. Escrow Agent acknowledges receipt
thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. INVESTMENT OF FUNDS
Except as Buyer and Seller may from time to time jointly instruct Escrow
Agent in writing, the Escrow Fund shall be remain invested in the Common Stock
until disbursement of the entire Escrow Fund.
3. CLAIMS
(a) From time to time on or before August 30, 1998, Buyer may give
notice (a "Notice of Loss") to Representative and Escrow Agent specifying in
reasonable detail the nature and dollar amount of any claim (a "Claim") for
Damages it may have under the Stock Purchase Agreement. If Seller gives notice
to Buyer and Escrow Agent disputing any Claim (a "Counter Notice") within 30
days following receipt by Escrow Agent of the Notice of Loss regarding such
Claim, such Claim shall be resolved as provided in Section 3.(b) of this Escrow
Agreement. If no Counter Notice is received by Escrow Agent within such 30-day
period, then the dollar amount of Damages claimed by Buyer as set forth in its
Notice of Loss shall be deemed established for purposes of this Escrow
Agreement and the Stock Purchase Agreement and, at the end of such 30-day
period, Escrow Agent shall pay to Buyer the dollar amount claimed in the Notice
of Loss from (and only to the extent of) the Escrow Fund. Escrow Agent shall
not inquire into or consider whether a Claim complies with the requirements of
the Stock Purchase Agreement.
<PAGE> 27
(b) If a Counter Notice is given with respect to a claim, Escrow Agent
shall make payment with respect thereto only in accordance with (i) joint
written instructions of Buyer and Seller (ii) a final non-appealable or
reviewable arbitrator's award or (iii) a final non-appealable order of a court
of competent jurisdiction. Any award or court order shall be accompanied by a
legal opinion by counsel for the presenting party satisfactory to Escrow Agent
to the effect that award or the order is final and non-appealable. Escrow Agent
shall act on such court order and legal opinion without further question.
(c) For purposes of this Agreement the Common Stock shall be valued at
$10.00 per share.
(d) If Buyer is entitled to receive payment out of the Escrow Fund,
Seller shall have the right to contribute cash to the Escrow Fund to cover such
payment and to withdraw Common Stock equal in value to the cash contributed.
Buyer's right to contribute cash shall be limited to Section 3.(b) damages.
Escrow Agent shall deliver stock based on value stated herein.
4. CASH DIVIDENDS AND VOTING RIGHTS
Each Seller in whose name shares of Common Stock held as part of the
Escrow Fund are registered shall receive all cash dividends declared and paid
on such shares throughout the period such shares are held in Escrow in the same
manner as any other shareholder of Buyer which dividends shall at no time be a
part of the Escrow. Each Seller shall retain all voting rights with respect to
his or her shares during the term of this Agreement.
5. TERMINATION OF ESCROW
On August 31, 1998, Escrow Agent shall pay and distribute the assets
then present in the Escrow Fund pro rata to each of the Sellers, unless any
Claims are then pending, in which case an amount equal to the aggregate dollar
amount of such Claims (as shown in the Notices of Loss for such Claims) shall
be retained by Escrow Agent in the Escrow Fund (and the balance paid and/or
distributed to Seller) until satisfactory resolution of such Claim in
accordance with Section 3(b) above. This Escrow Agreement shall terminate upon
the occurrence of the earlier of (a) agreement on the part of Buyer and (b)
payment by the Escrow Agent of all of the Escrow Fund in accordance with this
Escrow Agreement. Notwithstanding any termination of this Escrow Agreement,
the provisions of Sections 9, 10, 11, 12 and 19 shall survive such termination
and remain in full force and effect.
6. ACCOUNT STATEMENTS
Receipt of the Escrow Fund shall be confirmed by Escrow Agent as soon as
practicable by account statement, and any discrepancies in any such account
statement shall be noted by Buyer and Representative (defined in Section) 21 to
Escrow Agent within 30 calendar days after receipt thereof. Failure to inform
Escrow Agent in writing of any discrepancies in any such
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account statement within such 30 day period shall be conclusively deemed
confirmation of such account statement in its entirety. For purposes of this
Section 6, each account statement shall be deemed to have been received by the
party to whom directed on the earlier to occur of (i) actual receipt thereof
and (ii) three "Business Days" (hereinafter defined) after the deposit thereof
in the United States Mail, postage prepaid. The term "Business Day" shall mean
any day of the year, excluding Saturday, Sunday and any other day on which
national banks are required or authorized to close in San Antonio, Texas.
7. TAX MATTERS
Seller shall provide Escrow Agent with its taxpayer identification
number documented by an appropriate Form W8 or Form W9 upon execution of this
Escrow Agreement. Failure to so provide such forms may prevent or delay
disbursements from the Escrow Fund and may also result in the assessment of a
penalty and Escrow Agent's being required to withhold tax on any interest or
other income earned on the Escrow Fund. Any payments of income shall be
subject to applicable withholding regulations then in force in the United
States or any other jurisdiction, as applicable.
8. SCOPE OF UNDERTAKING.
Escrow Agent's duties and responsibilities in connection with this
Escrow Agreement shall be purely ministerial and shall be limited to those
expressly set forth in this Escrow Agreement. Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Escrow
Agreement or the Escrow Fund and shall not be required to deliver the Escrow
Fund or any part thereof or take any action with respect to any matters that
might arise in connection therewith, other than to receive, hold, invest,
reinvest and deliver the Escrow Fund as herein provided. Without limiting the
generality of the foregoing, it is hereby expressly agreed and stipulated by
the parties hereto the Escrow Agent shall not be required to exercise any
discretion hereunder and shall have no investment or management responsibility
and, accordingly, shall have no duty to, or liability for its failure to,
provide investment recommendations or investment advice to the Buyer, Seller or
Representative or any of them. Escrow Agent shall not be liable for any error
in judgment, any act or omission, any mistake of law or fact, or for anything
it may do or refrain from doing in connection herewith, except for, subject to
Section 9 hereinbelow, its own willful misconduct, bad faith or gross
negligence. It is the intention of the parties hereto that Escrow Agent shall
never be required to use, advance or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder.
9. RELIANCE; LIABILITY
Escrow Agent may rely on, and shall not be liable for acting or
refraining from acting in accordance with, any written notice, instruction or
request or other paper furnished to it hereunder or pursuant hereto and
believed by it to have been signed or presented by the proper
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<PAGE> 29
party or parties. Escrow Agent shall be responsible for holding, investing,
reinvesting and disbursing the Escrow Fund pursuant to this Escrow Agreement;
provided, however, that Escrow Agent shall have no liability for any loss
arising from any cause beyond its control, including, but no limited to, the
following: (a) acts of God, force majeure, including, without limitation, war
(whether or not declared or existing), revolution, insurrection, riot, civil
commotion, accident, fire, explosion, stoppage of labor, strikes and other
differences with employees; (b) the act, failure or neglect of any Buyer,
Shareholder or Representative of or any agent or correspondent of any of them;
(c) any delay, error, omission or default of any mail, courier, telegraph,
cable or wireless agency or separator; or (d) the acts or edicts of any
government or governmental agency or other group or entity exercising
governmental powers. Escrow Agent is not responsible or liable in any manner
whatsoever for the sufficiency, correctness, genuineness or validity of the
subject matter of this Escrow Agreement or any part hereof or for the
transactions requiring or underlying the execution of this Escrow Agreement,
the form or execution hereof or for the identity or authority of any person
executing the Escrow Agreement on behalf of the Buyer, Shareholder and
Representative or depositing the Escrow Fund.
10. RIGHT OF INTERPLEADER
Subject to Section 19 hereof and without waiving the same, should any
controversy arise involving the parties hereto or any of them or any other
person, firm or entity and such controversy results in claims and demands
having made by them, or any of them in connection with or for any part of the
Escrow Fund, or should a substitute escrow agent fail to be designated as
provided in Section 15 hereof, Escrow Agent shall have the right, but not the
obligation, either to (a) withhold delivery of the Escrow Fund until the
controversy is resolved or the conflicting demands are withdrawn or (b)
institute a petition for interpleader in any court of competent jurisdiction to
determine the rights of the parties hereto. The parties hereto agree that to
the extent such controversy is between the Buyer and Seller, such controversy
shall be resolved in accordance with Section 19 and the parties hereto shall
take such actions as may be necessary to cause the court in which such petition
for interpleader has been filed to recognize and enforce the arbitrator's
award. In the event Escrow Agent is a party to any dispute, Escrow Agent shall
have the additional right to refer such controversy to binding arbitration.
Should a petition for interpleader be instituted, or should Escrow Agent be
threatened with litigation or become involved in litigation or binding
arbitration in any manner whatsoever in connection with this Escrow Agreement
or the Escrow Fund, Buyer and Seller hereby jointly and severally agree to
reimburse Escrow Agent for its reasonable attorney's fees and any and all other
reasonable expenses, losses, costs and damages incurred by Escrow Agent in
connection with or resulting from such threatened or actual litigation or
arbitration except to the extent arising out of the Escrow Agent's willful
misconduct, bad faith or gross negligence.
11. INDEMNIFICATION
Buyer and Seller hereby jointly and severally indemnify Escrow Agent,
its officers, directors, partners, employees and agents (each herein called an
"Indemnified Party") against,
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<PAGE> 30
and hold each Indemnified Party harmless from, any and all expenses, including,
without limitation, attorney's fees and court costs, losses, costs, damages and
claims, including, but not limited to, costs of investigation, litigation and
arbitration, tax liability and loss on investments suffered or incurred by any
Indemnified Party in connection with or arising from or out of this Escrow
Agreement, except such acts or omissions as may result from the willful
misconduct, bad faith or gross negligence of such Indemnified Party. IT IS THE
EXPRESS INTENT OF EACH OF BUYER AND SELLER TO INDEMNIFY EACH OF THE
INDEMNIFIED PARTIES FOR, AND HOLD THEM HARMLESS AGAINST, THEIR OWN NEGLIGENT
ACTS OR OMISSION TO THE EXTENT PERMITTED BY APPLICABLE LAW.
12. COMPENSATION AND REIMBURSEMENT OF EXPENSES
Buyer and Seller hereby agree, jointly and severally, (i) to pay Escrow
Agent for its services hereunder in accordance with the fee schedule attached
hereto as Exhibit A and (ii) to pay all reasonable expenses incurred by Escrow
Agent in connection with the performance of its duties and enforcement of its
rights hereunder and otherwise in connection with the preparation, operation,
administration and enforcement of this Escrow Agreement, including, without
limitation, reasonable attorney's fees, brokerage costs and related expenses
incurred by Escrow Agent. No increase in the rate of any fee charged by the
Escrow Agent shall be valid hereunder unless previously approved in writing by
Buyer and Representative. The fee of $1,500 for the initial one year period
shall be paid to the Escrow Agent, one-half (1/2) by Seller and one-half (1/2)
by Buyer upon execution of this Escrow Agreement. As between Buyer and Seller,
any such compensation and reimbursement to which Escrow Agent is entitled
shall be borne 50% by Buyer and 50% by Seller.
13. NOTICES
Any notice or other communication required or permitted to be given
under this Escrow Agreement by any party hereto to any other party hereto shall
be considered as properly given if in writing and (a) delivered against receipt
therefor, (b) mailed by registered or certified mail, return receipt requested
and postage prepaid of (c) sent by facsimile, in each case to the address or
facsimile number, as the case may be, set forth below:
If to Buyer: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
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<PAGE> 31
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Seller and/or Warren F. Kruger
Representative: 2100 S. Utica, Suite 310
Tulsa, OK 74114
Facsimile No.: (918) 749-0404
with a copy to: William W. Pritchard
Hall, Estill, Hardwick, Gable, Golden & Nelson
320 South Boston Avenue, Suite 400
Tulsa, OK 74103
Facsimile: (918) 594-0496
Escrow Agent: F&M Bank & Trust
Attn: Bill Grant, Trust Dept.
1330 S. Harvard
Tulsa, OK 74112
Facsimile: (918) 743-6256
Except to the extent otherwise provided in Section 6 hereinabove delivery of
any communication given in accordance herewith shall be effective only upon
actual receipt thereof by the party or parties to whom such communication is
directed. Any party to this Escrow Agreement may change the address to which
communications hereunder are to be directed by giving written notice to the
other party or parties hereto in the manner provided in this section.
Notwithstanding the foregoing, any notice hereunder delivered to Representative
with respect to a Claim shall only be given in accordance with clauses (a) and
(b) above, and notice to Representative by facsimile with respect to a Claim
shall not be deemed given for purposes of this Escrow Agreement.
14. CONSULTATION WITH LEGAL COUNSEL
Escrow Agent may consult with its counsel or other counsel satisfactory
to it concerning any question relating to its duties or responsibilities
hereunder or otherwise in connection herewith and shall not be liable for any
action taken, suffered or omitted by it in good faith upon the advice of such
counsel.
15. RESIGNATION
The Escrow Agent may removed at any time with the written consent of
Buyer and Representative. Escrow Agent may resign hereunder upon thirty (30)
days' prior notice to the
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Buyer and Representative. If the Escrow Agent shall resign or be removed,
Buyer and Representative shall appoint, as soon as possible, a successor escrow
agent. Upon the effective date of such resignation or removal, Escrow Agent
shall deliver the Escrow Fund to any substitute escrow agent designated by
Buyer and Representative in writing. Any successor escrow agent shall be
deemed to have accepted the responsibilities hereunder upon execution of this
Escrow Agreement and delivery of such executed document to Buyer and
Representative. If Buyer and Representative fail to designate a substitute
escrow agent within thirty (30) days after the giving of such notice, Escrow
Agent may institute a petition for interpleader. Escrow Agent's sole
responsibility after such 30-day notice period expires shall be to hold the
Escrow Fund (without any obligation to reinvest the same) and to deliver the
same to a designated substitute escrow agent, if any, or in accordance with the
directions of a final order or judgment of a court of competent jurisdiction,
at which time of delivery Escrow Agent's obligations hereunder shall cease and
terminate.
16. ASSIGNMENT
This Escrow Agreement shall not be assigned by either of the parties
without the prior written consent of Escrow Agent and the non-assigning party
(such assigns of any of Buyer, Seller or Representative to which Escrow Agent
consents, if any, and Escrow Agent's assigns being hereinafter referred to
collectively as "Permitted Assigns").
17. SEVERABILITY
If one or more of the provisions hereof shall for any reason be held to
be invalid, illegal or unenforceable in any respect under applicable law, such
invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Escrow Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein,
and the remaining provisions hereof shall be given full force and effect.
18. GENERAL
The section headings contained in this Escrow Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Escrow Agreement. This Escrow Agreement and any
affidavit, certificate, instrument, agreement or other document required to be
provided hereunder may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
but one and the same instrument. Unless the context shall otherwise required,
the singular shall include the plural and vice-versa, and each pronoun in any
gender shall include all other genders. The terms and provisions of this
Escrow Agreement constitute the entire agreement among the parties hereto in
respect of the subject matter hereof, and neither Buyer, Seller, Representative
nor Escrow Agent has relied on any representations or agreements of the other,
except as specifically set forth in this Escrow Agreement or, with respect to
the Buyer and Seller, the Stock Purchase Agreement. This Escrow Agreement or
any provision hereof may be amended, modified, waived or
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terminated only by written instrument duly signed by the parties hereto. This
Escrow Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective heirs, devisees, executor, administrators,
personal representatives, successors, trustees, receivers and Permitted
Assigns. This Escrow Agreement is for the sole and exclusive benefit of Buyer,
Seller, Representative and the Escrow Agent, and nothing in this Escrow
Agreement, express or implied, is intended to confer or shall be construed as
conferring upon any other person any rights, remedies or any other type or
types of benefits.
19. ARBITRATION
All disputes hereunder between or among Seller and Buyer shall be
settled in accordance with the provisions of the Stock Purchase Agreement
governing arbitration.
20. WAIVER
The rights and remedies of the parties to this Escrow Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Escrow Agreement or the
documents referred to in this Escrow Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Escrow Agreement or the documents referred to in
this Escrow Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party; (b) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Escrow Agreement or the
documents referred to in this Escrow Agreement.
21. REPRESENTATIVE
(a) Seller shall act through the Representative, who shall be deemed
authorized to act on behalf of Seller in the manner set forth in this Section
21. Seller has selected Warren F. Kruger as the initial Representative.
(b) A Representative may resign at any time effective upon giving
written notice to each of the parties hereto. The Seller may at any time
remove a Representative by giving ten days' written notice to him. If a
Representative shall resign or be removed, the Seller may by written election
appoint any number of successor Representatives and shall so appoint a
successor if the Representative in question was the only Representative in
office. The Representative shall promptly notify Buyer in writing of the
resignation or removal of any Representative and of the appointment of any
successor Representative.
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(c) With respect to matters involving the Seller, Buyer and Escrow
Agent shall rely conclusively upon any written instruction of a
Representative. Buyer and Escrow Agent shall rely conclusively on the
authority of a Representative designated herein or by the Seller until Buyer
and Escrow Agent receive a written instruction naming another person as
Representative to succeed to that position in the place of the existing
Representative, which instruction shall be signed by the Seller.
(d) The Representative may take any action on behalf of the Seller
which it deems appropriate to take with respect to any claim for Damages
("Claim") received by it pursuant to the Stock Purchase Agreement.
(e) The Representative may on behalf of the Seller, at any time and
without regard to whether or not proceedings for the resolution or
determination thereof have commenced, agree upon, resolve, settle, or
compromise any Claim under the Stock Purchase Agreement in the sole and
absolute discretion of the Representative.
(f) The Representative may on behalf of the Seller, in its sole and
absolute discretion, pursue, elect not to pursue, or terminate the pursuit of
any Claim or issue under the Stock Purchase Agreement, including the conduct of
arbitration of an litigation of third party claims, as provided herein and in
the Agreement.
(g) Under no circumstances shall the Representative be liable to
Seller for any act it may take in its capacity as Representative, or for the
failure to take any action, or for the actions of Seller, or for any damage,
loss or expense suffered or incurred resulting from the exercise of the
Representative's sole and absolute discretion in acting hereunder, except only
for acts of gross negligence, bad faith or willful misconduct.
(h) The Representative shall be and hereby is authorized to retain
counsel, accountants, or other professional assistants to assist in determining
the validity of claims or in otherwise acting hereunder as a Representative.
Any such expenses shall be borne by the Seller and may be taken from the
proceeds of the Escrow Fund to be delivered to such Seller.
(i) The Representative shall not be liable for any expense incurred
on behalf of the Seller or any of them in protesting, analyzing, resisting,
arbitrating, litigating, negotiating with respect to, or defending any claim
made in connection with this Agreement, or for any amounts otherwise expended
in acting hereunder.
(j) On demand by the Representative, Seller shall contribute all sums
demanded to pay the fees and expense incurred by the Representative on behalf
of the Seller in acting hereunder.
(k) The Representative shall keep the Seller reasonably informed of
actions taken by it in acting hereunder.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: PACKAGED ICE, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
SELLER: --------------------------------
WARREN F. KRUGER
--------------------------------
JULIE S. KRUGER
ESCROW AGENT: F&M BANK & TRUST
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 36
Exhibit 2.2(c)
UNDERTAKING AGREEMENT
THIS UNDERTAKING AGREEMENT ("Undertaking"), executed and delivered on
this 12th day of September, 1997, by and among Warren F. Kruger and Julie S.
Kruger (collectively, the "Sellers") in favor of Packaged Ice, Inc. a Texas
corporation ("PI"), Century Ice of Tulsa, Inc., an Oklahoma corporation ("CIT")
and Ice Cold Enterprises, Inc. ("ICE" and together with PI and CIT, the
"Company").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement dated as of September
12, 1997, between Sellers and PI (the "Agreement"), Sellers have concurrently
herewith sold, conveyed, assigned, transferred and delivered to PI all of the
outstanding capital stock of ICE and CIT; and
WHEREAS, in partial consideration therefor, the Agreement requires that
Sellers undertake to assume and to agree to perform, pay or discharge or cause
to be performed, paid or discharged certain liabilities and obligations of ICE
and CIT;
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
Sellers agree as follows:
1. Sellers hereby jointly and severally undertake, assume and agree
to perform, pay or discharge in accordance with their terms, to the extent not
heretofore performed, paid or discharged and subject to the limitations
contained in the Undertaking, the liabilities and obligations of ICE and CIT
which are listed or described in Schedule 1 hereto, but only to the extent that
such liabilities and obligations are so listed or described in such Schedule.
2. Other than as specifically set forth in this Undertaking, the
Sellers assume no liability or obligation of any kind, character or description
of Company or any other person.
<PAGE> 37
3. The Sellers agree to indemnify Company for and hold it harmless
from and against all losses, damages, liabilities, costs and expenses
(including, but not limited to, reasonable attorneys' fees and expenses)
incurred by Company as a result of the Sellers' failure to perform, pay or
discharge the liabilities and obligations expressly assumed by the Seller
pursuant hereto.
4. This Undertaking shall be enforceable against the successors and
assigns of the Sellers and shall inure to the benefit of the successors and
assigns of Company.
IN WITNESS WHEREOF, this Undertaking has been duly executed and
delivered by the Sellers on the date first above written.
/s/ Warren F. Kruger
WARREN F. KRUGER
/s/ Julie S. Kruger by Warren F. Kruger
JULIE S. KRUGER
<PAGE> 38
SCHEDULE 1 TO
UNDERTAKING
LIABILITIES AND OBLIGATIONS ASSUMED
The liabilities and obligations of ICE and CIT as of the Closing Date
including, without limitation, (a) current portion of long-term debt, (b)
accounts payable, (c) employee compensation, (d), accrued expenses, (e)
long-term debt, net of current portion, (f) lease and contractual obligations,
(g) any federal or state income or franchise taxes, or any withholding tax
under sections 1441 and 1442 of the Internal Revenue Code of 1986, as amended
(the "Code") or under any state law, of ICE or CIT or their predecessors
relating to any period prior to the Closing Date, (h) pending and threatened
claims, litigation and administrative actions as of the Closing Date, and (i)
any attorneys', accountants', broker's or finder's fees, taxes or other costs
or expenses of ICE or CIT incurred in connection with the Agreement or the
transactions contemplated thereby, save and except: (1) the employment
agreements with Greg Trickel and Harry Presson, (2) the Sapulpa Lease
Agreement, (3) one (1) forklift lease, (4) certain oral agreements pertaining
to discount rebates and commission incurred in the normal course of business
and which survive the Closing Date, namely the City of Tulsa Ice Contract
(pressed block ice for water cans), Broken Arrow Public Schools Agreement (bag
ice quote), cup dispenser agreements, and as well as certain written
agreements, such as the Horner Letter pertaining to price confirmation, Wal-
Mart Letter pertaining to price confirmation, and the prepaid lease agreements
with Yorktown regarding a cellular tower, and (5) garnishment actions against
certain employees as follows:
3
<PAGE> 39
<TABLE>
<CAPTION>
EMPLOYEE PAID TO AMOUNT WITHHELD
- -------- ------- ---------------
<S> <C> <C>
Patrick Grimes (Tulsa) U.S. Dept. of Education $19/week
(For a total of
$22,118.05)
George Scott (Tulsa) U.S. Dept. of Education 10% of disposable wages
(For a total of
$1,733.66)
Mike Forrest (Muskogee) Dept. of Human Services $378/month
(Until further notice)
</TABLE>
4
<PAGE> 40
EXHIBIT 5.9
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of
September 12, 1997, by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Century Ice of Tulsa, Inc. and Ice Cold Enterprises, Inc., each an
Oklahoma corporation (collectively, the "Company") and Warren F. Kruger ("W.
Kruger") and Julie S. Kruger ("J. Kruger").
RECITALS
WHEREAS, W. Kruger and J. Kruger have sold all of the stock they own in
the Company to Parent pursuant to that certain Stock Purchase Agreement dated
as of September 12, 1997 (the "Stock Purchase Agreement"); and
WHEREAS, Section 5.9 of the Stock Purchase Agreement requires that W.
Kruger and J. Kruger execute and deliver a noncompetition agreement as a
condition to the consummation of the transactions contemplated by the Stock
Purchase Agreement.
AGREEMENT
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. ACKNOWLEDGMENTS BY W. KRUGER AND J. KRUGER.
W. Kruger and J. Kruger understand, acknowledge and agree that (a) the
Company and Parent have required that W. Kruger and J. Kruger make the
covenants set forth in Sections 2 and 3 of this Agreement as a condition to
Parent's acquisition of the Stock (as defined in the Stock Purchase Agreement);
(b) the provisions of Sections 2 and 3 of this Agreement are reasonable and do
not impose a greater restraint on W. Kruger and J. Kruger than is necessary to
protect the goodwill or other business interest of the Company and Parent; (c)
the provisions set forth in Sections 2 and 3 are not oppressive to W. Kruger
and J. Kruger nor injurious to the public; and (d) the Company and Parent would
be irreparably damaged if W. Kruger or J. Kruger were to breach the covenants
set forth in Sections 2 and 3 of this Agreement.
2. CONFIDENTIAL INFORMATION.
W. Kruger and J. Kruger acknowledge and agree that all confidential
information known or obtained by W. Kruger and J. Kruger, whether before or
after the date hereof, relating to the Company is now the property of the
Company. Therefore, W. Kruger and J. Kruger agree that they will not, at any
time, disclose to any unauthorized persons or use for their own account or for
the benefit of any third party any confidential information, whether W. Kruger
and J. Kruger have such information in their respective memory or embodied in
writing or other physical form, without the written consent of the Company of
Parent, unless and to the extent that such
4
<PAGE> 41
confidential information (i) is or becomes generally known to and available for
use by the public, other than as a result of the fault of W. Kruger or J.
Kruger or any other person bound by a duty of confidentiality to Parent of the
Company, (ii) becomes available to W. Kruger or J. Kruger on a non-confidential
basis from a source other than Parent of the Company, provided that such source
is not bound by a confidentiality agreement or other contractual, legal or
fiduciary obligation of confidentiality to Parent or the Company, or (iii) W.
Kruger and J. Kruger or any of their representatives are compelled to disclose
by judicial or administrative process or, in the opinion of W. Kruger's or J.
Kruger's respective or joint counsel, by other mandatory requirements of law.
W. Kruger and J. Kruger agree to deliver to Parent or the Company at any time
Parent or the Company may request, all documents, memoranda, notes, plans,
records, reports, and other documentation, models, components, devices, or
computer software, whether embodied in a disk or in other form (and all copies
of all of the foregoing, excluding W. Kruger's and J. Kruger's personal copies
of the transactional documents related to the aforementioned Stock Purchase
Agreement), relating to the Company that W. Kruger and J. Kruger may then
possess or have under their respective or joint control. W. Kruger's and J.
Kruger's obligations with respect to this Section 2 shall terminate five years
after the date of this Agreement.
3. NONCOMPETITION.
As an inducement for Parent to enter into and consummate the Stock
Purchase Agreement, and in exchange for the consideration paid to W. Kruger and
J. Kruger under the Stock Purchase Agreement, W. Kruger and J. Kruger agree
that:
(a) For a period of five (5) years after the date hereof within the
State of Oklahoma or any state bordering Oklahoma:
(i) Except with respect to services provided to the Company or
Parent, W. Kruger and J. Kruger will not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control or participate in the
ownership, management, operation, financing or control of, be employed by,
associated with, or in any manner connected with, lend W. Kruger's and/or J.
Kruger's name or any similar name to, lend W. Kruger's and/or J. Kruger's
credit to, or render services or advice to, any business whose products or
activities compete in whole or in part with the products or activities of the
Company or Parent as it relates to the production, distribution,
transportation, and sale of ice products, as of the date hereof; provided,
however, that W. Kruger and J. Kruger may purchase or otherwise acquire up to
(but not more than) one percent of any class of securities of any enterprise
(but without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of
1934. W. Kruger and J. Kruger agree that this covenant is reasonable with
respect to its duration, geographical area, and scope;
(ii) W. Kruger and J. Kruger will not, directly or indirectly,
individually or for any other person (a) solicit or attempt to solicit any
employee of Parent or the Company in attempt to encourage the employee to leave
the employ of Parent or the Company, (b) in any way interfere with the
relationship between Parent, the Company and any employee of Parent or the
5
<PAGE> 42
Company, (c) knowingly employ, or otherwise engage as an employee, independent
contractor, or otherwise any employee of Parent or the Company or (d) induce or
attempt to induce any customer, supplier, licensee, or business relation of
Parent or the Company to cease doing business with Parent or the Company, or in
any way interfere with the relationship between any customer, supplier,
licensee, or business relation of Parent or the Company; and
(iii) W. Kruger and J. Kruger will not, directly or indirectly,
either for itself or any other person, solicit the business of any person known
to W. Kruger and J. Kruger to be a customer or prospective customer of Parent
or the Company, whether or not W. Kruger or J. Kruger had personal contact with
such person, with respect to products or activities which compete in whole or
in part with the products or activities of Parent, the Company or any
subsidiary thereof.
(b) In the event of a breach by W. Kruger and J. Kruger of any
covenant set forth in Subsection 3(a) of this Agreement, the term of such
covenant will be extended by the period of the duration of such breach;
4. REMEDIES.
If either W. Kruger and/or J. Kruger breaches the covenants set forth
in Sections 2 or 3 of this Agreement, Parent and the Company will be entitled
to the following remedies;
(a) Damages from W. Kruger and J. Kruger; and
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 2 and 3 of this Agreement, it being agreed that money damages alone
may be inadequate to compensate the Parent and the Company and would be an
inadequate remedy for such breach.
(c) Prior to commencing any legal action, Parent and/or the Company
shall first give notice, as provided for herein, to W. Kruger and J. Kruger.
Upon the giving of notice by Parent and/or the Company, W. Kruger and/or J.
Kruger shall have no more than thirty (30) days to cure whatever breach of this
Agreement is alleged by Parent and/or the Company.
5. SUCCESSORS AND ASSIGNS.
This Agreement will be binding upon W. Kruger and J. Kruger and their
respective assigns, heirs and legal representatives and will inure to the
benefit of Parent and the Company and their affiliates, successors and assigns.
Neither this Agreement nor any rights or obligations hereunder shall be
assignable by W. Kruger and J. Kruger. the Company and Parent shall have the
right to assign their rights under this Agreement to any entity which acquires
all or substantially all of the assets of the Company or Parent.
6
<PAGE> 43
6. WAIVER.
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. To the maximum extent permitted by applicable law: (a) no
claim or right arising out of this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing and signed by the other party; (b) no waiver that may be given by a
party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of
any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
7. GOVERNING LAW.
This Agreement will be governed by the laws of the State of Oklahoma.
8. JURISDICTION.
The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in this Agreement upon the District Court of Tulsa
County, Oklahoma.
9. SEVERABILITY.
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by law or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of
this Agreement. If any of the covenants set forth in this Agreement are held by
a court of competent jurisdiction to contain limitations as to time,
geographical area or scope of activity to be restrained that are not reasonable
and impose a greater restraint than is necessary to protect the goodwill or
other business interest of the Company or Parent, the court shall reform the
covenants to the extent necessary to cause the limitations contained in the
covenants as to time, geographical area and scope of activity to be restrained
to be reasonable and to impose a restraint that is not greater than necessary
to protect the goodwill or other business interest of the Company or Parent and
enforce the covenants as reformed.
10. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
7
<PAGE> 44
11. SECTION HEADINGS, CONSTRUCTION.
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
12. NOTICES.
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when:
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as
a party may designate by notice to other parties):
W. Kruger: Warren F. Kruger
2100 S. Utica, Suite 310
Tulsa, Oklahoma 74114
J. Kruger: Julie S. Kruger
2100 S. Utica, Suite 310
Tulsa, Oklahoma 74114
With a copy to: Hall, Estill, Hardwick, Gable, Golden &
Nelson
Attention: William W. Pritchard, Esq.
320 South Boston Ave., Suite 400
Tulsa, Oklahoma 74103
Parent and the Company: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, President
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
8
<PAGE> 45
13. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement. This Agreement may not be
amended except by a written agreement executed by the party to be charged with
the amendment.
[NONCOMPETITION AGREEMENT SIGNATURE PAGE FOLLOWS]
9
<PAGE> 46
[NONCOMPETITION AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
/s/ Warren F. Kruger
WARREN F. KRUGER
/s/ Julie S. Kruger
JULIE S. KRUGER
THE PARENT:
PACKAGED ICE, INC.
By:/s/ James F. Stuart
JAMES F. STUART, Chief Executive Officer
THE COMPANY:
CENTURY ICE OF TULSA, INC.
By:/s/ James F. Stuart
JAMES F. STUART, Chief Executive Officer
ICE COLD ENTERPRISES, INC.
By:/s/ James F. Stuart
JAMES F. STUART, Chief Executive Officer
10
<PAGE> 47
EXHIBIT 5.10
INVESTMENT LETTER
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING; SIGNIFICANT REPRESENTATIONS
ARE CALLED FOR HEREIN.
PACKAGED ICE, INC.
INVESTMENT LETTER
James F. Stuart, Chief Executive Officer
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Dear Sir:
In connection with the issuance of the $.01 par value Common Stock of
Packaged Ice, Inc., a Texas corporation (the "Company") (pursuant to that
certain document entitled "Stock Purchase Agreement", dated September 12, 1997,
by and among Warren F. Kruger, Julie S. Kruger and the Company, the undersigned
acknowledges that the Company will be relying on the information and
representations with respect to the undersigned set forth herein in determining
whether an investment in the Common Stock is suitable for him or her and
whether the undersigned otherwise qualifies to receive Common Stock. The
undersigned hereby warrants and represents to the Company that the following
statements are true:
(a) The undersigned understands and agrees that the Common Stock
being acquired has not been registered under the Securities Act, and that
accordingly it will not be transferable except as permitted under various
exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. The
undersigned acknowledges that he must bear the economic risk of his investment
in such securities for an indefinite period of time.
(b) The undersigned hereby represents and warrants to the Company
that he is acquiring the Common Stock for investment purposes only, for his own
account, and not as nominee or agent for any other person or entity, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act.
(c) The undersigned represents and warrants that he has knowledge,
skill and experience in financial, business and investment matters relating to
an investment of this type and is capable of evaluating the merits and risks of
such investment and protecting his interest in connection with the acquisition
of the Common Stock. The undersigned acknowledges that the acquisition of the
Common Stock is a speculative investment and involves substantial risks. The
undersigned represents that he has retained, at his own expense, and relied
upon, appropriate professional advice regarding the investment, tax and legal
merits and consequences of owning the Common Stock. The undersigned has the
ability to bear the economic risks of this investment in the Company including
a complete loss of the investment, and the undersigned has no need for
liquidity in such investment.
(d) The undersigned is an "Accredited Investor" within the meaning of
Rule 501(a) of Regulation D of the Securities Act and who either alone or with
his purchaser representative(s) has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the prospective investment within the meaning of Rule 506(b)(2)(ii) of
Regulation D of the Securities Act.
11
<PAGE> 48
(e) The undersigned acknowledges that he has obtained all information
from the Company that he deems to be necessary in connection with his
investment in the Common Stock. The undersigned further acknowledges having
had the opportunity, either personally or through his representatives, to ask
questions of and receive answers from management of the Company concerning the
Company's business and the terms and conditions of the Common Stock and the
transaction in which they are being acquired.
(f) The undersigned is presently a bona fide resident of the state
set forth on the signature page hereof as his "Address". This address and the
Social Security number set forth herein are his true and correct address and
Social Security number. The undersigned has no present intention of becoming a
resident of any other state or jurisdiction.
(g) The information provided to the Company herein is true and
correct in all respects as of the date hereof. The undersigned agrees to
notify the Company immediately if any of the statements made herein shall
become untrue.
The undersigned acknowledges that he understands the meaning and legal
consequences of the representations and warranties set forth herein and that
the Company has relied upon such representations and warranties, and the
undersigned hereby agrees to indemnify and hold harmless the Company, and all
officers, directors, employees agents and representatives thereof, from and
against any and all claims, demands, losses, damages, expenses or liabilities
(including attorneys' fees) due to or arising out of a breach of any such
representations or warranties. Notwithstanding the foregoing, however, no
representation, warranty, acknowledgment or agreement made herein by the
undersigned shall in any manner be deemed to constitute a waiver of any rights
granted to him under federal or state securities laws.
Sincerely,
/s/ Warren F. Kruger
Printed Name:Warren F. Kruger
Social Security Number:443 48 4933
Address: 2100 S. Utica #310
City, State, Zip:Tulsa, OK 74114
12
<PAGE> 49
EXHIBIT 5.10
INVESTMENT LETTER
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING; SIGNIFICANT REPRESENTATIONS
ARE CALLED FOR HEREIN.
PACKAGED ICE, INC.
INVESTMENT LETTER
James F. Stuart, Chief Executive Officer
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Dear Sir:
In connection with the issuance of the $.01 par value Common Stock of
Packaged Ice, Inc., a Texas corporation (the "Company") (pursuant to that
certain document entitled "Stock Purchase Agreement", dated September 12, 1997,
by and among Warren F. Kruger, Julie S. Kruger and the Company, the undersigned
acknowledges that the Company will be relying on the information and
representations with respect to the undersigned set forth herein in determining
whether an investment in the Common Stock is suitable for him or her and
whether the undersigned otherwise qualifies to receive Common Stock. The
undersigned hereby warrants and represents to the Company that the following
statements are true:
(a) The undersigned understands and agrees that the Common Stock
being acquired has not been registered under the Securities Act, and that
accordingly it will not be transferable except as permitted under various
exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. The
undersigned acknowledges that he must bear the economic risk of his investment
in such securities for an indefinite period of time.
(b) The undersigned hereby represents and warrants to the Company
that he is acquiring the Common Stock for investment purposes only, for his own
account, and not as nominee or agent for any other person or entity, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act.
(c) The undersigned represents and warrants that he has knowledge,
skill and experience in financial, business and investment matters relating to
an investment of this type and is capable of evaluating the merits and risks of
such investment and protecting his interest in connection with the acquisition
of the Common Stock. The undersigned acknowledges that the acquisition of the
Common Stock is a speculative investment and involves substantial risks. The
undersigned represents that he has retained, at his own expense, and relied
upon, appropriate professional advice regarding the investment, tax and legal
merits and consequences of owning the Common Stock. The undersigned has the
ability to bear the economic risks of this investment in the Company including
a complete loss of the investment, and the undersigned has no need for
liquidity in such investment.
(d) The undersigned is an "Accredited Investor" within the meaning of
Rule 501(a) of Regulation D of the Securities Act and who either alone or with
his purchaser representative(s) has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the prospective investment within the meaning of Rule 506(b)(2)(ii) of
Regulation D of the Securities Act.
(e) The undersigned acknowledges that he has obtained all information
from the Company that he deems to be necessary in connection with his
investment in the Common Stock. The undersigned further
13
<PAGE> 50
acknowledges having had the opportunity, either personally or through his
representatives, to ask questions of and receive answers from management of the
Company concerning the Company's business and the terms and conditions of the
Common Stock and the transaction in which they are being acquired.
(f) The undersigned is presently a bona fide resident of the state
set forth on the signature page hereof as his "Address". This address and the
Social Security number set forth herein are his true and correct address and
Social Security number. The undersigned has no present intention of becoming a
resident of any other state or jurisdiction.
(g) The information provided to the Company herein is true and
correct in all respects as of the date hereof. The undersigned agrees to
notify the Company immediately if any of the statements made herein shall
become untrue.
The undersigned acknowledges that he understands the meaning and legal
consequences of the representations and warranties set forth herein and that
the Company has relied upon such representations and warranties, and the
undersigned hereby agrees to indemnify and hold harmless the Company, and all
officers, directors, employees agents and representatives thereof, from and
against any and all claims, demands, losses, damages, expenses or liabilities
(including attorneys' fees) due to or arising out of a breach of any such
representations or warranties. Notwithstanding the foregoing, however, no
representation, warranty, acknowledgment or agreement made herein by the
undersigned shall in any manner be deemed to constitute a waiver of any rights
granted to him under federal or state securities laws.
Sincerely,
/s/ Julie S. Kruger
Printed Name: Julie S. Kruger
Social Security Number: ###-##-####
Address: 2828 South Yorktown Ave
City, State, Zip: Tulsa, OK 74114
14
<PAGE> 51
SCHEDULE 11.3
ALLOCATION SCHEDULE
CENTURY ICE OF TULSA, INC.:
<TABLE>
<S> <C>
Total Consideration $3,006,000
Liabilities Assumed 119,000
Fair market value of Class II Assets -0-
Fair market value of Class III Assets $ 884,700
ICE COLD ENTERPRISES, INC.:
Total Consideration $2,094,000
Liabilities Assumed -0-
Fair market value of Class II Assets -0-
Fair market value of Class III Assets $ 615,300
</TABLE>
15
<PAGE> 1
EXHIBIT 11.1
PACKAGED ICE, INC. AND SUBSIDIARIES
COMPUTATION OF
EARNING PER COMMON SHARE
AND COMMON EQUIVALENTS SHARE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net loss $(270,968) $ (44,734) $(1,981,784) $(387,382)
Add interest expense on convertible
demand notes 505
Less dividends on preferred stock:
Series A
Series B
--------- --------- ----------- ---------
Loss applicable to common stock $(270,968) $ (44,734) $(1,981,279) $(387,382)
========= ========= =========== =========
Weighted average common shares
outstanding 3,822,555 2,826,371 3,431,896 2,826,371
Incremental shares attributable to
conversion of demand notes 7,268
Incremental shares attributable to
outstanding stock options and warrants 909,362 272,769 658,113 272,769
As adjusted for fully diluted
--------- --------- ----------- ---------
calculation 4,731,917 3,099,140 4,097,776 3,099,140
========= ========= =========== =========
Loss per common and common
equivalent share:
Primary $ (0.07) $ (0.02) $ (0.58) $ (0.14)
Fully-Diluted (1) (0.06) (0.01) (0.48) (0.12)
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K; although
it is contrary to paragraphs 14, 30 and 40 of Accounting Principles Board
Opinion No. 15 because it produces an antidilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statement of Income found on pages
4 and 5 of the Company's form 10-Q for the Year-to-date, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,682,230
<SECURITIES> 0
<RECEIVABLES> 5,555,281
<ALLOWANCES> 55,188
<INVENTORY> 970,079
<CURRENT-ASSETS> 11,522,958
<PP&E> 38,096,385
<DEPRECIATION> 4,576,525
<TOTAL-ASSETS> 82,824,399
<CURRENT-LIABILITIES> 7,596,394
<BONDS> 50,760,769
0
0
<COMMON> 38,782
<OTHER-SE> 19,226,254
<TOTAL-LIABILITY-AND-EQUITY> 82,824,399
<SALES> 20,963,363
<TOTAL-REVENUES> 20,963,363
<CGS> 12,336,269
<TOTAL-COSTS> 12,336,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,176,603
<INCOME-PRETAX> (1,981,784)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,981,784)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,981,784)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> (.58)
</TABLE>
