<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 28, 1998
[ ] 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 1-4887
TEXAS INDUSTRIES, INC.
(Exact name of registrant as specified in the charter)
Delaware 75-0832210
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1341 West Mockingbird Lane, Suite 700W, Dallas, Texas 75247-6913
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 647-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of April 7, 1998, 21,128,986 shares of Registrant's Common Stock, $1.00 par
value, were outstanding.
Page 1 of 17
<PAGE>
INDEX
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
- -----------------------------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -- February 28, 1998 and May 31, 1997........... 3
Consolidated Statements of Income -- three months and nine months ended
February 28, 1998 and February 28, 1997................................... 4
Consolidated Statements of Cash Flows -- nine months ended February 28, 1998
and February 28, 1997..................................................... 5
Notes to Consolidated Financial Statements.................................. 6
Independent Accountants' Review Report...................................... 11
Item 2. Management's Discussion and Analysis of Operating Results
and Financial Condition..................................................... 12
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K.............................................. 15
SIGNATURES
- ----------
</TABLE>
-2-
<PAGE>
CONSOLIDATED BALANCE SHEETS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
February 28, May 31,
- ------------------------------------------------------------------------------
In thousands 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 4,428 $ 19,834
Notes and accounts receivable 152,079 122,783
Inventories 166,571 167,146
Prepaid expenses 45,467 34,613
----------- --------
TOTAL CURRENT ASSETS 368,545 344,376
OTHER ASSETS
Real estate and other investments 13,301 14,920
Goodwill and other intangibles 155,081 63,297
Other 33,110 26,553
----------- --------
201,492 104,770
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 133,298 118,248
Buildings 68,199 66,156
Machinery and equipment 979,092 815,019
----------- --------
1,180,589 999,423
Less allowances for depreciation 633,258 600,646
----------- --------
547,331 398,777
----------- --------
$ 1,117,368 $ 847,923
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 90,010 $ 51,021
Accrued interest, wages and other items 43,573 36,909
Current portion of long-term debt 13,430 13,452
----------- --------
TOTAL CURRENT LIABILITIES 147,013 101,382
LONG-TERM DEBT 369,404 176,056
DEFERRED FEDERAL INCOME TAXES AND OTHER CREDITS 83,402 80,080
MINORITY INTEREST -- 37,594
SHAREHOLDERS' EQUITY
Common stock, $1 par value 25,067 25,067
Additional paid-in capital 255,149 255,149
Retained earnings 324,605 262,774
Cost of common shares in treasury (87,272) (90,179)
----------- --------
517,549 452,811
----------- --------
$1,117,368 $847,923
=========== ========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
(Unaudited)
CONSOLIDATED STATEMENTS OF INCOME
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Nine months ended
February 28, February 28,
- -------------------------------------------------------------------------------------
In thousands except per share 1998 1997 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $281,421 $216,618 $861,168 $696,936
COSTS AND EXPENSES (INCOME)
Cost of products sold 228,074 178,129 683,116 554,956
Selling, general and administrative 23,752 17,431 67,798 56,006
Interest 6,205 4,852 14,418 14,165
Other income (5,059) (1,824) (10,603) (7,169)
-------- -------- -------- --------
252,972 198,588 754,729 617,958
-------- -------- -------- --------
INCOME BEFORE THE FOLLOWING ITEMS 28,449 18,030 106,439 78,978
Income taxes 9,201 6,330 35,252 26,767
-------- -------- -------- --------
19,248 11,700 71,187 52,211
Minority interest in Chaparral (620) (1,574) (4,400) (4,298)
-------- -------- -------- --------
NET INCOME $ 18,628 $ 10,126 $ 66,787 $ 47,913
======== ======== ======== ========
BASIC
Average shares 21,135 21,418 21,066 22,012
Earnings per share $ .88 $ .48 $ 3.18 $ 2.18
======== ======== ======== ========
DILUTED
Average shares 21,912 21,786 21,717 22,457
Earnings per share $ .85 $ .47 $ 3.08 $ 2.14
======== ======== ======== ========
Cash dividends $ .075 $ .075 $ 22.5 $ .175
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
TEXAS INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine months ended
February 28,
- -----------------------------------------------------------------------
In thousands 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 66,787 $ 47,913
Loss on disposal of assets 611 186
Non-cash items
Depreciation, depletion and amortization 45,001 40,979
Deferred taxes (1,538) (2,331)
Undistributed minority interest 4,177 3,643
Other - net 5,601 4,182
Changes in operating assets and liabilities
Notes and accounts receivable (12,537) 2,226
Inventories and prepaid expenses 6,305 (27,075)
Accounts payable and accrued liabilities 28,126 (4,002)
Real estate and investments 1,834 2,742
--------- --------
Net cash provided by operations 144,367 68,463
INVESTING ACTIVITIES
Purchase of Riverside Cement Company (110,916) --
Purchase of Chaparral minority interest (71,970) --
Capital expenditures - Virginia steel facility (47,881) --
Capital expenditures - other (113,568) (65,262)
Proceeds from disposal of assets 2,282 1,426
Other - net (4,300) (2,316)
--------- --------
Net cash used by investing (346,353) (66,152)
FINANCING ACTIVITIES
Proceeds from long-term borrowing 267,639 53,206
Debt retirements (74,324) (28,726)
Purchase of treasury shares (558) (41,572)
Purchase of Chaparral stock -- (3,770)
Dividends paid (4,721) (3,794)
Other - net (1,456) (1,707)
--------- --------
Net cash provided (used) by financing 186,580 (26,363)
--------- --------
Decrease in cash (15,406) (24,052)
Cash at beginning of period 19,834 28,055
--------- --------
Cash at end of period $ 4,428 $ 4,003
========= ========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Texas Industries, Inc. (the Company or TXI), through its subsidiaries, is a
producer of steel and cement, aggregate and concrete products for the
construction and manufacturing industries. Chaparral Steel Company (Chaparral)
produces beams, merchant and special bar quality rounds, reinforcing bars and
channels, primarily for markets in North America and, under certain market
conditions, Europe and Asia. Cement, aggregate and concrete operations supply
cement and aggregates, ready-mix, pipe, block and brick from facilities
concentrated primarily in Texas, Louisiana, and California with several products
marketed throughout the U.S.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended February 28,
1998, are not necessarily indicative of the results that may be expected for the
year ended May 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended May 31, 1997.
ESTIMATES: The preparation of financial statements and accompanying notes in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported. Actual results
could differ from those estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and all subsidiaries. The minority interest represents
the separate public ownership of Chaparral which was acquired by the Company on
December 31, 1997. Certain amounts in the prior period financial statements
have been reclassified to conform to the current period presentation.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded at
cost. Provisions for depreciation are computed generally using the straight-
line method. Provisions for depletion of mineral deposits are computed on the
basis of the estimated quantity of recoverable raw materials.
CASH EQUIVALENTS: For cash flow purposes, temporary investments which have
maturities of less than 90 days when purchased are considered cash equivalents.
EARNINGS PER SHARE: Effective February 28, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS 128). SFAS
128 prescribes new calculations for Basic and Diluted Earnings Per Share (EPS)
which replaces the former calculations for Primary and Fully Diluted EPS and
requires the restatement of prior period EPS data.
Basic EPS is computed by adjusting net income for the amortization of additional
goodwill in connection with a contingent payment for the acquisition of
Chaparral, then dividing by the weighted average number of common shares
outstanding during the period including contingently issuable shares. Diluted
EPS also adjusts the outstanding shares for the dilutive effect of stock options
and awards.
-6-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued
Basic and Diluted EPS are calculated as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
February 28, February 28,
-------------------------------------------------------------------------
In thousands except per share 1998 1997 1998 1997
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Net income $18,628 $10,126 $66,787 $47,913
Contingent price amortization 58 58 174 174
------- ------- ------- -------
$18,686 $10,184 $66,961 $48,087
======= ======= ======= =======
Shares:
Weighted average shares outstanding 21,034 21,337 20,969 21,923
Contingently issuable shares 101 81 97 89
------- ------- ------- -------
21,135 21,418 21,066 22,012
Stock option and award dilution 777 368 651 445
------- ------- ------- -------
21,912 21,786 21,717 22,457
======= ======= ======= =======
Basic earnings per share $ .88 $ .48 $ 3.18 $ 2.18
======= ======= ======= =======
Diluted earnings per share $ .85 $ .47 $ 3.08 $ 2.14
======= ======= ======= =======
</TABLE>
INTANGIBLE ASSETS: Goodwill and other intangibles is presented net of
accumulated amortization of $20.8 million at February 28, 1998 and $17.9 million
at May 31, 1997. Goodwill resulting from the acquisitions of Chaparral Steel
Company and Riverside Cement Company, totalling $148.8 million at February 28,
1998 and $57.2 million at May 31, 1997 (net of accumulated amortization) are
being amortized currently on a straight-line basis over 40-year periods. Other
intangibles consisting primarily of goodwill and non-compete agreements are
being amortized on a straight-line basis over periods of 2 to 15 years.
Management reviews remaining goodwill and other intangibles with consideration
toward recovery through future operating results (undiscounted) at the current
rates of amortization.
INCOME TAXES: Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing
a consolidated return with its subsidiaries. Current and deferred tax expense
is allocated among the members of the group based on a stand-alone calculation
of the tax of the individual member.
WORKING CAPITAL
Working capital totaled $221.5 million at February 28, 1998, compared to $243.0
million at May 31, 1997.
Notes and accounts receivable of $152.1 million at February, compared with
$122.8 million at May, are presented net of allowances for doubtful receivables
of $7.2 million at February and $2.5 million at May.
Inventories are stated at cost (not in excess of market) generally using the
last-in, first-out method (LIFO). If the average cost method (which
approximates current replacement cost) had been used, inventory values would
have been higher by $12.7 million at February and $11.7 million at May.
-7-
<PAGE>
WORKING CAPITAL-Continued
Inventories are summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
In thousands February May
---------------------------------------------------------------------------
<S> <C> <C>
Finished products $ 61,739 $ 77,021
Work in process 35,739 27,162
Raw materials and supplies 69,093 62,963
-------- --------
$166,571 $167,146
======== ========
</TABLE>
LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
In thousands February May
----------------------------------------------------------------------------
<S> <C> <C>
Revolving credit facility maturing 2002, interest rate
6.03% (.4% over LIBOR) $ 38,000 $ 40,000
Senior notes due through 2017, interest rates
average 7.28% 200,000 --
Senior notes due through 2008, interest rates
average 7.28% 75,000 75,000
Senior notes due through 2004, interest rates
average 10.2% 56,000 --
Senior note due through 1999, interest rate
14.2% 4,091 --
Pollution control bonds, due through 2007, interest rate
6.38% (75% of prime) 7,595 7,935
Replaced Chaparral debt -- 64,182
Other, maturing through 2005, interest rates
from 8% to 10% 2,148 2,391
-------- --------
382,834 189,508
Less current maturities 13,430 13,452
-------- --------
$369,404 $176,056
======== ========
</TABLE>
Annual maturities of long-term debt for each of the five succeeding years are
$13.4, $9.1, $8.9, $8.9 and $46.7 million.
The Company has available a bank-financed $350 million long-term revolving
credit facility. In addition to the $38.0 million currently outstanding under
this facility, $9.4 million has been utilized to support letters of credit.
Commitment fees at a current annual rate of .125% are paid on the unused portion
of this facility.
On December 31, 1997, Chaparral's senior and first mortgage notes, which
restricted dividends and advances to its shareholders including the parent
company were replaced with senior notes of the Company having the same interest
rate and maturities as the Chaparral notes but with the same loan covenants as
the Company's other senior notes.
Loan agreements contain covenants which provide for minimum working capital,
restrictions on purchases of treasury stock and payment of dividends on common
stock, and limitations on incurring certain indebtedness and making certain
investments. Under the most restrictive of these agreements, the aggregate
amount of annual cash dividends on common stock is limited based on the ratio of
earnings before interest, taxes, depreciation and amortization to fixed charges.
The Company is in compliance with all loan covenant restrictions.
The amount of interest paid for the nine-month periods presented was $12.3
million in 1998 and $12.2 million in 1997. Interest capitalized totaled $2.1
million in the 1998 period.
-8-
<PAGE>
SHAREHOLDERS' EQUITY
Common stock consists of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
In thousands February May
-------------------------------------------------------------------------
<S> <C> <C>
Shares authorized 40,000 40,000
Shares outstanding at end of period 21,088 20,896
Weighted average shares outstanding assuming dilution 21,717 22,163
Shares held in treasury 3,979 4,171
Shares reserved for stock options and other 3,979 2,163
</TABLE>
There are authorized 100,000 shares of Cumulative Preferred Stock, no par value,
of which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting),
redeemable at $105 per share and entitled to $100 per share upon dissolution.
On March 29, 1996, the Company redeemed and retired all outstanding shares of
such $5 Cumulative Preferred Stock. An additional 25,000 shares are designated
Series B Junior Participating Preferred Stock. The Series B Preferred Stock is
not redeemable and ranks, with respect to the payment of dividends and the
distribution of assets, junior to (i) all other series of the Preferred Stock
unless the terms of any other series shall provide otherwise and (ii) the $5
Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996,
the Company distributed a dividend of one preferred share purchase right for
each outstanding share of the Company's Common Stock. Each right entitles the
holder to purchase from the Company one two-thousandth of a share of the Series
B Junior Participating Preferred Stock at a price of $122.50 per one two-
thousandth share of Series B Preferred Stock, subject to adjustment. The rights
will expire on November 1, 2006 unless the date is extended or the rights are
earlier redeemed or exchanged by the Company pursuant to the Rights Agreement.
STOCK OPTION PLANS
The Company's stock option plans provide that non-qualified and incentive stock
options to purchase Common Stock may be granted to directors, officers and key
employees at market prices at date of grant. Generally, options become
exercisable in installments beginning one or two years after date of grant and
expire six or ten years later depending on the initial date of grant. A summary
of option transactions for the nine-month period ended February 28, 1998,
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Weighted Average
Shares Under Option Option Price
----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at June 1 1,797,131 $21.62
Granted 365,550 46.27
Exercised (195,454) 15.15
Canceled (44,040) 21.35
--------- ------
Outstanding at February 28 1,923,187 $26.97
========= ======
</TABLE>
At February 28, 1998, there were 536,437 shares exercisable and 1,918,530 shares
available for future grants. Outstanding options expire on various dates to
January 14, 2008.
INCOME TAXES
Federal income taxes for the interim periods ended February 28, 1998 and 1997,
have been included in the accompanying financial statements on the basis of an
estimated annual rate. The estimated annualized tax rate is 33.1% for 1998
compared with 33.9% for 1997. The primary reason that these respective tax
rates differ from the 35% statutory corporate rate is due to goodwill expense
which is not tax deductible, percentage depletion which is tax deductible and
the net state income tax expense. The Company made income tax payments of $37.2
million and $30.8 million in the nine-month periods ended February 28, 1998 and
1997, respectively.
-9-
<PAGE>
LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or by
hazardous substances or wastes used in, generated or disposed of by the Company,
the Company may be held liable for such damages and be required to pay the cost
of investigation and remediation of such contamination. The amount of such
liability could be material. Changes in federal or state laws, regulations or
requirements or discovery of unknown conditions could require additional
expenditures by the Company.
The Company and subsidiaries are defendants in lawsuits which arose in the
normal course of business. In management's judgment (based on the opinion of
counsel) the ultimate liability, if any, from such legal proceedings will not
have a material effect on the consolidated financial position of the Company.
ACQUISITIONS
On December 31, 1997, the Company acquired the 15.7% separate public ownership
of Chaparral Steel Company. Pursuant to the merger agreement, the owners of the
approximately 4.5 million publicly traded shares received cash consideration of
$15.50 per share. As of February 28, 1998, $72.0 million of the estimated $77.1
million total acquisition cost including transaction expenses had been paid.
The excess of the acquisition costs over the fair value of the net assets
acquired, approximately $34.9 million, was recorded as goodwill and is being
amortized over a 40-year period.
Effective December 31, 1997, the Company acquired Riverside Cement Company for
an estimated $115.4 million in cash and the assumption of certain liabilities.
An initial cash payment of $110.9 million was made on January 15, 1998 with the
balance payable within 60 days. The estimated purchase price was allocated to
the net assets acquired based on their estimated fair values. The fair value of
tangible assets acquired and liabilities assumed was $65.8 million and $9.1
million, respectively. The balance of the purchase price, $58.7 million, was
recorded as goodwill and is being amortized over a 40-year period. Riverside
Cement Company owns and operates cement plants in Crestmore and Oro Grande,
California with distribution terminals in the northern and southern parts of the
state. The purchased manufacturing facilities are planned to be upgraded and
expanded with modern technology within existing permit limitations and limestone
reserves. The purchase is expected to increase the Company's cement capacity by
60%.
-10-
<PAGE>
EXHIBIT A
---------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors
Texas Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Industries, Inc. and subsidiaries as of February 28, 1998, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended February 28, 1998 and 1997, and the condensed consolidated
statements of cash flows for the nine-month periods ended February 28, 1998 and
1997. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Texas Industries, Inc. and
subsidiaries as of May 31, 1997, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then ended [not
presented herein] and in our report dated July 8, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of May 31, 1997, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
-------------------------------------
March 20, 1998
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of operations and financial condition for the three-month and nine-
month periods ended February 28, 1998 to the three-month and nine-month periods
ended February 28, 1997.
RESULTS OF OPERATIONS
Consolidated net sales of $281.4 million for the quarter ended February 28, 1998
increased 30% from the prior year period. Steel sales were $174.5 million, up
$26.8 million as shipments increased 43,000 tons on 6% higher average selling
prices. Net sales for the current nine-month period at $528.9 million were 20%
higher than 1997 levels on a 16% increase in shipments and $10 per ton increase
in average selling prices. Continued strength in the construction industries
has sustained demand for structural products. Structural mill shipments were up
21% over the prior year quarter, although slightly lower than the November 1997
quarter. Pricing, 2% higher than the November 1997 quarter, reflects the impact
of the previously announced summer price increases. Realized prices for bar
mill products increased 5% over the prior year quarter as a result of improved
product mix and higher rebar and SBQ prices while shipments were 9% lower.
Cement, aggregate and concrete sales for the quarter were $106.9 million, 55%
higher than the prior year period. Cement sales for the quarter were up $20.1
million from the prior year. The acquisition of Riverside Cement Company in
January 1998 opened new cement markets in Southern California and surrounding
states to the Company. Shipments from the Company's Texas operations increased
28% from the prior year period, with total shipments including Riverside up 68%.
Cement average pricing was comparable to that of the prior year. Ready-mix
pricing increased 3% with volumes 45% above those of the prior year quarter.
Aggregate shipments were up 29%, with overall average prices below the prior
year period due to the product mix. The return to more normal weather
conditions in Texas and Louisiana and the continued strength of construction
activity has provided a favorable balance between supply and demand for the
Company's products.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Three months ended
February 28,
-----------------------------------------------------------------
In thousands 1998 1997
-----------------------------------------------------------------
<S> <C> <C>
NET SALES
Bar mill $ 40,311 $ 42,420
Structural mills 131,797 103,897
Transportation and other 2,412 1,398
-------- --------
TOTAL STEEL 174,520 147,715
Cement 46,330 26,256
Ready-mix 40,969 27,398
Stone, sand & gravel 16,480 13,844
Other products 23,053 16,798
Interplant (19,931) (15,393)
-------- --------
TOTAL CEMENT, AGGREGATE AND CONCRETE 106,901 68,903
-------- --------
TOTAL NET SALES $281,421 $216,618
======== ========
UNITS SHIPPED
Bar mill (tons) 112 124
Structural mills (tons) 317 262
-------- --------
TOTAL STEEL TONS 429 386
Cement (tons) 692 413
Ready-mix (cubic yards) 750 516
Stone, sand & gravel (tons) 3,553 2,764
</TABLE>
-12-
<PAGE>
BUSINESS SEGMENTS-Continued
<TABLE>
<CAPTION>
Three months ended
February 28,
-----------------------------------------------------------------
In thousands 1998 1997
-----------------------------------------------------------------
<S> <C> <C>
STEEL OPERATIONS
Gross profit $ 37,142 $ 32,738
Less: Depreciation & amortization 8,858 8,452
Selling, general & administrative 8,947 6,919
Other income (1,462) (494)
-------- --------
OPERATING PROFIT 20,799 17,861
CEMENT, AGGREGATE AND CONCRETE OPERATIONS
Gross profit 31,560 18,742
Less: Depreciation, depletion &
amortization 7,217 4,932
Selling, general & administrative 7,927 6,057
Other income (453) (423)
-------- --------
OPERATING PROFIT 16,869 8,176
-------- --------
TOTAL OPERATING PROFIT 37,668 26,037
CORPORATE RESOURCES
Other income 3,144 907
Less: Depreciation & amortization 243 199
Selling, general & administrative 5,915 3,863
-------- --------
(3,014) (3,155)
INTEREST EXPENSE (6,205) (4,852)
-------- --------
INCOME BEFORE TAXES & OTHER ITEMS $ 28,449 $ 18,030
======== ========
</TABLE>
Consolidated cost of products sold including depreciation, depletion and
amortization was $228.1 million, an increase of $49.9 million from the prior
year quarter. Steel costs of $146.2 million, increased $22.8 million as a
result of increased shipments and higher melting conversion costs which
increased average unit costs. Cement, aggregate and concrete costs were $81.9
million, an increase of $27.1 million over the prior year period as a result of
increased volumes and higher per unit cement manufacturing costs.
Operating profit of $37.7 million in the current quarter was 45% higher than
the prior year period. Steel profits at $20.8 million were $2.9 million higher
due primarily to increased structural shipments at higher average selling
prices. Cement, aggregate and concrete profits were up $8.7 million over the
prior year on increased volumes. In addition, the Riverside acquisition, which
represents a 60% increase in the Company's cement capacity, contributed to
operating profit despite severe wet weather in the region.
Selling, general and administrative expenses including depreciation and
amortization at $23.8 million, increased $6.3 million over the prior year
quarter. Steel SG&A expense increased $2.0 million primarily due to increased
employee incentive accruals as a result of increased profits. Cement, aggregate
and concrete SG&A expense increased $2.2 million primarily due to expanded
operations and higher incentive accruals. Corporate resources SG&A expense
increased $2.1 million due primarily to increased performance based compensation
expenses and general expenses not allocated to operations. Corporate other
income includes $2.1 million from property sales generated by the Company's real
estate operations, $1.5 million higher than the 1997 period. Interest expense
for the current quarter, at $7.3 million including $1.1 million which was
capitalized, increased $2.4 million over the prior year period due to the
additional $200 million long-term borrowing completed in December 1997. Income
tax expense was provided at a .8% lower estimated annualized tax rate in 1998.
-13-
<PAGE>
CASH FLOWS
Net cash provided by operations in 1998, at $144.4 million, increased $75.9
million over 1997 due to higher net income, increased depreciation, depletion
and amortization expense and changes in working capital items. Receivables
increased $12.5 million in 1998 on increased sales. In 1997, receivables
decreased $2.2 million, as a result of reduced cement, aggregate and concrete
shipments and the collection of $6.9 million in notes receivable from real
estate sales offset by increased receivables due to changes in steel's cash
discount policy. Inventories declined $8.4 million in 1998 as increased
shipments reduced steel inventories. In 1997, inventories grew $22.7 million
due to steel's record melt shop production and reduced shipments in both
operations. Accounts payable and accrued expenses increased $28.1 million in
1998 compared to a decrease of $4.0 million in 1997 due in part to increased
trade payables from expanded operations and higher incentive, interest and tax
accruals.
Investing activities used $346.4 million compared to $66.2 million in 1997.
Capital expenditures for normal replacement and technological upgrades of
existing equipment and expansion of the Company's operations of $113.6 million
for the current nine-month period were $48.3 million greater than 1997.
Expenditures for corporate resources of $1.7 million were comparable to the
prior year. Cement, aggregate and concrete expenditures of $44.7 million include
the purchase of expanded shale and clay facilities in Colorado and additional
ready-mix plants in Texas and Louisiana. Steel expenditures of $67.2 million
include bar mill upgrades at the Midlothian steel facility which will expand and
improve the existing product mix. The fiscal 1998 capital budget is estimated to
reach $160 million.
The Company's Virginia steel facility currently under construction used $47.9
million during 1998. Production is scheduled to begin in 1999 with total costs
for the site, utilities, equipment and installation estimated to be
approximately $450 million.
Effective December 31, 1997, the Company purchased Riverside Cement Company for
an estimated $115.4 million in cash and the assumption of certain liabilities
valued at $9.1 million. An initial cash payment of $110.9 million was made on
January 15, 1998 with the balance payable within 60 days. The fair value of the
tangible assets acquired was $65.8 million. The balance of the purchase price,
$58.7 million, was recorded as goodwill and is being amortized over a 40-year
period. Riverside Cement Company owns and operates plants in Crestmore and Oro
Grande, California with distribution terminals in the northern and southern
parts of the state.
On December 31, 1997, the Company completed its acquisition of the minority
interest of Chaparral Steel Company. As of February 28, 1998, $72.0 million of
the estimated $77.1 million total acquisition cost including transaction
expenses had been paid. The excess of the acquisition costs over the fair value
of the net assets acquired, approximately $34.9 million, was recorded as
goodwill and is being amortized over a 40-year period.
Financing activities provided $186.6 million in 1998 compared to $26.4 million
used in 1997. Borrowings, net of debt retirements, increased $168.8 million in
1998 over 1997. On December 18, 1997, the Company concluded the placement of
$200 million in fixed-rate senior notes having an average maturity of twelve
years and average interest rate of 7.28%. In addition, on December 31, 1997,
Chaparral's senior and first mortgage notes, which restricted dividends and
advances to its shareholders, including the parent company, were replaced with
senior notes of the Company having the same interest rates and maturities as the
Chaparral notes but with the same loan covenants as the Company's other senior
notes. In 1997, the Company purchased $41.6 million of its Common Stock
pursuant to a decision announced in October 1996 authorizing the repurchase of
shares for general corporate purposes. During the same period, Chaparral
purchased $3.8 million of its common stock. The Company's quarterly cash
dividend at $.075 per common share was 28% higher than the per share rate in
1997 on 4.6% fewer outstanding shares.
FINANCIAL CONDITION
The Company has a $350 million long-term revolving credit facility which expires
in December 2002. At February 28, 1998, $302.6 million was available for future
borrowings.
The Company generally maintains a policy of financing major capital expansion
projects with long-term borrowing. Working capital, investments and replacement
assets are typically funded out of cash flow from operations. The Company
expects current financial resources and cash from 1998 operations to be
sufficient to provide funds for planned capital expenditures, scheduled debt
repayments and other known working capital needs. If additional funds are
required to accomplish long-term expansion of operations, management believes
that funding can be obtained through lending or equity sources to meet such
requirements.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 "Statement re: Computation of Earnings per Share" has been
omitted because the information required therein is included elsewhere in the
financial statements or notes thereto.
The following exhibits are included herein:
10.1 Partnership Interests Purchase Agreement with an effective date of
December 31, 1997 by and among TXI California, Inc., TXI Riverside,
Inc., RVC Venture Corp. and Ssangyong/Riverside Venture Corp. filed
with the Securities and Exchange Commission on Form 8-K dated January
26, 1998, and incorporated herein by reference
10.2 $350,000,000 Second Amended and Restated Credit Agreement among Texas
Industries Inc., Certain Leaders, Certain Co-Agents and NationsBank
of Texas, N.A., as Administrative Lender dated December 18, 1997
10.3 Texas Industries, Inc. $80,000,000 7.15% Senior Notes, Series A, due
April 15, 2006; $40,000,000 7.20% Senior Notes, Series B, due April
15, 2007; $10,000,000 7.28% Senior Notes, Series C, due April 15,
2009; $45,000,000 7.395% Senior Notes, Series D, due April 15, 2012;
$25,000,000 7.59% Senior Notes, Series E, due April 15, 2017 note
agreement dated as of December 18, 1997
15.1 Letter re: Unaudited Interim Financial Information
27.1 Financial Data Schedule for the nine-month period ended February 28,
1998
27.2 Restated Financial Data Schedule for the three-month period ended
August 31, 1997 and six-month period ended November 30, 1997
27.3 Restated Financial Data Schedule for the three-month period ended
August 31, 1996, six-month period ended November 30, 1996, nine-month
period ended February 28, 1997 and year ended May 31, 1997
27.4 Restated Financial Data Schedule for the three-month period ended
August 31, 1995, six-month period ended November 30, 1995, nine month
period ended February 29, 1996, and year-ended May 31, 1996
27.5 Restated Financial Data Schedule for the year ended May 31, 1995
These schedules contain summary financial information extracted from the
Registrant's Unaudited Consolidated Financial Statements and are qualified in
their entirety by reference to such financial statements.
The Registrant filed the following report on Form 8-K during the three-month
period ended February 28, 1998:
January 26, 1998, reporting that on January 15, 1998 TXI Riverside, Inc.
and TXI California, Inc. each a wholly-owned subsidiary of Registrant
purchased an aggregate of 100% of the partnership interests of Riverside
Cement Company for a purchase price of approximately $114,981,815 from
RVC Venture Corp. and Ssangyong/Riverside Venture Corp. Riverside Cement
Company owns and will continue to operate cement manufacturing and
bagging facilities in California.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
TEXAS INDUSTRIES, INC.
April 10, 1998 /s/ Richard M. Fowler
- -------------- ------------------------------------------------
Richard M. Fowler
Vice President & Chief Financial Officer
April 10, 1998 /s/ James R. McCraw
- -------------- ------------------------------------------------
James R. McCraw
Vice President - Accounting/Information Services
-16-
<PAGE>
INDEX TO EXHIBITS
Exhibits Page
10.1 Partnership Interests Purchase Agreement with an
effective date of December 31, 1997 by and among
TXI California, Inc., TXI Riverside, Inc., RVC
Venture Corp. and Ssangyong/Riverside Venture Corp.
filed with the Securities and Exchange Commission
on Form 8-K dated January 26, 1998, and incorporated
herein by reference............................................. *
10.2 $350,000,000 Second Amended and Restated Credit
Agreement among Texas Industries Inc., Certain Leaders,
Certain Co-Agents and NationsBank of Texas, N.A., as
Administrative Lender dated December 18, 1997................... **
10.3 Texas Industries, Inc. $80,000,000 7.15% Senior Notes,
Series A, due April 15, 2006;
$40,000,000 7.20% Senior Notes, Series B, due April 15, 2007;
$10,000,000 7.28% Senior Notes, Series C, due April 15, 2009;
$45,000,000 7.395% Senior Notes, Series D, due April 15, 2012;
$25,000,000 7.59% Senior Notes, Series E, due April 15, 2017
note agreement dated as of December 18, 1997.................... **
15.1 Letter re: Unaudited Interim Financial Information............. 18
27.1 Financial Data Schedule for the nine-month period ended
February 28, 1998............................................... **
27.2 Restated Financial Data Schedule for the three-month
period ended August 31, 1997 and six-month period ended
November 30, 1997............................................... **
27.3 Restated Financial Data Schedule for the three-month period
ended August 31, 1996, six-month period ended November 30, 1996,
nine-month period ended February 28, 1997 and year ended
May 31, 1997.................................................... **
27.4 Restated Financial Data Schedule for the three-month period
ended August 31, 1995, six-month period ended November 30,
1995, nine month period ended February 29, 1996, and year-ended
May 31, 1996.................................................... **
27.5 Restated Financial Data Schedule for the year ended
May 31, 1995.................................................... **
* Previously filed and incorporated herein by reference.
** Electronically filed only.
-17-
<PAGE>
EXHIBIT 10.2
================================================================================
$350,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
TEXAS INDUSTRIES, INC.
CERTAIN LENDERS,
CERTAIN CO-AGENTS
AND
NATIONSBANK OF TEXAS, N.A.,
AS ADMINISTRATIVE LENDER
December 18, 1997
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 Defined Terms...................................... 1
Section 1.2 Amendments and Renewals............................ 17
Section 1.3 Construction....................................... 17
ARTICLE 2
Advances
Section 2.1 The Advances....................................... 18
Section 2.2 Manner of Borrowing and Disbursement............... 19
Section 2.3 Interest........................................... 23
Section 2.4 Fees............................................... 24
Section 2.5 Prepayment......................................... 26
Section 2.6 Reduction of Commitment............................ 26
Section 2.7 Non-Receipt of Funds by the Administrative Lender.. 27
Section 2.8 Payment of Principal of Advances................... 27
Section 2.9 Reimbursement...................................... 28
Section 2.10 Manner of Payment.................................. 28
Section 2.11 LIBOR Lending Offices.............................. 29
Section 2.12 Sharing of Payments................................ 29
Section 2.13 Calculation of LIBOR Rate.......................... 30
Section 2.14 Booking Loans...................................... 30
Section 2.15 Taxes.............................................. 30
Section 2.16 Letters of Credit.................................. 33
Section 2.17 Extension of Maturity Date......................... 39
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to the Initial Advance and the
Letters of Credit.................................. 39
Section 3.2 Conditions Precedent to All Advances and Letters
of Credit.......................................... 41
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties..................... 42
Section 4.2 Survival of Representations and Warranties, etc.... 49
<PAGE>
ARTICLE 5
General Covenants
Section 5.1 Preservation of Existence and Similar Matters...... 49
Section 5.2 Business; Compliance with Applicable Law........... 49
Section 5.3 Maintenance of Properties.......................... 49
Section 5.4 Accounting Methods and Financial Records........... 50
Section 5.5 Insurance.......................................... 50
Section 5.6 Payment of Taxes and Claims........................ 50
Section 5.7 Visits and Inspections............................. 50
Section 5.8 Payment of Indebtedness............................ 51
Section 5.9 Use of Proceeds.................................... 51
Section 5.10 Indemnity.......................................... 51
ARTICLE 6
Information Covenants
Section 6.1 Quarterly Financial Statements and Information..... 52
Section 6.2 Annual Financial Statements and Information;
Certificate of No Default......................... 53
Section 6.3 Compliance Certificates............................ 54
Section 6.4 Copies of Other Reports and Notices................ 54
Section 6.5 Notice of Litigation, Default and Other Matters.... 55
Section 6.6 ERISA Reporting Requirements....................... 56
ARTICLE 7
Negative Covenants
Section 7.1 Indebtedness....................................... 57
Section 7.2 Liens.............................................. 58
Section 7.3 Investments........................................ 58
Section 7.4 Liquidation, Merger, New Subsidiaries.............. 58
Section 7.5 Guaranties......................................... 59
Section 7.6 Treasury Stock Purchases and Venture Investments... 59
Section 7.7 Affiliate Transactions............................. 59
Section 7.8 Compliance with ERISA.............................. 59
Section 7.9 Leverage Ratio..................................... 60
Section 7.10 Fixed Charge Coverage Ratio........................ 60
Section 7.11 Capitalization Ratio............................... 60
Section 7.12 Sale and Leaseback................................. 60
Section 7.13 Sale or Discount of Receivables.................... 60
Section 7.14 Subordinated Debt.................................. 60
Section 7.15 Acquisitions....................................... 61
- 2 -
<PAGE>
ARTICLE 8
Default
Section 8.1 Events of Default.................................. 61
Section 8.2 Remedies........................................... 64
ARTICLE 9
Changes in Circumstances
Section 9.1 LIBOR Basis Determination Inadequate............... 65
Section 9.2 Illegality......................................... 65
Section 9.3 Increased Costs.................................... 66
Section 9.4 Base Rate Advances Rather than LIBOR Advances...... 67
Section 9.5 Capital Adequacy................................... 67
ARTICLE 10
Agreement Among Lenders
Section 10.1 Agreement Among Lenders............................ 68
Section 10.2 Lender Credit Decision............................. 70
Section 10.3 Benefits of Article................................ 70
ARTICLE 11
Miscellaneous
Section 11.1 Notices............................................ 71
Section 11.2 Expenses........................................... 71
Section 11.3 Waivers............................................ 72
Section 11.4 Determination by the Lenders Conclusive and
Binding............................................ 73
Section 11.5 Set-Off............................................ 73
Section 11.6 Assignment......................................... 73
Section 11.7 Counterparts....................................... 75
Section 11.8 Severability....................................... 75
Section 11.9 Interest and Charges............................... 75
Section 11.10 Headings........................................... 76
Section 11.11 Amendment and Waiver............................... 76
Section 11.12 Exception to Covenants............................. 76
Section 11.13 No Liability of Issuing Bank....................... 77
Section 11.14 Confidentiality.................................... 77
Section 11.15 No Duties of Co-Agents............................. 78
SECTION 11.16 GOVERNING LAW...................................... 78
SECTION 11.17 WAIVER OF JURY TRIAL............................... 78
SECTION 11.18 ENTIRE AGREEMENT................................... 78
- 3 -
<PAGE>
Schedules and Exhibits
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation
Schedule 4: Subsidiaries
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Money Market Funds
Schedule 8: Existing Letters of Credit
Exhibit A: Promissory Note
Exhibit B: Bid Rate Note
Exhibit C: Subsidiary Guaranty
Exhibit D: Compliance Certificate
Exhibit E: Assignment Agreement
Exhibit F: Bid Rate Advance Request
Exhibit G: Invitation to Bid
Exhibit H: Confirmation of Bid
Exhibit I: Notice of Acceptance of Bid
Exhibit J: Request for Maturity Date Extension
- 4 -
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of December
18, 1997, among TEXAS INDUSTRIES, INC., a Delaware corporation ("Borrower"), the
Lenders from time to time party hereto (the "Lenders"), the Co-Agents from time
to time party hereto (the "Co-Agents"), and NATIONSBANK OF TEXAS, N.A., a
national banking association, as Administrative Lender for the Lenders (the
"Administrative Lender").
BACKGROUND
The Borrower, certain of the Lenders and the Administrative Lender are
parties to that certain Amended and Restated Credit Agreement, dated as of
October 12, 1995 (said Credit Agreement, as amended, the "Existing Credit
Agreement"). The Borrower has requested that the Lenders amend and restate the
Existing Credit Agreement by making a revolving credit facility available to the
Borrower in the maximum principal amount of $350,000,000. The Lenders have
agreed to do so, subject to the terms and conditions set forth below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree that the Existing Credit Agreement is amended and restated in its
entirety as follows:
ARTICLE 1
Definitions
Section 1.1 Defined Terms. For purposes of this Agreement:
"Absolute Bid Rate" means an absolute fixed rate of interest per annum.
"Absolute Bid Rate Advances" means a Bid Rate Advance that bears interest
at an Absolute Bid Rate.
"Account" has the meaning assigned to such term in the UCC.
"Acquisition" means any transaction pursuant to which the Borrower or any
of its Subsidiaries, (a) whether by means of a capital contribution or purchase
or other acquisition of stock or other securities or other equity participation
or interest, (i) acquires more than 50% of the equity interest in any Person
pursuant to a solicitation by the Borrower or such Subsidiary of tenders of
equity securities of such Person, or through one or more
<PAGE>
negotiated block, market, private or other transactions, or a combination of any
of the foregoing, or (ii) makes any entity a Subsidiary of the Borrower or such
Subsidiary, or causes any entity, other than a Subsidiary of the Borrower or
such Subsidiary, to be merged into the Borrower or such Subsidiary (or agrees to
be merged into any other entity other than a wholly-owned Subsidiary (excluding
directors' qualifying shares) of the Borrower or such Subsidiary), or (b)
purchases all or substantially all of the business or assets of any Person or of
any operating division of any Person.
"Adjusted EBITDA" means, for the four fiscal quarters immediately preceding
any date of determination, calculated for the Borrower and its Subsidiaries on a
consolidated basis, an amount equal to the sum of (a) EBITDA (excluding, to the
extent included, equity in earnings of any Venture and for any fiscal quarter
calculation prior to the Chaparral Merger, equity in earnings of Chaparral),
plus (b) for any fiscal quarter calculation prior to the Chaparral Merger,
Dividends received from Chaparral plus (c) Distributions received from any
Venture. For purposes of determining Adjusted EBITDA, there shall be (i)
excluded the EBITDA attributable to any asset disposed of during the four fiscal
quarters immediately preceding the date of determination for the twelve-month
period preceding the date of determination and (ii) included the EBITDA
attributable to any asset acquired during the four fiscal quarters immediately
preceding the date of determination for the twelve-month period preceding the
date of determination. Furthermore, Dividends received from Chaparral shall be
based on that number of shares of capital stock of Chaparral held by the
Borrower at the end of the fiscal quarter immediately preceding the date of
determination and the dividend rate applicable at such time to such shares.
"Adjusted LIBOR Rate" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) determined by the Administrative Lender to be equal to the
quotient obtained by dividing (a) the LIBOR Rate for such LIBOR Advance for such
Interest Period by (b) 1 minus the Reserve Requirement for such LIBOR Advance
for such Interest Period.
"Administrative Lender" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
"Administrative Lender Fee Letter" has the meaning set forth in Section
2.4(c) hereof.
"Advance" means a Revolving Credit Advance or a Bid Rate Advance.
<PAGE>
"Affiliate" means any Person that directly or indirectly through one or
more Subsidiaries Controls, or is Controlled By or Under Common Control with,
the Borrower.
"Agreement" means this Amended and Restated Credit Agreement, as further
amended, modified, supplemented and restated from time to time.
"Agreement Date" means the date of this Agreement.
"Applicable Environmental Laws" means applicable laws pertaining to health
or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
"Applicable Law" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
(S)(S) 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-1H, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, and if said Article 5069-1H is not
applicable, Article 5069-1D, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit; provided that the parties hereto agree that the provisions of Chapter
15, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply
to Advances, this Agreement, the Notes or any other Loan Documents.
"Applicable Margin" means the following per annum percentages, applicable
in the following situations:
<PAGE>
<TABLE>
<CAPTION>
Base Rate LIBOR
Applicability Margin Margin
------------- ------ ------
<S> <C> <C>
(i) Category 1 - The Leverage Ratio is equal to or 0.00% 0.625%
greater than 3.0 to 1
(ii) Category 2 - The Leverage Ratio is less than 3.0 0.00% 0.500%
to 1 but is equal to or greater than 2.0 to 1
(iii) Category 3 - The Leverage Ratio is less than 2.0 0.00% 0.400%
to 1 but is equal to or greater than 1.0 to 1
(iv) Category 4 - The Leverage Ratio is less than 1.0 0.00% 0.300%
to 1
</TABLE>
The Applicable Margin payable by the Borrower on the Revolving Credit Advances
outstanding hereunder shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis according to the
performance of the Borrower as tested by the Leverage Ratio; provided, that each
adjustment in the Applicable Margin shall be effective as of the first day of
the month immediately following the month in which the Administrative Lender
receives the financial statements required pursuant to Section 6.1 or 6.2
hereof, as appropriate. If financial statements of the Borrower (and
corresponding Compliance Certificate setting forth the Leverage Ratio) are not
received by the Administrative Lender by the date required pursuant to Section
6.1 or 6.2 hereof, as appropriate, the Applicable Margin shall be determined
pursuant to Category 1 above until such time as such financial statements and
Compliance Certificate are received. The Applicable Margin shall initially be
determined pursuant to Category 3 above until such time as a calculation of the
Leverage Ratio which would result in an adjustment of the Applicable Margin is
received.
"Assignees" means any assignee of a Lender pursuant to an Assignment
Agreement and has the meaning ascribed thereto in Section 11.6 hereof.
"Assignment Agreement" has the meaning ascribed thereto in Section 11.6
hereof.
"Authorized Signatory" means such senior personnel of the Borrower as may
be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances hereunder.
"Base Rate Advance" means any Revolving Credit Advance bearing interest at
the Base Rate Basis.
"Base Rate Basis" means, for any day, a per annum interest rate equal to
the lesser of (a) the Highest Lawful Rate on such day, or (b) the higher of (i)
the sum of (A) 0.50% plus (B) the
<PAGE>
Federal Funds Rate plus (C) the Applicable Margin, or (ii) the sum of (A) the
Prime Rate on such day plus (B) the Applicable Margin. The Base Rate Basis shall
be adjusted automatically as of the opening of business on the effective date of
each change in the Prime Rate or Federal Funds Rate, as the case may be, to
account for such change.
"Bid Rate Advance" means an Advance the interest rate on which is
determined by agreement between the Borrower and the Lender making such Advance
pursuant to Section 2.1(c) hereof.
"Bid Rate Advance Request" means any certificate signed by an Authorized
Signatory requesting Bid Rate Advances hereunder, substantially in the form of
Exhibit F hereto.
"Bid Rate Note" means each promissory note of the Borrower evidencing Bid
Rate Advances, substantially in the form of Exhibit B hereto, together with any
extension, renewal or amendment thereof or substitution therefor.
"Borrower" means Texas Industries, Inc., a Delaware corporation, formerly
known as Texas Industries, Inc.
"Business Day" means a day on which commercial banks are open (a) for the
transaction of business in Dallas, Texas and, (b) with respect to any LIBOR
Advance, for the transaction of international business (including dealings in
U.S. dollar deposits) in London, England.
"Capitalization Ratio" means, for any date of determination, the ratio of
(a) Total Debt (which for purposes of this definition only shall exclude
obligations in respect of letters of credit) to (b) the sum of Total Debt plus
Net Worth, in each case for the four fiscal quarters immediately preceding the
date of determination.
"Capitalized Lease Obligations" means that portion of any obligation of the
Borrower or any Subsidiary as lessee under a lease which at the time would be
required to be capitalized on a balance sheet prepared in accordance with GAAP.
"Change of Control" means (a) any merger or consolidation of the Borrower
with or into any person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the assets of the Borrower,
on a consolidated basis, in one transaction or a series of related transactions,
(b) any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Securities Exchange Act, whether or not applicable) is or
becomes the "beneficial owner", directly or indirectly, of more than 50% of the
total voting power in the aggregate of all classes of capital stock of the
Borrower then outstanding normally entitled to vote in elections of directors,
or (c) during any period of 24 consecutive months after the Agreement
<PAGE>
Date, individuals who at the beginning of such 24-month period constituted the
board of directors of the Borrower (together with any new directors whose
election by such board of directors or whose nomination for election by the
shareholders of the Borrower was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of the Borrower then in office.
"Chaparral" means Chaparral Steel Company, a Delaware corporation, which
upon completion of the Chaparral Merger, will be a wholly-owned Subsidiary of
the Borrower.
"Chaparral Merger" means the acquisition by the Borrower or an Affiliate of
all of the issued and outstanding capital stock of Chaparral not previously
owned by the Borrower, whereupon Chaparral will become a wholly-owned Subsidiary
of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means $350,000,000, as reduced from time to time pursuant to
Section 2.6 hereof.
"Compliance Certificate" means a certificate, signed by an Authorized
Signatory, in substantially the form of Exhibit D hereto, appropriately
completed.
"Confirmation of Bid" means any certificate signed by an Authorized
Signatory confirming the terms of its Bid Rate Advance, substantially in the
form of Exhibit H hereto.
"Control" or "Controlled By" or "Under Common Control" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 5% or more (in number of votes) of the securities
(or in the case of a Person that is not a corporation, 5% or more of the equity
interest) having ordinary voting power shall be conclusively presumed to control
such Person.
"Controlled Group" means as of the applicable date, as to any Person, all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) which are under common control with such Person
and which, together with such Person, are treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code; provided, however, that the
Subsidiaries of the Borrower (other than Chaparral and its Subsidiaries) shall
be deemed to be members of the Borrower's Controlled Group.
"Debtor Relief Laws" means any applicable liquidation,
<PAGE>
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief Laws affecting the rights of creditors
generally from time to time in effect.
"Default" means an Event of Default and/or any of the events specified in
Section 8.1, regardless of whether there shall have occurred any passage of time
or giving of notice that would be necessary in order to constitute such event an
Event of Default.
"Default Rate" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, or (b) the sum of the Base Rate plus two
percent.
"Depreciation" means depreciation and depletion expense as determined in
accordance with GAAP.
"Determining Lenders" means, on any date of determination, any combination
of the Lenders having more than 50% of the aggregate amount of the Revolving
Credit Advances then outstanding; provided, however, that if there are no
Revolving Credit Advances outstanding hereunder, "Determining Lenders" shall
mean any combination of Lenders whose Specified Percentages aggregate more than
50%.
"Distributions" means, as to any Venture, any payment on, or the making of
any distribution to any holder of, any equity interest of such Venture.
"Dividend" means, as to any Person, any declaration or payment of any
dividend (other than a stock dividend) on, or the making of any distribution,
loan, advance or investment to or in any holder of, any shares of capital stock
(or other equity or beneficial interest) of such Person (other than salaries and
bonuses paid in the ordinary course of business).
"Dollar" or "$" means the lawful currency of the United States of America.
"EBITDA" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) pre-tax
net income (excluding therefrom any items of extraordinary gain, including net
gains on the sale of assets other than asset sales in the ordinary course of
business, and adding thereto any items of extraordinary loss, including net
losses on the sale of assets other than asset sales in the ordinary course of
business), plus (b) interest expense, Depreciation and amortization.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower or any
<PAGE>
member of its Controlled Group, (a) a Reportable Event (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under
regulations issued under Section 4043 of ERISA), (b) the withdrawal of any such
Person or any member of its Controlled Group from a Plan subject to Title IV of
ERISA during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate
under Section 4041(c) of ERISA, (d) the institution of proceedings to terminate
a Plan by the PBGC, (e) the failure to make required contributions which could
result in the imposition of a lien under Section 412 of the Code or Section 302
of ERISA, or (f) any other event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or the imposition of any
liability under Title IV of ERISA other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" means any of the events specified in Section 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"Existing Letters of Credit" means those letters of credit listed on
Schedule 8 hereto and issued pursuant to the Existing Credit Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Lender on such day on such transactions as determined by the
Administrative Lender.
"Fixed Charges" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis determined in accordance
with GAAP, the sum of, without duplication, (a) scheduled principal payments on
Total Debt (excluding any payments pursuant to Section 2.8(c) hereof), plus (b)
interest expense (including interest expense pursuant to Capitalized Lease
Obligations), plus (c) Dividends, in each case for the four fiscal quarters
immediately preceding the date of calculation.
"Fixed Charge Coverage Ratio" means the ratio of Adjusted
<PAGE>
EBITDA to Fixed Charges.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period, except as otherwise
required by the adoption of Statement of Financial Accounting Standards No. 106.
"Governmental Authority" means (a) the government of (i) the United States
of America and any State or other political subdivision thereof or (ii) any
jurisdiction in which the Borrower or any Subsidiary conducts all or any part of
its business or owns any property or (b) any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, any such government.
"Guaranty" or "Guaranteed", as applied to an obligation of another Person,
means and include (a) a guaranty, direct or indirect, in any manner, of any part
or all of such obligation, and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of nonperformance) of any
part or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit.
"Guarantor" means each Subsidiary.
"Highest Lawful Rate" means at the particular time in question the maximum
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be (a)
the weekly rate ceiling described in and computed in accordance with the
provisions of Article 5069-1D, Title 79, Revised Civil Statutes of 1925, as
amended, or (b) either the quarterly ceiling or the annualized ceiling computed
pursuant to Art. 5069-1D.008, Title 79, Revised Civil Statutes of Texas, as
amended; provided, however, that at any time the weekly rate ceiling, the
quarterly ceiling or the annualized ceiling shall be less than 18% per annum or
more than
<PAGE>
24% per annum, the provisions of Article 5069-1D.009(a) and (b), Title 79,
Revised Civil Statutes of Texas, as amended, shall control for purposes of such
determination, as applicable.
"Indebtedness" means, with respect to any Person, (a) all items which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person, (b) all obligations
secured by any Lien (other than Liens referred to in clauses (b), (c), (d), (e),
(g) or (i) of the definition of Permitted Liens) on any property or asset owned
by such Person, whether or not the obligation secured thereby shall have been
assumed, (c) to the extent not otherwise included, all Capitalized Lease
Obligations of such Person, all obligations of such Person with respect to
leases constituting part of a sale and leaseback arrangement, all Guaranties,
all obligations under interest rate swap agreements, hedge agreements, foreign
exchange contracts or agreements or similar agreements and arrangements, all
indebtedness for borrowed money, and all reimbursement obligations with respect
to outstanding letters of credit, (d) any "withdrawal liability" of the Borrower
or any Subsidiary, as such term is defined under Part I of Subtitle E of Title
IV of ERISA, (e) the principal portion of all obligations of such Person under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an operating
lease pursuant to GAAP, and (f) all preferred stock issued by such Person and
required by the terms thereof to be redeemed, or for which mandatory sinking
fund payments are due, by a fixed date.
"Indemnified Matters" has the meaning ascribed to it in Section 5.10(a)
hereof.
"Indemnitees" has the meaning ascribed to it in Section 5.10(a) hereof.
"Interest Period" means, for (a) any LIBOR Advance, the period beginning on
the day such LIBOR Advance is made and ending one, two, three or six months
thereafter (as the Borrower shall select), (b) any Absolute Bid Rate Advance,
the period beginning on the day such Bid Rate Advance is made and ending not
less than 7 days nor more than 180 days thereafter (as the Borrower shall
select), and (c) any LIBOR Bid Rate Advance, the period beginning on the day
such Bid Rate Advance is made and ending one, two, three or six months
thereafter (as the Borrower shall select); provided, however, that all of the
foregoing provisions are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless, with
<PAGE>
respect to a LIBOR Advance or a LIBOR Bid Rate Advance, the result of such
extension would be to extend such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period with respect to a LIBOR Advance or a LIBOR
Bid Rate Advance that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iii) the Borrower may not select any Interest Period in respect of
LIBOR Advances or LIBOR Bid Rate Advances having an aggregate amount less
than $1,000,000; and
(iv) there shall be outstanding at any one time no more than ten
Interest Periods in the aggregate.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower and
any Lender.
"Investment" means any direct or indirect purchase or other acquisition of,
or beneficial interest in, capital stock, partnership interests or other
securities of any other Person, or any direct or indirect loan, advance (other
than advances to employees for moving and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
to, or investment in any other Person, including without limitation the
incurrence or sufferance of Indebtedness or the purchase of accounts receivable
of any other Person that are not current assets or do not arise in the ordinary
course of business.
"Invitation to Bid" means any certificate by the Administrative Lender
identifying each Lender of the Borrower's Bid Rate Advance Request,
substantially in the form of Exhibit I hereto.
"Issuing Bank" means NationsBank of Texas, N.A. in its capacity as issuer
of the Letters of Credit.
"Lender" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a portion of the
Commitment or is owed any part of the Obligations (including the Administrative
Lender in its individual capacity), and each Assignee that hereafter becomes
party hereto pursuant to Section 11.6 hereof.
"L/C Cash Collateral Account" has the meaning specified in
<PAGE>
Section 2.16(g) hereof.
"L/C Related Documents" has the meaning specified in Section 2.16(e)
hereof.
"Letter of Credit" has the meaning specified in Section 2.16(a) hereof, and
shall also mean and include the Existing Letters of Credit.
"Letter of Credit Agreement" has the meaning specified in Section 2.16(b)
hereof.
"Letter of Credit Facility" has the meaning specified in Section 2.16(a)
hereof.
"Leverage Ratio" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis, the ratio of Total Debt
as of the date of calculation to Adjusted EBITDA for the four fiscal quarters
immediately preceding the date of calculation.
"LIBOR Advance" means a Revolving Credit Advance which the Borrower
requests to be made as a LIBOR Advance or which is reborrowed as a LIBOR
Advance, in accordance with the provisions of Section 2.2 hereof.
"LIBOR Basis" means a per annum interest rate equal to the lesser of (a)
the Highest Lawful Rate, or (b) the sum of the Adjusted LIBOR Rate plus the
Applicable Margin.
"LIBOR Bid Rate" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate or (b) the sum of the Adjusted LIBOR Rate plus or
minus the Margin.
"LIBOR Bid Rate Advance" means a Bid Rate Advance that bears interest at
the LIBOR Bid Rate.
"LIBOR Lending Office" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
other office of the Lender or any of its affiliates hereafter designated by
notice to the Borrower and the Administrative Lender.
"LIBOR Rate" means, for any LIBOR Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum
<PAGE>
(rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100th of 1%).
"Lien" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Loan Documents" means this Agreement, the Notes, the Subsidiary Guaranty
and any other document or agreement executed or delivered from time to time by
the Borrower, any Subsidiary or any other Person in connection herewith or as
security for the Obligations.
"Long Term Debt" means any obligation which is due one year or more from
the date of creation thereof which under GAAP is shown as a liability, plus,
without duplication, amounts equal to the aggregate net rentals payable one year
or more from the date of creation thereof under Capitalized Lease Obligations.
"Margin" means, as to any LIBOR Bid Rate Advance, the margin (expressed as
a percentage per annum in the form of a decimal to no more than four decimal
places) to be added or subtracted from the Adjusted LIBOR Rate to determine the
interest rate applicable to such Advance.
"Material Adverse Effect" means any act or circumstance or event that (a)
could reasonably be expected to be material and adverse to (i) the business,
assets, liabilities, financial condition, results of operations, business or
prospects of the Borrower and its Subsidiaries taken as a whole or (ii) the
ability of the Borrower or any Guarantor to perform their obligations under the
respective Loan Documents, or (b) in any manner whatsoever does or could
reasonably be expected to materially and adversely affect the validity or
enforceability of any Loan Document.
"Maturity Date" means December 18, 2002, or the earlier date of termination
in whole of the Commitment pursuant to Section 2.6 or 8.2 hereof.
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
<PAGE>
"Multiemployer Plan" means, as to any Person, at any time, a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person
or any member of its Controlled Group is making, or is obligated to make
contributions or has made, or been obligated to make, contributions.
"Necessary Authorization" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with, any
governmental or other regulatory authority necessary or appropriate to enable
the Borrower or any Subsidiary to maintain and operate its business and
properties.
"Negative Pledge Agreement" means any agreement, contract or arrangement
whereby any Person is prohibited from, or would otherwise be in default as a
result of, creating, assuming, incurring or suffering to exist, directly or
indirectly, any Lien on any of its assets.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
disposition of any asset by any Person, the aggregate amount of cash received by
such Person in connection with such transaction minus reasonable fees, costs and
expenses and related taxes.
"Net Worth" means, for the Borrower and its Subsidiaries, on a consolidated
basis, determined in accordance with GAAP, the sum of: (i) capital stock taken
at par value, plus (ii) capital surplus plus (iii) retained earnings less
treasury stock.
"Note" means any Revolving Credit Note or Bid Rate Note and "Notes" means
the Revolving Credit Notes and the Bid Rate Notes.
"Notice of Acceptance of Bid" means any certificate signed by an Authorized
Signatory accepting bids for Bid Rate Advances, substantially in the form of
Exhibit I hereto.
"Notice of Issuance" has the meaning ascribed to it in Section 2.16(b)
hereof.
"Obligations" means (a) all obligations of any nature (whether matured or
unmatured, fixed or contingent, including the Reimbursement Obligations) of the
Borrower or any Subsidiary to the Lenders under the Loan Documents as they may
be amended from time to time, and (b) all obligations of the Borrower or any
Subsidiary for losses, damages, expenses or any other liabilities of any kind
that any Lender may suffer by reason of a breach by the Borrower or any
Subsidiary of any obligation, covenant or undertaking with respect to any Loan
Document.
"Participant" has the meaning ascribed to it in Section 11.6(c) hereof.
<PAGE>
"Participation" has the meaning ascribed to it in Section 11.6(c) hereof.
"Payment Date" means the last day of the Interest Period for any Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means, as applied to any Person:
(a) any Lien in favor of the Lenders to secure the Obligations hereunder;
(b) (i) Liens on real estate for real estate taxes not yet delinquent, (ii)
Liens on leasehold interests created by the lessor in favor of any mortgagee of
the leased premises, and (iii) Liens for taxes, assessments, governmental
charges, levies or claims that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on such Person's books, but only so long as no foreclosure, restraint,
sale or similar proceedings have been commenced with respect thereto;
(c) Liens of carriers, landlords, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way, restrictions and other similar encumbrances on
the use of real property which do not interfere with the ordinary conduct of the
business of such Person;
(f) Liens created to secure Indebtedness permitted by Sections 7.1(d) and
7.1(j) hereof, which is incurred solely for the purpose of financing the
acquisition or construction of such assets and incurred at the time of
acquisition or construction, so long as each such Lien shall at all times be
confined solely to the asset or assets so acquired or constructed (and proceeds
thereof), and refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired or constructed and the amount of Indebtedness
related thereto is not increased;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall
<PAGE>
have established adequate reserves for such judgments or awards, (ii) such
judgments or awards shall be fully insured and the insurer shall not have denied
coverage, or (iii) such judgments or awards shall have been bonded to the
satisfaction of the Determining Lenders;
(h) Any Liens existing on the Agreement Date which are described on
Schedule 2 hereto, and Liens resulting from the refinancing of the related
Indebtedness, provided that the Indebtedness secured thereby shall not be
increased and the Liens shall not cover additional assets of the Borrower; and
(i) Liens filed of record out of an abundance of caution by lessors of
personal property, so long as each such Lien shall at all times be confined
solely to the asset or assets so leased.
"Person" means an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan as defined in Section 3(3) of ERISA
(including a Multiemployer Plan that is covered by Title IV of ERISA) pursuant
to which any employees of the Borrower, its Subsidiaries or any member of their
Controlled Group participate.
"Prime Rate" means, at any time, the prime interest rate announced or
published by the Administrative Lender from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Lender as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Lender.
"Prudential Borrower Notes" means, collectively, those certain (a)
$25,000,000 7.14% Senior Notes, Series A of the Borrower, dated as of April 9,
1996, payable to the order of The Prudential Insurance Company of America and
maturing on April 9, 2004, (b) $25,000,000 7.30% Senior Notes, Series B of the
Borrower, dated as of April 9, 1996, payable to the order of The Prudential
Insurance Company of America and maturing on April 9, 2006, and (c) $25,000,000
7.40% Senior Notes, Series C of the Borrower, dated as of April 9, 1996, payable
to the order of The Prudential Insurance Company of America and maturing on
April 9, 2008.
"Prudential Chaparral Notes" means, collectively, those certain (a)
$20,000,000 10.85% Senior Notes of Chaparral, dated as of April 30, 1990,
payable to the order of The Prudential Insurance Company of America and maturing
on April 30, 2004, (b) $20,000,000 10.35% Senior Notes of Chaparral, dated as of
April 30, 1990, payable to the order of The Prudential Insurance Company of
America
<PAGE>
and maturing on April 30, 2004, (c) $20,000,000 10.50% Senior Notes of
Chaparral, dated as of April 30, 1990, payable to the order The Prudential
Insurance Company of America and maturing on April 30, 2004, and (d) $20,000,000
9.08% Senior Notes of Chaparral, dated as of October 17, 1991, payable to the
order of The Prudential Insurance Company of America and maturing on April 30,
2004.
"Quarterly Date" means the last day of each February, May, August and
November, beginning November 30, 1997.
"Reimbursement Obligations" means, in respect of any Letter of Credit as at
any date of determination, the sum of (a) the maximum aggregate amount which is
then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit and not theretofore
reimbursed by the Borrower.
"Refinancing Advance" means any Revolving Credit Advance which is used to
pay the principal amount (or any portion thereof) of a Revolving Credit Advance
at the end of its Interest Period and which, after giving effect to such
application, does not result in an increase in the aggregate amount of
outstanding Revolving Credit Advances.
"Release Date" means the date on which the Notes have been paid, all other
Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"Reportable Event" has the meaning set forth in Section 4043(b) of ERISA.
"Request for Maturity Date Extension" has the meaning set forth in Section
2.17 hereof.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the
effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks with respect to (i) any
category of liabilities which includes deposits by reference to which the
Adjusted LIBOR Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include LIBOR Advances or LIBOR Bid Rate Advances.
The Adjusted LIBOR Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"Revolving Credit Advance" means an Advance made pursuant to
<PAGE>
Section 2.1(a) hereof.
"Revolving Credit Note" means each promissory note of the Borrower
evidencing Revolving Credit Advances hereunder, substantially in the form of
Exhibit A hereto, together with any extension, renewal or amendment thereof, or
substitution therefor.
"Senior Notes" means, collectively, those certain (a) $80,000,000 7.15%
Senior Notes, Series A of the Borrower, dated December, 1997 and maturing April
15, 2006, (b) $40,000,000 7.20% Senior Notes, Series B of the Borrower, dated
December, 1997 and maturing April 15, 2007, (c) $10,000,000 7.28% Senior Notes,
Series C of the Borrower, dated December, 1997 and maturing April 15, 2009, (d)
$45,000,000 7.395% Senior Notes, Series D of the Borrower, dated December, 1997
and maturing April 15, 2012, and (e) $25,000,000 7.59% Senior Notes, Series E of
the Borrower, dated December, 1997 and maturing April 15, 2017, in form and
substance satisfactory to the Determining Lenders.
"Solvent" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll, P.C.,
or such other legal counsel as the Administrative Lender may select.
"Specified Percentage" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or if applicable, specified in
its most recent Assignment Agreement.
"Subordinated Debt" means all Indebtedness of the Borrower or any
Subsidiary which shall be subordinated, on terms satisfactory to the Determining
Lenders, to the Obligations.
"Subsidiary" means any corporation, partnership, joint venture, trust,
estate or other Person of which 50% or more of (a) the outstanding stock (other
than directors' qualifying shares) having ordinary voting power to elect a
majority of its board of directors, regardless of the existence at the time of a
right of the holders of any class of securities of such corporation to
<PAGE>
exercise such voting power by reason of the happening of any contingency, (b)
the interest in the capital or profits of such partnership or joint venture, (c)
the beneficial interest of such trust or estate, or (d) the equity interest of
such other Person, is at the time owned by the Borrower, directly or through one
or more intermediaries; provided, however, notwithstanding anything herein to
the contrary, a Venture shall not be a Subsidiary unless otherwise designated in
writing by the Borrower and such Venture shall have satisfied the requirements
of Section 7.3(c) hereof.
"Subsidiary Guaranty" means each Subsidiary Guaranty, executed by each
Guarantor, guarantying payment and performance of the Obligations, substantially
in the form of Exhibit C hereto, as such agreement may be amended, modified,
supplemented or restated from time to time.
"Taxes" has the meaning ascribed thereto in Section 2.15 hereof.
"Total Debt" means, as of any date of determination, determined for the
Borrower and its Subsidiaries on a consolidated basis determined in accordance
with GAAP, the sum (without duplication) of (a) all principal outstanding under
the Loan Documents, (b) all obligations evidenced by a promissory note or
otherwise representing borrowed money, (c) all reimbursement obligations for
letters of credit, (d) all Capitalized Lease Obligations.
"Treasury Stock Purchases" means, with respect to any Person, any purchase,
redemption or other acquisition or retirement for value by such Person of any
shares of capital stock of such Person.
"UCC" means the Uniform Commercial Code of Texas, as amended from time to
time.
"Venture" means any Person (other than a corporation or any other Person
designated in writing by the Borrower as a Subsidiary) in which the Borrower,
directly or indirectly, has an ownership interest of at least 50% but less than
100%.
"Venture Investments" means all Investments by the Borrower or any
Subsidiary in Ventures.
Section 1.2 Amendments and Renewals. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms pursuant to the
provisions of Section 11.11 hereof.
Section 1.3 Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and
<PAGE>
vice versa, unless otherwise specifically required by the context. All
accounting terms used in this Agreement which are not otherwise defined herein
shall be construed in accordance with GAAP on a consolidated basis for the
Borrower and its Subsidiaries, unless otherwise expressly stated herein.
ARTICLE 2
Advances
Section 2.1 The Advances.
(a) Revolving Credit Advances. Each Lender severally agrees, upon the
terms and subject to the conditions of this Agreement, to make Revolving Credit
Advances to the Borrower from time to time in an aggregate amount not to exceed
its Specified Percentage of the Commitment less its Specified Percentage of the
aggregate amount of all Reimbursement Obligations then outstanding (assuming
compliance with all conditions to drawing) for the purposes set forth in Section
5.9 hereof. Notwithstanding the immediately preceding sentence, at no time
shall the sum of (i) the aggregate principal amount of Revolving Credit Advances
outstanding plus (ii) the aggregate outstanding amount of Reimbursement
Obligations plus (iii) the aggregate principal amount of Bid Rate Advances
outstanding exceed the Commitment. Subject to Section 2.9 hereof, Advances may
be repaid and then reborrowed. Any Advance shall, at the option of the Borrower
as provided in Section 2.2 hereof (and, in the case of LIBOR Advances, subject
to availability and to the provisions of Article 9 hereof), be made as a Base
Rate Advance or a LIBOR Advance; provided that there shall not be outstanding to
any Lender, at any one time, more than ten LIBOR Advances under the Commitment.
On the Maturity Date unless sooner paid as provided herein, the outstanding
Revolving Credit Advances shall be repaid in full.
(b) Bid Rate Advances. Each Lender may, in its sole discretion and on the
terms and conditions set forth in this Agreement, make Bid Rate Advances to the
Borrower from time to time in an aggregate amount not in excess of the
difference between (i) the Commitment minus (ii) the sum of (A) the aggregate
outstanding principal amount of all Revolving Credit Advances, plus (B) the
amount of all Reimbursement Obligations. Bid Rate Advances may either bear
interest at the Absolute Bid Rate or the LIBOR Bid Rate. Each Absolute Bid Rate
Advance shall be for a period of not less than 7 days and not more than 180
days. Each LIBOR Bid Rate Advance shall be for a period of one, two, three or
six months. Bid Rate Advances may not be prepaid without the prior written
consent of the Lender making such Bid Rate Advance. Each borrowing of a Bid
Rate Advance shall be a principal amount which is at least $10,000,000 and which
is an integral multiple of $1,000,000. No Lender shall have an obligation to
make Bid Rate Advances, and the
<PAGE>
Borrower shall have no obligation to accept any offer for Bid Rate Advances.
Section 2.2 Manner of Borrowing and Disbursement.
(a) In the case of Base Rate Advances other than a Refinancing Advance, the
Borrower, through an Authorized Signatory, shall give the Administrative Lender
prior to 10:30 a.m., Dallas, Texas time, on the date of any proposed Base Rate
Advance irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given), of its intention to borrow or reborrow a Base Rate Advance hereunder.
Such notice of borrowing shall specify the requested funding date, which shall
be a Business Day, and the amount of the proposed aggregate Base Rate Advances
to be made by Lenders.
(b) In the case of LIBOR Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender at least three Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given), of its intention to borrow or reborrow a LIBOR Advance hereunder.
Notice shall be given to the Administrative Lender prior to 11:00 a.m., Dallas,
Texas time, in order for such Business Day to count toward the minimum number of
Business Days required. LIBOR Advances shall in all cases be subject to
availability and to Article 9 hereof. For LIBOR Advances, the notice of
borrowing shall specify the requested funding date, which shall be a Business
Day, the amount of the proposed aggregate LIBOR Advances to be made by Lenders
and the Interest Period selected by the Borrower, provided that no such Interest
Period shall extend past the Maturity Date, or prohibit or impair the Borrower's
ability to comply with Section 2.8 hereof.
(c) Subject to Sections 2.1 and 2.9 hereof, at least three Business Days
prior to each Payment Date for a LIBOR Advance, the Borrower, through an
Authorized Signatory, shall give the Administrative Lender irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), specifying whether all or
a portion of such LIBOR Advance outstanding on the Payment Date (i) is to be
repaid and then reborrowed in whole or in part as a LIBOR Advance, (ii) is to be
repaid and then reborrowed in whole or in part as a Base Rate Advance, or (iii)
is to be repaid and not reborrowed; provided, however, notwithstanding anything
in this Agreement to the contrary, if on any Payment Date a Default shall exist,
such LIBOR Advance may only be reborrowed as a Base Rate Advance. Upon such
Payment Date, such LIBOR Advance shall, subject to the provisions
<PAGE>
hereof, be so repaid and, as applicable, reborrowed.
(d) Subject to Sections 2.1 and 2.9 hereof, upon at least two Business
Days' (or at least three Business Days' for a reborrowing as one or more LIBOR
Advances) irrevocable prior written notice, through an Authorized Signatory, or
irrevocable telephonic notice followed immediately by written notice (provided,
however, that the Borrower's failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), the Borrower may repay or prepay a
Base Rate Advance, and (i) reborrow all or a portion of the principal amount
thereof as a Base Rate Advance, (ii) provided no Default shall exist, reborrow
all or a portion of the principal amount thereof as one or more LIBOR Advances,
or (iii) not reborrow all or any portion of such Base Rate Advance. Upon such
Payment Date or date of repayment, such Base Rate Advance shall, subject to the
provisions hereof, be so repaid and, as applicable, reborrowed.
(e) The aggregate amount of Base Rate Advances to be made by the Lenders on
any day shall be in a principal amount which is at least $500,000 and which is
an integral multiple of $250,000; provided, however, that such amount may equal
the unused amount of the Commitment. The aggregate amount of LIBOR Advances
having the same Interest Period and to be made by the Lenders on any day shall
be in a principal amount which is at least $1,000,000 and which is an integral
multiple of $250,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice (other than with respect to a Bid Rate Advance) received from the
Borrower pursuant to this Section. Failure of the Borrower to give any notice
in accordance with Sections 2.2(c) and (d) hereof shall result in a repayment of
any such existing Revolving Credit Advance on the applicable Payment Date by a
Refinancing Advance which is a Base Rate Advance. Each Lender shall, not later
than noon, Dallas, Texas time, on the date of any Revolving Credit Advance that
is not a Refinancing Advance, deliver to the Administrative Lender, at its
address set forth herein, such Lender's Specified Percentage of such Revolving
Credit Advance in immediately available funds in accordance with the
Administrative Lender's instructions. Prior to 2:00 p.m., Dallas, Texas time,
on the date of any Revolving Credit Advance hereunder, the Administrative Lender
shall, subject to satisfaction of the conditions set forth in Article 3,
disburse the amounts made available to the Administrative Lender by the Lenders
by (i) transferring such amounts by wire transfer pursuant to the Borrower's
instructions, or (ii) in the absence of such instructions, crediting such
amounts to the account of the Borrower maintained with the Administrative
Lender. All Revolving Credit Advances shall be made by each Lender according to
its Specified Percentage. No Lender shall be relieved of its obligation to fund
its Specified Percentage of any Revolving Credit Advance notwithstanding the
fact that at any time the aggregate outstanding principal amount of all Bid Rate
Advances made by such Lender
<PAGE>
exceed its Specified Percentage of the Commitment.
(g) Bid Rate Advances. With respect to each borrowing consisting of Bid
Rate Advances, the Borrower shall give the Administrative Lender prior to 11:00
a.m. (Dallas time), (i) in the case of LIBOR Bid Rate Advances, at least four
Business Days prior to the proposed date of borrowing and (ii) in the case of
Absolute Bid Rate Advances, at least three Business Days prior to the proposed
date of borrowing, written notice of its intention to borrow Bid Rate Advances
pursuant to a Bid Rate Advance. Such Bid Rate Advance Request shall specify (i)
the requested date of borrowing, which shall be a Business Day, (ii) the
aggregate amount of the proposed borrowing of Bid Rate Advances (which shall be
at least $10,000,000 and which is an integral multiple of $1,000,000 in excess
thereof), (iii) the Interest Period with respect thereto, provided that such
Interest Period shall not extend past the Maturity Date, and (iv) whether the
Bid Rate Advances requested are Absolute Bid Rate Advances or LIBOR Bid Rate
Advances. Bid Rate Advance Requests that do not conform substantially to the
format of Exhibit F may be rejected by the Administrative Lender, and the
Administrative Lender shall give prompt notice to the Borrower of such
rejection. The Borrower shall pay a $1,000 non-refundable, administrative fee
for the account of the Administrative Lender for each notice of proposed
borrowing consisting of Bid Rate Advances. Such fee shall be paid to the
Administrative Lender on the date of delivery of the Borrower's notice of
intention to borrow Bid Rate Advances, and shall not be refunded notwithstanding
that the proposed borrowing is canceled by Borrower or no Lender offers to make
a Bid Rate Advance.
(i) Upon the receipt by the Administrative Lender of a Bid Rate
Advance Request that conforms with the requirements herein, the
Administrative Lender shall, by telecopy in the form of the Invitation to
Bid, invite each Lender to bid, on the terms and conditions of this
Agreement, to make Bid Rate Advances pursuant to the Bid Rate Advance
Request.
(ii) Each Lender shall, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Bid Rate Advances to the Borrower
as part of such proposed borrowing at a rate or rates of interest specified
by such Lender in its sole discretion, by delivering a Confirmation of Bid
to the Administrative Lender before 11:00 a.m. (Dallas time), (A) three
Business Days prior to the proposed date of borrowing, in the case of a
request for LIBOR Bid Rate Advances, and (B) two Business Days prior to the
proposed date of borrowing, in the case of a request for Absolute Bid Rate
Advances, (1) setting forth (a) the minimum amount (which shall be
$1,000,000 or an integral multiple in excess thereof) and maximum amount of
each Bid Rate Advance which such Lender would be willing to make as part of
the proposed borrowing (which amounts may exceed such Lender's Specified
Percentage)
<PAGE>
and (b) the Absolute Bid Rate or Margin therefor, as applicable, and (2)
confirming the Interest Period therefor. Confirmation of Bids that do not
conform substantially to Exhibit H may be rejected by the Administrative
Lender, and the Administrative Lender shall notify the applicable Lender of
such rejection as soon as practicable. If any Lender shall fail to respond
to the Administrative Lender by such time, such Lender shall be deemed to
have elected not to make an offer. Any Confirmation of Bid submitted by a
Lender pursuant to this Section 2.2(g)(ii) is irrevocable.
(iii) The Administrative Lender shall promptly notify the Borrower of
the number of Confirmation of Bids, the interest rate(s) and Interest
Period(s) applicable thereto, the maximum principal amount bid at each
interest rate for each Interest Period, and the identity of each Lender
submitting a Confirmation of Bid.
(iv) Not later than 1:00 p.m. (Dallas time) (A) three Business Days
prior to the proposed date of borrowing in the case of LIBOR Bid Rate
Advances and (B) two Business Days prior to the proposed date of the
proposed borrowing in the case of Absolute Bid Rate Advances, the Borrower
shall, in turn, either
(A) cancel such proposed borrowing by giving the Administrative
Lender notice to that effect, or
(B) accept one or more of the offers made by any Lender or
Lenders pursuant to clause (ii) above, in its sole discretion, by
giving notice to the Administrative Lender of the amount of each Bid
Rate Advance (which amount shall be equal to or greater than the
minimum amount, and equal to or less than the maximum amount, for
which notification was given to the Borrower by any Lender for such
Bid Rate Advance pursuant to clause (ii) above) to be made by each
Lender as part of such borrowing, and reject any remaining offers made
by Lenders pursuant to clause (ii) above by giving the Administrative
Lender notice to that effect; provided, however, that if offers are
made by two or more such Lenders with the same LIBOR Bid Rates or
Absolute Bid Rates for a greater aggregate principal amount than the
amount for which such offers are accepted for the related term, the
principal amount of Bid Rate Advances accepted shall be allocated by
the Borrower among such Lenders as nearly as possible (in multiples
not less than $1,000,000) in proportion to the aggregate principal
amount of such offers, and (3) the aggregate principal amount of
offers accepted by the Borrower shall not exceed the maximum amount
contained in the related Bid Rate Advance Request.
<PAGE>
(v) The Administrative Lender shall promptly give telephonic notice
to each bidding Lender if any of its offers have been accepted (and if so,
in what amount, at what interest rate and for what Interest Period), and
each successful Lender will thereupon become bound, subject to the other
applicable conditions hereof, to make each Bid Rate Advance for which its
offer has been accepted.
(vi) After completing the notifications referred to in clause (v)
above, the Administrative Lender shall notify each bidding Lender (A) the
aggregate amount of Bid Rate Advances made in connection with such proposed
borrowing, (B) the maturities thereof, and (C) the lowest and highest
interest rates at which Bid Rate Advances were made for each maturity.
(vii) If the Administrative Lender shall at any time elect to submit a
bid for a Bid Rate Advance in its capacity as a Lender, it shall submit
such bid directly to the Borrower one-half hour earlier than the latest
time at which other Lenders are required to submit their bid to the
Administrative Lender pursuant to Section 2(g)(ii) hereof.
(viii) If the Borrower accepts one or more offers made by any Lender
or Lenders pursuant to clause (iv)(B) above, each such Lender shall, unless
any applicable condition specified in Article 3 hereof has not been
satisfied, not later than 12:00 noon (Dallas time) on the date of a Bid
Rate Advance hereunder, make available to the Administrative Lender the
principal amount of each Bid Rate Advance in immediately available funds,
to be disbursed by the Administrative Lender by wire transfer pursuant to
instructions of the Borrower.
Section 2.3 Interest.
(a) On Base Rate Advances.
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of each Base Rate Advance, from the date such Advance is
made until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) and repaid, which shall be payable as
set forth in Section 2.3(a)(ii) hereof, at a simple interest rate per annum
equal to the Base Rate Basis for such Base Rate Advance as in effect from
time to time, provided that interest on such Base Rate Advance shall not
exceed the Maximum Amount.
(ii) Interest on each Base Rate Advance shall be computed on the basis
of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
<PAGE>
(b) On LIBOR Advances.
(i) The Borrower shall pay interest on the unpaid principal amount of
each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction, or
otherwise) and repaid, at a rate per annum equal to the LIBOR Basis for
such Advance. The Administrative Lender, whose determination shall be
conclusive, shall determine the LIBOR Basis on the second Business Day
prior to the applicable funding date and shall notify the Borrower and the
Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on the three-month anniversary of the beginning of
such Interest Period.
(c) On Bid Rate Advances. The Borrower shall pay interest on each Absolute
Bid Rate Advance at the Absolute Bid Rate offered by the Lender making such
Advance (but not in excess of the Highest Lawful Rate) in arrears on its Payment
Date, and, in addition, if the Interest Period for an Absolute Bid Rate Advance
exceeds 90 days, interest on such Bid Rate Advance shall also be due and payable
on the ninetieth day from the beginning of such Interest Period. Interest on
each Absolute Bid Rate Advance shall be computed on the basis of a year of 365
or 366 days, as applicable, for the number of days actually elapsed. The
Borrower shall pay interest on each LIBOR Bid Rate Advance at the LIBOR Bid Rate
offered by the Lender making such Advance (but not in excess of the Highest
Lawful Rate) in arrears on its Payment Date, and, in addition, if the Interest
Period for a LIBOR Bid Rate Advance exceeds three months, interest on such LIBOR
Bid Rate Advance shall be due and payable in arrears on the three-month
anniversary of the beginning of such Interest Period. Interest on such LIBOR
Bid Rate Advance shall be computed on the basis of a 360-day year for the actual
number of days elapsed.
(d) Interest if No Notice of Selection of Interest Rate Basis. If the
Borrower fails to give the Administrative Lender timely notice of its selection
of a LIBOR Basis or an Interest Period for a LIBOR Advance, or if for any reason
a determination of a LIBOR Basis for any Advance is not timely concluded due to
the fault of the Borrower, the Base Rate Basis shall apply to the applicable
Advance.
(e) Interest After an Event of Default. (i) After an Event of Default
(other than an Event of Default specified in Section 8.1(f) or (g) hereof) and
during any continuance thereof,
<PAGE>
at the option of Determining Lenders, and (ii) after an Event of Default
specified in Section 8.1(f) or (g) hereof and during any continuance thereof,
automatically and without any action by the Administrative Lender or any Lender,
the Obligations shall bear interest at a rate per annum equal to the Default
Rate. Such interest shall be payable on the earlier of demand or the Maturity
Date, and shall accrue until the earlier of (i) waiver or cure (to the
satisfaction of the Determining Lenders) of the applicable Event of Default,
(ii) agreement by the Lenders to rescind the charging of interest at the Default
Rate, or (iii) payment in full of the Obligations. The Lenders shall not be
required to accelerate the maturity of the Advances, to exercise any other
rights or remedies under the Loan Documents, or to give notice to the Borrower
of the decision to charge interest at the Default Rate. The Lenders will
undertake to notify the Borrower, after the effective date, of the decision to
charge interest at the Default Rate.
Section 2.4 Fees.
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrower agrees to
pay to the Administrative Lender, for the ratable account of the Lenders, a
nonrefundable commitment fee (which commitment fee shall be payable in arrears
on each Quarterly Date and on the Maturity Date), based on the daily average
unused portion of the Commitment (subject to Section 11.9 hereof, computed on
the basis of a year of 360-day year for the actual number of days elapsed, and
for purposes of calculation of the commitment fee, Letters of Credit outstanding
from time to time will reduce the unused portion of the Commitment and Bid Rate
Advances outstanding from time to time shall not reduce the unused portion of
the Commitment) commencing on the Agreement Date, at the following per annum
percentages, applicable in the following situations:
<TABLE>
<CAPTION>
Applicability Percentage
<S> <C>
(i) Category 1 - The Leverage Ratio is equal to or greater than 0.225%
3.0 to 1
(ii) Category 2 - The Leverage Ratio is less than 3.0 to 1 but is 0.150%
equal to or greater than 2.0 to 1
(iii) Category 3 - The Leverage Ratio is less than 2.0 to 1 but is 0.125%
greater than or equal to 1.0 to 1
(iv) Category 4 - The Leverage Ratio is less than 1.0 to 1 0.100%
</TABLE>
Such fee shall be subject to reduction or increase, as applicable, and as set
forth in the table above, on a quarterly basis according
<PAGE>
to the performance of the Borrower as tested by the Leverage Ratio; provided,
that each adjustment in such fee shall be effective as of the first day of the
month immediately following the month in which the Administrative Lender
receives the financial statements required pursuant to Section 6.1 or 6.2
hereof, as appropriate. If financial statements of the Borrower (and
corresponding Compliance Certificate setting forth the Leverage Ratio) are not
received by the Administrative Lender by the date required pursuant to Section
6.1 or 6.2 hereof, as appropriate, the commitment fee shall be determined as if
the Leverage Ratio is equal to or greater than 3.0 to 1 until such time as such
financial statements and Compliance Certificate are received. For the period
from the Agreement Date to the date that an adjustment in such fee would
otherwise be made pursuant to the terms hereof, the commitment fee shall be
determined pursuant to Category 3 above.
(b) Closing Fee. Subject to Section 11.9 hereof, the Borrower agrees to
pay to the Administrative Lender, for the account of the Lenders being committed
in a commitment letter to the Administrative Lender to hold a portion of the
Commitment hereunder of (i) greater than or equal to $50,000,000, a one-time
closing fee equal to the product of (x) 0.07% times (y) the amount equal to the
product of (A) such Lender's Specified Percentage times (B) the Commitment, (ii)
greater than or equal to $35,000,000, but less than $50,000,000, a one-time
closing fee equal to the product of (x) 0.05% times (y) the amount equal to the
product of (A) such Lender's Specified Percentage times (B) the Commitment, and
(iii) less than $35,000,000, a one-time closing fee equal to the product of (x)
0.03% times (y) the amount equal to the product of (A) such Lender's Specified
Percentage times (B) the Commitment. Such fee shall be payable on the Agreement
Date, and shall be fully-earned when due and, subject to Section 11.9 hereof,
nonrefundable when paid.
(c) Other Fees. Subject to Section 11.9 hereof, the Borrower agrees to pay
to the Administrative Lender, for its account and not the account of the
Lenders, the fees provided for in the letter agreement ("Administrative Lender
Fee Letter"), dated as of the Agreement Date, between the Borrower and the
Administrative Lender on the date and in the amounts specified therein.
Section 2.5 Prepayment.
(a) Voluntary Prepayments. The principal amount of any Base Rate Advance
may be prepaid in full or in part at any time, without penalty and without
regard to the Payment Date for such Advance, upon two Business Days' prior
telephonic notice (to be promptly followed by written notice) by an Authorized
Signatory to the Administrative Lender. LIBOR Advances may be voluntarily
prepaid upon three Business Days' prior telephonic notice (to be promptly
followed by written notice) by an Authorized Signatory to the Administrative
Lender, but only so long as the Borrower
<PAGE>
concurrently reimburses the Lenders in accordance with Section 2.9 hereof. Any
notice of prepayment shall be irrevocable.
(b) Mandatory Prepayment. On or before the date of any reduction of the
Commitment pursuant to Section 2.6 hereof, the Borrower shall prepay outstanding
Advances in an amount necessary to reduce the sum of outstanding Advances and
Reimbursement Obligations to an amount not greater than the Commitment as so
reduced pursuant to Section 2.6 hereof.
(c) Mandatory Prepayments from Sales of Equity. Concurrently with the
receipt of Net Cash Proceeds from the sale or disposition by the Borrower or any
Subsidiary of any equity interest in any Venture, the Borrower shall prepay
Advances (which may not be made by means of a Refinancing Advance) in a
principal amount equal to such Net Cash Proceeds.
(d) Prepayments, Generally. With respect to mandatory prepayments, the
Borrower shall first prepay all Base Rate Advances and shall thereafter prepay
LIBOR Advances. To the extent that any prepayment requires that a LIBOR Advance
be repaid on a date other than the last day of its Interest Period, the Borrower
shall reimburse each Lender in accordance with Section 2.9 hereof. Any
prepayment of a LIBOR Advance shall be accompanied by interest accrued on the
principal amount being prepaid. Any voluntary partial prepayment of a Base Rate
Advance shall be in a principal amount of $100,000 or an integral multiple
thereof.
Section 2.6 Reduction of Commitment.
(a) Voluntary Reduction. The Borrower shall have the right, upon not less
than 10 Business Days' notice (provided no notice shall be required for a
termination in whole of the Commitment) by an Authorized Signatory to the
Administrative Lender (if telephonic, to be confirmed by telex or in writing on
or before the date of reduction or termination), which shall promptly notify the
Lenders, to terminate or reduce the Commitment, in whole or in part. Each
partial termination shall be in an aggregate amount which is at least $5,000,000
and which is an integral multiple of $100,000, and no voluntary reduction in the
Commitment shall cause any LIBOR Advance to be repaid prior to the last day of
its Interest Period.
(b) Mandatory Reduction. The Commitment shall be automatically reduced by
the amount of Net Cash Proceeds received from the sale or disposition by the
Borrower or any Subsidiary of any equity interest in any Venture. On the
Maturity Date, the Commitment shall automatically reduce to zero.
(c) General Requirements. The Borrower shall reimburse each Lender for any
loss or out-of-pocket expense incurred by each Lender in connection with any
prepayment pursuant to Section 2.5
<PAGE>
hereof, as set forth in Section 2.9 hereof to the extent applicable. The
Borrower shall not have any right to rescind any termination or reduction. Once
reduced, the Commitment may not be increased or reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Lender. Unless the
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Revolving Credit Advance (which notice shall be effective upon
receipt) that such Lender does not intend to make the proceeds of such Revolving
Credit Advance available to the Administrative Lender, the Administrative Lender
may assume that such Lender has made such proceeds available to the
Administrative Lender on such date, and the Administrative Lender may in
reliance upon such assumption (but shall not be required to) make available to
the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Lender by such Lender, the
Administrative Lender shall be entitled to recover such amount on demand from
such Lender (or, if such Lender fails to pay such amount forthwith upon such
demand, from the Borrower) together with interest thereon in respect of each day
during the period commencing on the date such amount was available to the
Borrower and ending on (but excluding) the date the Administrative Lender
receives such amount from the Lender, with interest thereon at a per annum rate
equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds
Rate. No Lender shall be liable for any other Lender's failure to fund a
Revolving Credit Advance hereunder.
Section 2.8 Payment of Principal of Advances. The Borrower agrees to pay
the principal amount of the Advances to the Administrative Lender for the
account of the Lenders, as applicable, as follows:
(a) Base Rate Advances. The unpaid principal amount of the Base Rate
Advances shall be due and payable on the applicable Maturity Date.
(b) LIBOR Advances. The principal amount of each LIBOR Advance hereunder
shall be due and payable on its Payment Date, which principal payment may be
made by means of a Refinancing Advance.
(c) Bid Rate Advances. The principal amount of each Bid Rate Advance shall
be due and payable on its Payment Date.
(d) Commitment Reduction. On the date of each reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the Advances outstanding on such date of reduction in excess of the
Commitment as reduced minus all outstanding Reimbursement Obligations shall be
due and payable, which principal payment may not be made by means of Refinancing
<PAGE>
Advances. On the Maturity Date, the Commitment shall be reduced to zero.
(e) Maturity Date. The principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations related thereto, shall be
due and payable in full on the Maturity Date.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur any
losses or reasonable out-of-pocket expenses in connection with (a) failure by
the Borrower to borrow any LIBOR Advance or Bid Rate Advance after having given
notice of its intention to borrow in accordance with Section 2.2 hereof (whether
by reason of the Borrower's election not to proceed or the non-fulfillment of
any of the conditions set forth in Article 3 hereof), (b) any prepayment for any
reason of any LIBOR Advance or Bid Rate Advance in whole or in part (including a
prepayment pursuant to Sections 2.5(c) and 9.3(b) hereof), or (c) any prepayment
of any LIBOR Advance that is not made on any date specified in a notice of
prepayment given by the Borrower, the Borrower agrees to pay to any such Lender,
upon its demand, an amount sufficient to compensate such Lender for all such
losses and out-of-pocket expenses, subject to Section 11.9 hereof. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, calculated in its usual fashion, absent manifest error, shall be
binding and conclusive. Such losses shall include, without limiting the
generality of the foregoing, lost profits and reasonable expenses incurred by
such Lender in connection with the re-employment of funds prepaid, repaid,
converted or not borrowed, converted or paid, as the case may be. Upon request
of the Borrower, such Lender shall provide a certificate setting forth the
amount to be paid to it by the Borrower hereunder and calculations therefor.
Section 2.10 Manner of Payment.
(a) Each payment (including prepayments) by the Borrower of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) If any payment under this Agreement or any other Loan Document shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, unless such Business Day falls
in another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension of time shall in such case be included in computing
interest and fees, if any, in connection with such
<PAGE>
payment.
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees then due and payable; (iii) to the
payment of interest then due and payable on the Advances; (iv) to the payment of
all other amounts not otherwise referred to in this clause (d) then due and
payable under the Loan Documents; and (v) to the payment of principal then due
and payable on the Advances.
(e) Except as otherwise provided in the last sentence of this Section
2.10(e), each payment by the Borrower in respect of obligations relating to the
Revolving Credit Advances and the Letters of Credit (whether for principal,
interest, fees or otherwise) shall, except as otherwise expressly provided
herein, be made to the Administrative Lender for the account of the Lenders pro
rata in accordance with their respective Specified Percentages. Except as
otherwise provided in the last sentence of this Section 2.10(e), each payment by
the Borrower in respect of obligations relating to the Bid Rate Advances shall
be made to the Administrative Lender for the account of the Lenders making such
Bid Rate Advances. Notwithstanding anything in this Section 2.10(e) or any
other provision of this Agreement or any other Loan Document to the contrary,
any payment by the Borrower in respect of any Advances after acceleration of the
Advances pursuant to Section 8.2 or any monies received by the Administrative
Lender as a result of the exercise of remedies under any Loan Documents after
acceleration of Advances pursuant to Section 8.2 shall be distributed pro rata
to each Lender based on the percentage that the outstanding Advances and
Reimbursement Obligations owed to such Lender bears to the aggregate Advances
and Reimbursement Obligations owed to all Lenders.
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in Schedule 1 attached hereto. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Advance to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of the Borrower for increased costs or expenses resulting solely from such
designation or transfer (except any such transfer which is made by a Lender
pursuant to Section 9.2 or 9.3 hereof, or otherwise for the purpose of complying
with
<PAGE>
Applicable Law). Increased costs for expenses resulting from a change in
law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether
voluntary or involuntary, due to the exercise of any right of set-off, or
otherwise) on account of its Revolving Credit Advances in excess of its
Specified Percentage of all payments made by the Borrower with respect to
Revolving Credit Advances shall purchase from each other Lender such
participation in the Revolving Credit Advances made by such other Lender as
shall be necessary to cause such purchasing Lender to share the excess payment
pro rata according to Specified Percentages with each other Lender; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section, to the fullest extent permitted by law, may
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 Booking Loans. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any Affiliate.
<PAGE>
Section 2.15 Taxes.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Lender, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Lender (as the case
may be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation of such jurisdiction to the transactions contemplated by this
Agreement, (B) the activities of the Borrower in such jurisdiction, or (C) the
activities in connection with the transactions contemplated by this Agreement of
a Lender or the Administrative Lender; (iii) by reason of failure by the Lender
or the Administrative Lender to comply with the requirements of paragraph (e) of
this Section 2.15; and (iv) in the case of any Lender, any Taxes in the nature
of transfer, stamp, recording or documentary taxes resulting from a transfer
(other than as a result of foreclosure) by such Lender of all or any portion of
its interest in this Agreement, the Notes or any other Loan Documents (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Administrative Lender, (x) 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
2.15) such Lender or the Administrative Lender (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(y) the Borrower shall make such deductions and (z) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iv) of the first sentence
of Section 2.15(a)) that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative Lender
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.15) paid
<PAGE>
by such Lender or the Administrative Lender (as the case may be) and all
liabilities (including penalties, additions to tax, interest and reasonable
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted, other than penalties, additions
to tax, interest and expenses arising as a result of gross negligence on the
part of such Lender or the Administrative Lender, provided, however, that the
Borrower shall have no obligation to indemnify such Lender or the Administrative
Lender unless and until such Lender or the Administrative Lender shall have
delivered to the Borrower a certificate setting forth in reasonable detail the
basis of the Borrower's obligation to indemnify such Lender or the
Administrative Lender pursuant to this Section 2.15. This indemnification shall
be made within 30 days from the date such Lender or the Administrative Lender
(as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder, the Borrower will furnish to the Administrative Lender a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Lender, in either case stating that such
payment is exempt from or not subject to Taxes, provided, however, that such
certificate or opinion need only be given if: (i) the Borrower makes any
payment from any account located outside the United States, or (ii) the payment
is made by a payor that is not a United States Person. For purposes of this
Section 2.15 the terms "United States" and "United States Person" shall have the
meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 11.6 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrower through the Administrative Lender, with a copy to
the Administrative Lender:
(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"),
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of Internal
Revenue Service Form 1001 or any successor thereto ("Form 1001").
<PAGE>
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Borrower through the Administrative Lender, with a copy to the
Administrative Lender, in replacement for the forms previously delivered by
it hereunder:
(A) if such changed or additional lending office is located in
the United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of
Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's tax status for withholding
purposes; and
(v) it shall notify the Borrower within 30 days after any event
(including an amendment to, or a change in any applicable law or regulation
or in the written interpretation thereof by any regulatory authority or any
judicial authority, or by ruling applicable to such Lender of any
governmental authority charged with the interpretation or administration of
<PAGE>
any law) shall occur that results in such Lender no longer being capable of
receiving payments without any deduction or withholding of United States
federal income tax.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be materially
disadvantageous to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments to
the Administrative Lender for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrower to
minimize amounts payable by the Borrower under this Section 2.15; provided,
however, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
Section 2.15 and the Lender or the Administrative Lender receives a refund of
any or all of such sums, such refund shall be applied to pay any amounts then
due and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrower, provided that no Default or Event of Default is in existence at such
time.
<PAGE>
Section 2.16 Letters of Credit.
(a) The Letter of Credit Facility. The Borrower may request the Issuing
Bank, on the terms and conditions hereinafter set forth, to issue, and the
Issuing Bank shall, if so requested, issue, letters of credit (the "Letters of
Credit") for the account of the Borrower or any Subsidiary from time to time on
any Business Day from the date of the initial Advance until the Maturity Date in
an aggregate maximum amount (assuming compliance with all conditions to drawing)
not to exceed at any time outstanding the lesser of (i) $100,000,000 (the
"Letter of Credit Facility") and (ii) the sum of (A) the Commitment minus (B)
the aggregate principal amount of Advances then outstanding. No Letter of
Credit shall be issued to support any obligation of the Borrower or any
Subsidiary in respect of debt for borrowed money. No Letter of Credit shall
have an expiration date (including all rights of renewal) later than the earlier
of (i) the Maturity Date or (ii) one year after the date of issuance thereof.
Immediately upon the issuance of each Letter of Credit (or, with respect to the
Existing Letters of Credit, on the Agreement Date), the Issuing Bank shall be
deemed to have sold and transferred to each Lender, and each Lender shall be
deemed to have purchased and received from the Issuing Bank, in each case
irrevocably and without any further action by any party, an undivided interest
and participation in such Letter of Credit, each drawing thereunder and the
obligations of the Borrower under this Agreement in respect thereof in an amount
equal to the product of (x) such Lender's Specified Percentage of the Commitment
times (y) the maximum amount available to be drawn under such Letter of Credit
(assuming compliance with all conditions to drawing). Within the limits of the
Letter of Credit Facility, and subject to the limits referred to above, the
Borrower may request the issuance of Letters of Credit under this Section
2.16(a), repay any Advances resulting from drawings thereunder pursuant to
Section 2.16(c) and request the issuance of additional Letters of Credit under
this Section 2.16(a).
(b) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the Administrative Lender and
each Lender prompt notice thereof by telex, telecopier or cable. Each Letter of
Credit shall be issued upon notice given in accordance with the terms of any
separate agreement between the Borrower (and, if such Letter of Credit is being
issued for the account of a Subsidiary, such Subsidiary) and the Issuing Bank in
form and substance reasonably satisfactory to the Borrower (and, if such Letter
of Credit is being issued for the account of a Subsidiary, such Subsidiary) and
the Issuing Bank providing for the issuance of Letters of Credit pursuant to
this Agreement and containing terms and conditions not inconsistent with this
Agreement (a "Letter of Credit Agreement"), provided that if any such terms and
conditions
<PAGE>
are inconsistent with this Agreement, this Agreement shall control. Each such
notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by
telex, telecopier or cable, specifying therein, in the case of a Letter of
Credit, the requested (A) date of such issuance (which shall be a Business Day),
(B) maximum amount of such Letter of Credit, (C) expiration date of such Letter
of Credit, (D) name and address of the beneficiary of such Letter of Credit, (E)
form of such Letter of Credit and (F) such other information as shall be
required pursuant to the relevant Letter of Credit Agreement. If the requested
terms of such Letter of Credit are acceptable to the Issuing Bank in its
reasonable discretion, the Issuing Bank will, upon fulfillment of the applicable
conditions set forth in Article 3 hereof, make such Letter of Credit available
to the Borrower (or, if such Letter of Credit is being issued for the account of
a Subsidiary, to such Subsidiary) at its office referred to in Section 11.1 or
as otherwise agreed with the Borrower (or, if such Letter of Credit is being
issued for the account of a Subsidiary, to such Subsidiary) in connection with
such issuance.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Revolving Credit Advance, which
shall bear interest at the Base Rate Basis, in the amount of such draft (but
without any requirement for compliance with the conditions set forth in Article
3 hereof). In the event that a drawing under any Letter of Credit is not
reimbursed by the Borrower by 11:00 a.m. (Dallas time) on the first Business Day
after such drawing, the Issuing Bank shall promptly notify Administrative Lender
and each other Lender. Each such Lender shall, on the first Business Day
following such notification, make a Revolving Credit Advance (or if as a result
of any Debtor Relief Law the Lenders are prohibited from making a Revolving
Credit Advance, each Lender shall fund its participation purchased pursuant to
Section 2.16(a) by making such amount available to the Administrative Lender),
which shall bear interest at the Base Rate Basis, and shall be used to repay the
applicable portion of the Issuing Bank's Revolving Credit Advance with respect
to such Letter of Credit, in an amount equal to the amount of its participation
in such drawing for application to reimburse the Issuing Bank (but without any
requirement for compliance with the applicable conditions set forth in Article 3
hereof) and shall make available to the Administrative Lender for the account of
the Issuing Bank, by deposit at the Administrative Lender's office, in same day
funds, the amount of such Revolving Credit Advance (or such participation). In
the event that any Lender fails to make available to the Administrative Lender
for the account of the Issuing Bank the amount of such Revolving Credit Advance
(or such participation), the Issuing Bank shall be entitled to recover such
amount on demand from such Lender together with interest thereon at a rate per
annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal
Funds Rate.
<PAGE>
(d) Increased Costs. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender or any corporation controlling the Issuing Bank or any Lender any
other condition regarding this Agreement or such Lender or any Letter of Credit,
and the result of any event referred to in the preceding clause (i) or (ii)
shall be to increase the cost to the Issuing Bank of issuing or maintaining any
Letter of Credit or to any Lender of purchasing any participation therein or
making any Revolving Credit Advance pursuant to Section 2.16(c), then, upon
demand by the Issuing Bank or such Lender, the Borrower shall, subject to
Section 11.9 hereof, pay to the Issuing Bank or such Lender, from time to time
as specified by the Issuing Bank or such Lender, additional amounts that shall
be sufficient to compensate the Issuing Bank or such Lender for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrower by the Issuing Bank or such Lender, shall include in reasonable detail
the basis for the demand for additional compensation and shall be conclusive and
binding for all purposes, absent manifest error. The obligations of the
Borrower under this Section 2.16(d) shall survive termination of this Agreement.
The Issuing Bank or any Lender claiming any additional compensation under this
Section 2.16(d) shall use reasonable efforts (consistent with legal and
regulatory restrictions) to reduce or eliminate any such additional compensation
which may thereafter accrue and which efforts would not, in the sole discretion
of the Issuing Bank or such Lender, be otherwise disadvantageous.
(e) Obligations Absolute. The obligations of the Borrower under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to Section 2.16(c) shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement, such
Letter of Credit Agreement and such other agreement or instrument under all
circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
the Letters of Credit or any
<PAGE>
Revolving Credit Advance pursuant to Section 2.16(c) or any other amendment
or waiver of or any consent to departure from all or any of the L/C Related
Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of the Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct;
(vi) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any
Subsidiary Guaranty or any other guarantee, for all or any of the
Obligations of the Borrower in respect of the Letters of Credit or any
Revolving Credit Advance pursuant to Section 2.16(c); or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than the Issuing's Bank
gross negligence or wilful misconduct.
(f) Compensation for Letters of Credit.
(i) Credit Fees. Subject to Section 11.9 hereof, the Borrower shall
pay to the Administrative Lender for the account of each Lender a credit
fee (which shall be payable quarterly in arrears on each Quarterly Date and
on the Maturity Date) on the average daily amount available for drawing
under all outstanding Letters of Credit (computed, subject to Section 11.9
hereof, on the basis of a 360-day year for the actual number of days
elapsed) at the following per annum percentages, applicable in the
following situations:
<PAGE>
<TABLE>
<CAPTION>
Applicability Percentage
- ------------------------------------------------------------------ -----------------------
<S> <C>
(A) Category 1 - The Leverage Ratio is greater than or 0.625%
equal to 3.0 to 1
(B) Category 2 - The Leverage Ratio is less than 3.0 to 1 0.500%
but is greater than or equal to 2.0 to 1
(C) Category 3 - The Leverage Ratio is less than 2.0 to 1 0.400%
but is greater than or equal to 1.0 to 1
(D) Category 4 - The Leverage Ratio is less than 1.0 to 1 0.300%
</TABLE>
(ii) Adjustment of Credit Fee. The credit fee payable in respect of
the Letters of Credit shall be subject to reduction or increase, as
applicable and as set forth in the table in (i) above, on a quarterly basis
according to the performance of the Borrower as tested by the Leverage
Ratio. Any such increase or reduction in such fee shall be effective on
the date of receipt of the financial statements required pursuant to
Section 6.1 or 6.2 hereof. If such financial statements are not received
by the date required, the fee payable in respect of the Letters of Credit
shall be determined pursuant to Category 3 above until such time as such
financial statements are received.
(iii) Issuance Fee. Subject to Section 11.9 hereof, the Borrower
shall pay to the Administrative Lender for the sole account of the Issuing
Bank an issuance fee (which fee shall be payable quarterly in arrears on
each Quarterly Date and on the Maturity Date) equal to 0.100% per annum on
the average daily amount available for drawing under all outstanding
Letters of Credit, and computed, subject to Section 11.9 hereof, on the
basis of a 360-day year for the actual number of days elapsed.
(g) L/C Cash Collateral Account.
(i) Upon the occurrence of an Event of Default and demand by the
Administrative Lender pursuant to Section 8.2(c) (but in the case of an
Event of Default specified in Section 8.1(f) or (g) hereof, without any
demand or taking of any other action by the Administrative Lender or any
Lender), the Borrower will promptly pay to the Administrative Lender in
immediately available funds an amount equal to 102% of the maximum amount
then available to be drawn under the Letters of Credit then outstanding.
Any amounts so received by the Administrative Lender shall be deposited by
the Administrative Lender in a deposit account maintained by the Issuing
Bank
<PAGE>
(the "L/C Cash Collateral Account").
(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrower hereby grants, conveys, assigns,
pledges, sets over and transfers to the Administrative Lender (for the
benefit of the Issuing Bank and Lenders), and creates in the Administrative
Lender's favor (for the benefit of the Issuing Bank and Lenders) a Lien in,
all money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Lender and the Borrower shall have no
right to withdraw or to cause the Administrative Lender to withdraw any
funds deposited in the L/C Cash Collateral Account. At any time and from
time to time, upon the Administrative Lender's request, the Borrower
promptly shall execute and deliver any and all such further instruments and
documents, including UCC financing statements, as may be necessary,
appropriate or desirable in the Administrative Lender's judgment to obtain
the full benefits (including perfection and priority) of the security
interest created or intended to be created by this paragraph (ii) and of
the rights and powers herein granted. The Borrower shall not create or
suffer to exist any Lien on any amounts or investments held in the L/C Cash
Collateral Account other than the Lien granted under this paragraph (ii)
and Liens arising by operation of Law and not by contract which secure
amounts not yet due and payable.
(iii) The Administrative Lender shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrower shall
fail directly to pay such Reimbursement Obligations and (B) after the
Maturity Date, apply any proceeds remaining in the L/C Cash Collateral
Account first to pay any unpaid Obligations then outstanding hereunder and
then to refund any remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar month, may direct
the Administrative Lender to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (A) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof and (B) one or more other types of
investments permitted by the Determining Lenders, in each case with such
maturities as the Borrower, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. In the
absence of any such direction from the
<PAGE>
Borrower, the Administrative Lender shall invest the funds held in the L/C
Cash Collateral Account (so long as the aggregate amount of such funds
exceeds any relevant minimum investment requirement) in one or more types
of investments with the consent of the Determining Lenders with such
maturities as the Borrower, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. All
such investments shall be made in the Administrative Lender's name for the
account of the Lenders. The Borrower recognizes that any losses or taxes
with respect to such investments shall be borne solely by the Borrower, and
the Borrower agrees to hold the Administrative Lender and the Lenders
harmless from any and all such losses and taxes. Administrative Lender may
liquidate any investment held in the L/C Cash Collateral Account in order
to apply the proceeds of such investment on account of the Reimbursement
Obligations (or on account of any other Obligation then due and payable, as
the case may be) without regard to whether such investment has matured and
without liability for any penalty or other fee incurred (with respect to
which the Borrower hereby agrees to reimburse the Administrative Lender) as
a result of such application.
(v) The Borrower shall pay to the Administrative Lender the fees
customarily charged by the Issuing Bank with respect to the maintenance of
accounts similar to the L/C Cash Collateral Account.
Section 2.17 Extension of Maturity Date. The Borrower may notify the
Administrative Lender in writing by August 31 of each year ("Request for
Maturity Date Extension"), in the form of Exhibit J attached hereto, while this
Agreement is in effect (commencing August 31, 1999) of its desire to extend the
Maturity Date for an additional 12 months beyond the then existing Maturity
Date. If the Request for Maturity Date Extension notice is given by the
Borrower, the Lenders, by September 30 of each such year while this Agreement is
in effect, will notify the Borrower of their decision to extend the Maturity
Date for an additional 12 months by returning to the Borrower the Request for
Maturity Date Extension as completed by the Lenders. Extension of the Maturity
Date shall be at the option and in the sole discretion of the Lenders. The
extension of the Maturity Date shall become, and will be deemed exclusively
evidenced by, the Lenders indicating their unanimous decision to extend the
Maturity Date on the Request for Maturity Date Extension. If the Lenders or the
Borrower fail to deliver the Request for Maturity Date Extension within the time
prescribed above, the Commitment will be terminated as of the then present
Maturity Date unless the parties hereto agree otherwise. The parties hereto
agree that any extension of the Maturity Date pursuant to this Section 2.17
shall not require any (a) amendment of or supplement to this Agreement or any
other Loan Documents or
<PAGE>
(b) execution and delivery of any renewal Notes unless otherwise required by the
Administrative Lender.
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to the Initial Advance and the Letters of
Credit. The obligation of each Lender to make the initial Advance and the
obligation of the Issuing Bank to issue the initial Letter of Credit is subject
to (i) receipt by the Administrative Lender of each of the following, in form
and substance satisfactory to each Lender, with a copy (except for the Notes)
for each Lender and (ii) satisfaction of the following conditions, except as
otherwise waived by each Lender:
(a) A loan certificate of the Borrower certifying as to the accuracy of its
representations and warranties in the Loan Documents, certifying that no Default
has occurred, and including a certificate of incumbency with respect to each
Authorized Signatory, and including (i) a copy of the Articles of Incorporation
of the Borrower, certified to be true, complete and correct by the secretary of
state of its state of incorporation, (ii) a copy of the By-Laws of the Borrower,
as in effect on the Agreement Date, (iii) a copy of the resolutions of the
Borrower authorizing it to execute, deliver and perform this Agreement, the
Notes and the other Loan Documents to which it is a party, and (iv) a copy of a
certificate of good standing and a certificate of existence for its state of
incorporation and each state in which it is qualified to do business;
(b) A certificate of an officer acceptable to the Lenders of each
Subsidiary, certifying as to the incumbency of the officers signing the Loan
Documents to which it is a party, and including (i) a copy of its Articles of
Incorporation (or other similar organizational document), certified as true,
complete and correct by the secretary of state of its state of incorporation or
organization, (ii) a copy of its By-Laws (or other similar governance document),
as in effect on the Agreement Date, (iii) a copy of the resolutions authorizing
it to execute, deliver and perform the Loan Documents to which it is a party,
and (iv) a copy of a certificate of good standing and a certificate of existence
for its state of incorporation or organization and each state in which it is
qualified to do business;
(c) duly executed Revolving Credit Notes, payable to the order of each
Lender and in an amount for each Lender equal to its Specified Percentage of the
Commitment;
(d) duly executed Bid Rate Notes, payable to the order of each Lender;
<PAGE>
(e) opinions of counsel to the Borrower and its Subsidiaries addressed to
the Lenders and in form and substance satisfactory to the Lenders, dated the
Agreement Date, and covering the matters set forth in Sections 4.1(a), (b), (c),
(e), (f), (h), (l), (m), (n) and (p) and such other matters incident to the
transactions contemplated hereby as the Administrative Lender or Special Counsel
may reasonably request;
(f) reimbursement for the Administrative Lender for Special Counsel's
reasonable fees and expenses rendered as of the date set forth in the invoice of
Special Counsel;
(g) the closing fee as required pursuant to Section 2.4(b) hereof;
(h) a duly executed and completed Subsidiary Guaranty, dated as of the
Agreement Date;
(i) payment in full of all accrued and outstanding obligations under the
Existing Credit Agreement (other than contingent obligations in respect of the
Existing Letters of Credit) whereupon all obligations of the Borrower (excluding
those obligations which expressly survive termination of the Existing Credit
Agreement) and the lenders under the Existing Credit Agreement (including with
respect to such lenders, without limitation, the Existing Letters of Credit)
shall terminate;
(j) all outstanding obligations owed by the Borrower under the Existing
Credit Agreement shall have been previously or shall be simultaneously paid in
full and all collateral therefor shall be released;
(k) the completion of the Chaparral Merger;
(l) the Prudential Chaparral Notes shall be amended and assumed by the
Borrower pursuant to terms satisfactory to the Lenders;
(m) the holders of the Prudential Borrower Notes, the Prudential Chaparral
Notes and the Senior Notes and the Lenders shall have entered into an
Intercreditor Agreement with respect thereto in form and substance satisfactory
to the Lenders;
(n) the Senior Notes shall have been or shall be simultaneously issued and
the Lenders shall have entered into an Intercreditor Agreement with respect
thereto in form and substance satisfactory to the Lenders; and
(o) in form and substance satisfactory to the Lenders and Special Counsel,
such other documents, instruments, reports and certificates as the
Administrative Lender or any Lender may reasonably require prior to execution of
this Agreement.
<PAGE>
Section 3.2 Conditions Precedent to All Advances and Letters of Credit.
The obligation of each Lender to make each Advance hereunder (including the
initial Advance) and the obligation of the Issuing Bank to issue each Letter of
Credit (including the initial Letter of Credit) is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each such
Advance or issuance:
(a) With respect to Advances (other than Refinancing Advances) and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrower under this Agreement, which, pursuant to Section 4.2 hereof, are made
at and as of the time of such Advance or issuance, shall be true and correct at
such time in all material respects, both before and after giving effect to the
application of the proceeds of the Advance or issuance;
(b) The incumbency of the Authorized Signatories shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificate pursuant
to Section 3.1(a) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Lender. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrower made to such effect if no written notice to the contrary, dated on or
before the date of such Advance or issuance, is received by the Administrative
Lender from the Borrower prior to the making of such Advance or issuance;
(c) There shall not exist a Default hereunder, with respect to Advances
(other than Refinancing Advances) and with respect to issuance of each Letter of
Credit, or an Event of Default, with respect to any Refinancing Advance, and,
with respect to each Advance (other than a Refinancing Advance) and with respect
to issuance of each Letter of Credit, the Administrative Lender shall have
received written or telephonic certification thereof by an Authorized Signatory
(which certification, if telephonic, shall be followed promptly by written
certification);
(d) The aggregate Advances and amount available for draws under Letters of
Credit, after giving effect to such proposed Advance or Letter of Credit, shall
not exceed the maximum principal amount then permitted to be outstanding
hereunder; and
(e) The Administrative Lender shall have received all such other
certificates, reports, statements, opinions of counsel or other documents as the
Administrative Lender or any Lender may reasonably request.
Notwithstanding the above, the obligation of each Lender to make a
Revolving Credit Advance pursuant to Section 2.16(c) (or fund its participation
in respect of Letters of Credit pursuant to Section 2.16(c)) shall be absolute
and unconditional and shall not
<PAGE>
be affected by any circumstances, including, without limitation, (i) the
occurrence of any Default or Event of Default, or (ii) the failure of the
Borrower to satisfy any condition set forth in this Section 3.2; provided,
however, the conditions precedent set forth in Sections 3.1 and 3.2 hereof with
respect to the Letter of Credit for which such Revolving Credit Advance is made
(or participation funded) shall have been satisfied in full at the time of
issuance of such Letter of Credit.
Each request by the Borrower to the Administrative Lender or the Issuing
Bank, as appropriate, for an Advance or the issuance of a Letter of Credit shall
constitute a representation and warranty by the Borrower as of the date of the
making of such Advance or the issuance of such Letter of Credit that all the
conditions contained in this Section 3.2 have been satisfied.
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties. The Borrower hereby
represents and warrants to each Lender as follows:
(a) Organization; Power; Qualification. As of the Agreement Date, the
respective jurisdiction of organization and percentage ownership by the Borrower
or another Subsidiary of the Subsidiaries listed on Schedule 4 are true and
correct. Each of the Borrower and its Subsidiaries is duly organized, validly
existing and in good standing under the laws of its state of organization. Each
of the Borrower and its Subsidiaries has the legal power and authority to own
its properties and to carry on its business as now being and hereafter proposed
to be conducted. Each of the Borrower and its Subsidiaries is duly qualified,
in good standing and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization except where the failure to be so qualified or
authorized would not have a Material Adverse Effect.
(b) Authorization. The Borrower has corporate power and has taken all
necessary corporate action to authorize it to borrow hereunder. Each of the
Borrower and its Subsidiaries has legal power and has taken all necessary legal
action to execute, deliver and perform the Loan Documents to which it is a party
in accordance with the terms thereof, and to consummate the transactions
contemplated thereby. Each Loan Document has been duly executed and delivered
by the Borrower or the Subsidiary executing it. Each of the Loan Documents to
which the Borrower and its Subsidiary are party is a legal, valid and binding
respective obligation of the Borrower or the Subsidiary, as applicable,
enforceable in accordance with its terms, subject, to enforcement of remedies,
to the following qualifications: (i) equitable principles generally,
<PAGE>
and (ii) Debtor Relief Laws (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Borrower or any Subsidiary).
(c) Compliance with Other Loan Documents and Contemplated Transactions.
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which they are respectively a party, and the consummation
of the transactions contemplated thereby, do not and will not (i) require any
consent or approval not already obtained, (ii) violate any Applicable Law, (iii)
conflict with, result in a breach of, or constitute a default under the articles
of incorporation, partnership agreement, trust agreement or by-laws, as
appropriate, of the Borrower or any Subsidiary, or under any Necessary
Authorization, indenture, agreement or other instrument, to which the Borrower
or any Subsidiary is a party or by which they or their respective properties may
be bound, or (iv) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired by the
Borrower or any Subsidiary, except Permitted Liens.
(d) Business. The Borrower and its Subsidiaries are engaged solely in the
business of manufacturing, mining, producing, transporting and selling
construction and construction related materials, including but not limited to
natural (sand and gravel) and manufactured aggregates, cement, concrete,
concrete products, clay and cement bricks, and concrete blocks; producing,
transporting and selling specialty products produced as by-products of such
construction and construction related materials; acquiring, developing and
selling real-estate; maintaining, owning, managing and operating aircraft;
acquiring, disposing, storing, treating, processing and recycling combustible
waste materials; producing and selling a broad range of carbon steel products
from recycled steel; recycling waste products; and acquiring, owning, disposing,
conducting and operating trades, services and businesses related and/or similar
to any of the foregoing.
(e) Licenses, etc. All Necessary Authorizations, which if not obtained
could be reasonably expected to have a Material Adverse Effect, have been duly
obtained, and are in full force and effect without any known conflict with the
rights of others and free from any unduly burdensome restrictions. The Borrower
and its Subsidiaries are and will continue to be in compliance in all material
respects with all provisions thereof. No circumstance exists which might impair
the utility of the Necessary Authorization or the right to renew such Necessary
Authorization the effect of which would have a Material Adverse Effect. No
Necessary Authorization, which if suspended, canceled or revoked could
reasonably be expected to have a Material Adverse Effect, is the subject of any
pending or, to the best of the Borrower's knowledge, threatened challenge,
suspension, cancellation or revocation.
<PAGE>
(f) Compliance with Law. The Borrower and its Subsidiaries are in
compliance in all respects with all Applicable Laws, except where the failure to
so comply would not have a Material Adverse Effect. The Borrower and its
Subsidiaries have duly and timely filed all reports, statements and filings that
are required to be filed by any of them with any Governmental Authority, and are
in all material respects in compliance therewith, including without limitation
the rules and regulations of any Governmental Authority relating to the
operation of the Borrower's and each Subsidiary's business. The Borrower and
its Subsidiaries have obtained all appropriate approvals and consents of, and
has made all filings with, the Governmental Authorities in connection with the
operation of the Borrower's and each Subsidiary's business.
(g) Title to Properties. The Borrower and its Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, all of their material
assets. None of their assets are subject to any Liens, except Permitted Liens.
No financing statement or other Lien filing (except relating to Permitted Liens)
is on file in any state or jurisdiction that names the Borrower or any of its
Subsidiaries as debtor or covers (or purports to cover) any assets of the
Borrower or any of its Subsidiaries. The Borrower and its Subsidiaries have not
signed any such financing statement or filing, nor any security agreement
authorizing any Person to file any such financing statement or filing.
(h) Litigation. Except as reflected on Schedule 3 hereto, there is no
action, suit or proceeding pending against, or, to the best of the Borrower's
knowledge, threatened against the Borrower, or in any other manner relating
directly and adversely to the Borrower or any of its Subsidiaries, or any of
their properties, in any court or before any arbitrator of any kind or before or
by any governmental body in which the amount claimed (in excess of applicable
insurance) exceeds $1,000,000.
(i) Taxes. All federal, state and other tax returns of the Borrower and
its Subsidiaries required by law to be filed have been duly filed and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Borrower, its Subsidiaries or any of their respective
properties, income, profits and assets, which are due and payable, have been
paid, unless the same are being diligently contested in good faith by
appropriate proceedings, with adequate reserves established therefor, and no
Lien (other than a Permitted Lien) has attached and no foreclosure, distraint,
sale or similar proceedings have been commenced. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of their
respective taxes are, in the judgment of the Borrower, adequate.
(j) Financial Statements; Material Liabilities. The Borrower has furnished
or caused to be furnished to the Lenders copies of its Fiscal Years 1996 and
1997 financial statements, which are
<PAGE>
prepared in good faith and complete in all material respects and present fairly
in accordance with GAAP the financial position of the Borrower and its
Subsidiaries as at such dates and the results of operations for the periods then
ended. The Borrower and its Subsidiaries taken as a whole have no material
liabilities, contingent or otherwise, nor material losses, except as set forth
in the May 31, 1997 financial statements.
(k) No Adverse Change. Since May 31, 1997, no event or circumstances has
occurred or arisen that could have a Material Adverse Effect.
(l) ERISA. None of the Borrower or its Controlled Group maintains or
contributes to any Plan other than those disclosed to the Administrative Lender
in writing. Each such Plan (other than any Multiemployer Plan) is in compliance
in all material respects with the applicable provisions of ERISA, the Code, and
any other applicable Federal or state law, rule or regulation. With respect to
each Plan (other than any Multiemployer Plan) of the Borrower and each member of
its Controlled Group, all reports required under ERISA or any other Applicable
Law to be filed with any governmental authority, the failure of which to file
could reasonably result in liability of the Borrower or any member of its
Controlled Group in excess of $100,000, have been duly filed. All such reports
are true and correct in all material respects as of the date given. No Plan of
the Borrower or any member of its Controlled Group has been terminated under
Section 4041(c) of ERISA nor has any accumulated funding deficiency (as defined
in Section 412(a) of the Code) been incurred (without regard to any waiver
granted under Section 412 of the Code), nor has any funding waiver from the
Internal Revenue Service been received or requested the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group has failed to make any contribution or pay
any amount due or owing as required under the terms of any such Plan, or by
Section 412 of the Code or Section 302 of ERISA by the due date under Section
412 of the Code and Section 302 of ERISA the result of which could reasonably be
expected to have a Material Adverse Effect. There has been no ERISA Event or
any event requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA
with respect to any Plan or its related trust of the Borrower or any member of
its Controlled Group since the effective date of ERISA. The present value of
the benefit liabilities, as defined in Title IV of ERISA, of each Plan subject
to Title IV of ERISA (other than a Multiemployer Plan) of the Borrower and each
member of its Controlled Group does not exceed by more than $100,000 the present
value of the assets of each such Plan as of the most recent valuation date using
each such Plan's actuarial assumptions at such date. There are no pending, or
to the best of the Borrower's knowledge threatened, claims, lawsuits or actions
(other than routine claims for benefits in the ordinary course) asserted or
instituted against, and neither the Borrower nor any member of its
<PAGE>
Controlled Group has knowledge of any threatened litigation or claims against,
the assets of any Plan or its related trust or against any fiduciary of a Plan
with respect to the operation of such Plan the result of which could reasonably
be expected to have a Material Adverse Effect. None of the Borrower or, to the
best of the Borrower's knowledge, any member of its Controlled Group has engaged
in any prohibited transactions, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, in connection with any Plan the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group has withdrawn from any Multiemployer Plan
except as described in writing to the Administrative Lender prior to the
Agreement Date, nor has incurred or reasonably expects to incur (A) any
liability under Title IV of ERISA (other than premiums due under Section 4007 of
ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred
which with the giving of notice under Section 4219 of ERISA would result in such
liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the PBGC
or to a trustee appointed under Section 4042 of ERISA. None of the Borrower, any
member of its Controlled Group, or any organization to which the Borrower or any
member of its Controlled Group is a successor or parent corporation within the
meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069 the result of which could reasonably be expected
to have a Material Adverse Effect. None of the Borrower or any member of its
Controlled Group maintains or has established any Plan, which is a material
welfare benefit plan within the meaning of Section 3(1) of ERISA and which
provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations thereunder.
Each of Borrower and its Controlled Group which maintains a Plan which is a
welfare benefit plan within the meaning of Section 3(1) of ERISA has complied in
all material respects with any applicable notice and continuation requirements
of COBRA and the regulations thereunder. None of the Borrower or any member of
its Controlled Group maintains, has established, or has ever participated in a
multiemployer welfare benefit arrangement within the meaning of Section 3(40)(A)
of ERISA.
(m) Compliance with Regulations G, T, U and X. The Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying any margin stock within the
meaning of Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System. No more than 25% of the assets of the Borrower and its
Subsidiaries consist of margin stock. None of the Borrower and its Subsidiaries
nor any agent acting on their behalf, have taken or will knowingly
<PAGE>
take any action which might cause this Agreement or any other Loan Documents to
violate any regulation of the Board of Governors of the Federal Reserve System
or to violate the Securities Exchange Act of 1934, in each case as in effect now
or as the same may hereafter be in effect. Neither the making of the Advances
nor the use of the proceeds thereof will violate, or be inconsistent with, the
provisions of Regulations G, T, U or X of said Board of Governors.
(n) Governmental Regulation. The Borrower and its Subsidiaries are not
required to obtain any Necessary Authorization that has not already been
obtained from, or effect any material filing or registration that has not
already been effected with, any Governmental Authority in connection with the
execution and delivery of this Agreement or any other Loan Document, or the
performance thereof (other than any enforcement of remedies by the
Administrative Lender on behalf of the Lenders) in accordance with their
respective terms, including any borrowings hereunder.
(o) Absence of Default. The Borrower and its Subsidiaries are in
compliance in all material respects with all of the provisions of their articles
of incorporation and by-laws, and no event has occurred or failed to occur,
which has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both would
constitute, (i) a Default or an Event of Default or (ii) a default by the
Borrower or any of its Subsidiaries under any indenture, agreement or other
instrument, or any judgment, decree or order to which the Borrower or any of its
Subsidiaries or by which they or any of their material properties is bound.
(p) Investment Company Act. The Borrower is not required to register under
the provisions of the Investment Company Act of 1940, as amended. Neither the
entering into or performance by the Borrower of this Agreement nor the issuance
of the Notes violates any provision of such act or requires any consent,
approval, or authorization of, or registration with, the Securities and Exchange
Commission or any other governmental or public body of authority pursuant to any
provisions of such act.
(q) Environmental Matters. Each of the Borrower and its Subsidiaries is in
compliance with all Applicable Environmental Laws in effect in each jurisdiction
where it is presently doing business or has done business, and in which the
failure so to comply could have a Material Adverse Effect. Neither the Borrower
nor any of the Subsidiaries is subject to any liability under any Applicable
Environmental Laws that, in the aggregate, could have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary has received any (a) notice from any
Governmental Authority by which any of its present or previously-owned or leased
real properties has been designated, listed, or identified in any manner by any
Governmental Authority charged with administering or
<PAGE>
enforcing any Applicable Environmental Law as a Hazardous Substance disposal or
removal site, "Super Fund" clean-up site, or candidate for removal or closure
pursuant to any Applicable Environmental Law, (b) notice of any Lien arising
under or in connection with any Applicable Environmental Law that has attached
to any revenues of, or to, any of its owned or leased real properties, or (c)
summons, citation, notice, directive, letter, or other communication, written or
oral, from any Governmental Authority concerning any intentional or
unintentional action or omission by the Borrower or such Subsidiary in
connection with its ownership or leasing of any real property resulting in the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping, or
otherwise disposing of any Hazardous Substance into the environment resulting in
any material violation of an Applicable Environmental Law, in each case in (a),
(b) and (c) immediately preceding where the effect of which could have a
Material Adverse Effect.
(r) Certain Fees. No broker's, finder's or other fee or commission will be
payable by the Borrower (other than to the Lenders hereunder) with respect to
the making of the Commitment or the Advances hereunder or the issuance of any
Letters of Credit. The Borrower agrees to indemnify and hold harmless the
Administrative Lender and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising in
connection with any such fees or commissions.
(s) Necessary Authorizations. No event has occurred which permits (or with
the passage of time would permit) the revocation or termination of any Necessary
Authorization, or which could result in the imposition of any restriction
thereon of such a nature that could reasonably be expected to have a Material
Adverse Effect.
(t) Patents, Etc. The Borrower and its Subsidiaries have obtained all
patents, trademarks, service-marks, trade names, copyrights, licenses and other
rights, free from burdensome restrictions, that are necessary for the operation
of their business as presently conducted and as proposed to be conducted.
Nothing has come to the attention of the Borrower or any of its Subsidiaries to
the effect that (i) any process, method, part or other material presently
contemplated to be employed by the Borrower or any Subsidiary may infringe any
patent, trademark, service-mark, trade name, copyright, license or other right
owned by any other Person, or (ii) there is pending or overtly threatened any
claim or litigation against or affecting the Borrower or any Subsidiary
contesting its right to sell or use any such process, method, part or other
material.
(u) Disclosure. Neither this Agreement nor any other document, certificate
or statement which has been furnished to any Lender by or on behalf of the
Borrower or any Subsidiary in
<PAGE>
connection herewith contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statement contained
herein and therein not misleading at the time it was furnished. There is no fact
known to the Borrower and not known to the public generally that could
reasonably be expected to materially adversely affect the assets or business of
the Borrower and its Subsidiaries, or in the future could reasonably be expected
(so far as the Borrower can now foresee) to have a Material Adverse Effect,
which has not been set forth in this Agreement or in the documents, certificates
and statements furnished to the Lenders by or on behalf of the Borrower prior to
the date hereof in connection with the transaction contemplated hereby.
(v) Solvency. The Borrower is, and Borrower and its Subsidiaries on a
consolidated basis are, Solvent.
(w) Common Enterprise. The Borrower and its Subsidiaries are engaged in
the businesses set forth in Section 4.1(d) hereof. These operations require
financing on a basis such that the credit supplied can be made available from
time to time to the Borrower and various of the Subsidiaries, as required for
the continued successful operation of the Borrower and its Subsidiaries as a
whole. The Borrower and its Subsidiaries expect to derive benefit (and the
boards of directors of the Borrower and its Subsidiaries have determined that
the Borrower and the Subsidiaries may reasonably be expected to derive benefit),
directly or indirectly, from the credit extended by Lenders hereunder, both in
their separate capacities and as members of the group of companies, since the
successful operation and condition of the Borrower and its Subsidiaries is
dependent on the continued successful performance of the functions of the group
as a whole.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Advance and each Letter of Credit, and each shall be true
and correct when made, except to the extent (a) previously fulfilled in
accordance with the terms hereof, (b) applicable to a specific date or otherwise
subsequently inapplicable, or (c) previously waived in writing by the
Determining Lenders with respect to any particular factual circumstance. All
such representations and warranties shall survive, and not be waived by, the
execution hereof by any Lender, any investigation or inquiry by any Lender, or
by the making of any Advance under this Agreement.
<PAGE>
ARTICLE 5
General Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. The Borrower
shall, and shall cause each Subsidiary to:
(a) preserve and maintain, or timely obtain and thereafter preserve and
maintain, its existence, rights, franchises, licenses, authorizations, consents,
privileges and all other Necessary Authorizations from federal, state and local
governmental bodies and any tribunal (regulatory or otherwise), the loss of
which could have a Material Adverse Effect; and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, unless the failure to do
so could not have a Material Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law. The Borrower and
its Subsidiaries shall (a) engage solely in the businesses set forth in Section
4.1(d) hereof, and (b) comply in all material respects with the requirements of
all Applicable Law, including, without limitation, all Applicable Environmental
Laws.
Section 5.3 Maintenance of Properties. The Borrower shall, and shall
cause each Subsidiary to, maintain or cause to be maintained all its properties
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 5.4 Accounting Methods and Financial Records. The Borrower shall,
with respect to its consolidated financial statements, maintain a system of
accounting established and administered in accordance with GAAP, keep adequate
records and books of account in which complete entries will be made and all
transactions reflected in accordance with GAAP, and keep accurate and complete
records of its respective assets. The Borrower and each of its Subsidiaries
shall maintain a fiscal year ending on May 31.
Section 5.5 Insurance. The Borrower shall, and shall cause each
Subsidiary to, maintain insurance from responsible companies in such amounts and
against such risks as shall be customary and usual in the industry for companies
of similar size and capability,
<PAGE>
including, without limitation, business interruption coverage at the cement
plants of the Borrower located in Midlothian, Texas and Hunter, Texas.
Section 5.6 Payment of Taxes and Claims. The Borrower shall, and shall
cause each Subsidiary to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or its income or properties prior
to the date on which penalties attach thereto, and all lawful material claims
for labor, materials and supplies which, if unpaid, might become a Lien upon any
of its properties; except that no such tax, assessment, charge, levy or claim
need be paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books, but only so long as no Lien (other than a Permitted Lien)
shall attach with respect thereto and no foreclosure, distraint, sale or similar
proceedings shall have been commenced. The Borrower shall, and shall cause each
Subsidiary to, timely file all information returns required by federal, state or
local tax authorities.
Section 5.7 Visits and Inspections. The Borrower shall, and shall cause
each Subsidiary to, promptly permit representatives of the Administrative Lender
or any Lender from time to time to (a) visit and inspect the properties of the
Borrower and Subsidiary as often as the Administrative Lender or any Lender
shall reasonably deem advisable, (b) inspect and make extracts from and copies
of the Borrower's and each Subsidiary's books and records, and (c) discuss with
the Borrower's and each Subsidiary's directors, officers, employees and auditors
its business, assets, liabilities, financial positions, results of operations
and business prospects; provided, however, any information obtained by the
Administrative Lender or any Lender shall be handled pursuant to the
confidentiality provisions of Section 11.14 hereof. Prior to the occurrence of
an Event of Default, all such visits and inspections shall be conducted during
normal business hours. Following the occurrence and during the continuance of
an Event of Default, such visits and inspections shall be conducted at any time
requested by the Administrative Lender or any Lender.
Section 5.8 Payment of Indebtedness. Subject to Section 5.6 hereof, the
Borrower shall, and shall cause each Subsidiary to, pay its Indebtedness when
and as the same becomes due, other than amounts (other than the Obligations)
duly and diligently disputed in good faith.
Section 5.9 Use of Proceeds. The Borrower shall use the proceeds of
Advances to refinance the indebtedness under the Existing Credit Agreement which
is outstanding on the Agreement Date and for working capital and for other
general corporate purposes, including the Chaparral Merger, acquisitions and
Treasury Stock Purchases.
<PAGE>
Section 5.10 Indemnity.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS THE
ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES
IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING,
WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT
OR CONSEQUENTIAL AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR
OTHERWISE, ARISING FROM OR CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS
OF THE BORROWER OR ITS PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ANY SUBSIDIARY OR THE
VIOLATION OR ASSERTED VIOLATION BY THE BORROWER OR ANY SUBSIDIARY OF ANY
APPLICABLE LAW, INCLUDING ANY APPLICABLE ENVIRONMENTAL LAW), IN ANY MANNER
RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY ACT,
EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT
THERETO, THE MAKING OF ANY PARTICIPATIONS IN THE ADVANCES AND THE MANAGEMENT OF
THE ADVANCES, INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART,
OF ANY NEGLIGENCE OF ADMINISTRATIVE LENDER OR ANY LENDER (OTHER THAN THOSE
MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE ADMINISTRATIVE LENDER OR
ANY LENDER AND NOT THE BORROWER), OR THE USE OR INTENDED USE OF THE PROCEEDS OF
THE ADVANCES HEREUNDER, OR IN CONNECTION WITH ANY INVESTIGATION OF ANY POTENTIAL
MATTER COVERED HEREBY, BUT EXCLUDING (I) ANY CLAIM OR LIABILITY FROM AN
INDEMNITEE THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT
OF COMPETENT JURISDICTION, AND (II) MATTERS RAISED BY ONE LENDER AGAINST ANOTHER
LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS MANAGEMENT
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED
MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME
LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT
CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(b) In addition, the Borrower shall periodically, upon request, reimburse
each Indemnitee for its reasonable legal and other actual expenses (including
the cost of any investigation and
<PAGE>
preparation) incurred in connection with any Indemnified Matter. If for any
reason the foregoing indemnification is unavailable to any Indemnitee or
insufficient to hold any Indemnitee harmless with respect to Indemnified
Matters, then the Borrower shall contribute to the amount paid or payable by
such Indemnitee as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Borrower and the Borrower's stockholders on the one hand and such
Indemnitee on the other hand but also the relative fault of the Borrower and
such Indemnitee, as well as any other relevant equitable considerations. The
reimbursement, indemnity and contribution obligations under this Section shall
be in addition to any liability which the Borrower may otherwise have, shall
extend upon the same terms and conditions to each Indemnitee, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Borrower, the Administrative Lender, the Lenders
and all other Indemnitees. This Section 5.10 shall survive any termination of
this Agreement and payment of the Obligations.
ARTICLE 6
Information Covenants
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrower shall furnish or cause to be furnished to
each Lender:
Section 6.1 Quarterly Financial Statements and Information. Within 45
days after the end of each fiscal quarter (other than the last fiscal quarter of
each fiscal year), (i) a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and the related consolidated
statement of income and consolidated statement of changes in cash for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter and (ii) a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and the related consolidated
statement of income and consolidated statement of changes in cash for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter, with the Borrower's investment in any Ventures being accounted for in
accordance with the equity method of accounting, all of which shall be certified
by the president, chief financial officer or chief accounting officer of the
Borrower, to be, in his or her opinion, complete and correct in all material
respects and to present fairly, in accordance with GAAP (except to the extent
that the Borrower's investment in any Ventures is accounted for according to the
equity method of accounting), the financial position and results of operations
of the Borrower and its Subsidiaries as at the end of and for such period, and
for the elapsed portion of the year ended with the last
<PAGE>
day of such period, subject only to normal year-end adjustments.
Section 6.2 Annual Financial Statements and Information; Certificate of No
Default.
(a) Within 90 days after the end of each fiscal year, a copy of (i) the
consolidated balance sheets of the Borrower and its Subsidiaries, as of the end
of the current and prior fiscal years and (ii) consolidated statements of
earnings, consolidated statements of changes in shareholders' equity, and
consolidated statements of changes in cash as of and through the end of such
fiscal year, all of which consolidated statements are (A) prepared in accordance
with GAAP and (B) certified by independent certified public accountants
acceptable to the Lenders (the Lenders agree that Ernst & Young & Co. is
acceptable to the Lenders), whose opinion shall be in scope and substance in
accordance with generally accepted auditing standards and shall be unqualified.
(b) Within 90 days after the end of each fiscal year, a copy of (i) the
consolidated balance sheets of the Borrower and its Subsidiaries, as of the end
of the current and prior fiscal years and (ii) consolidated statements of
earnings, consolidated statements of changes in shareholder's equity, and
consolidated statements of changes in cash as of and through the end of such
fiscal year, all of which statements (A) will account for the Borrower's
investment in any Ventures according to the equity method of accounting and (B)
shall be certified by the president, chief financial officer or chief accounting
officer of the Borrower to be, in his or her opinion, complete and correct in
all material respects and to present fairly, in accordance with GAAP (except to
the extent that the Borrower's investment in any Ventures is accounted for
according to the equity method of accounting), the financial position and
results of operations of the Borrower and its Subsidiaries as at the end of each
such fiscal year.
(c) Simultaneously with the delivery of the statements required by this
Section 6.2, a letter from the Borrower's public accountants certifying that no
Default was detected during the examination of the Borrower and its
Subsidiaries, and authorizing the Borrower to deliver such financial statements
and opinion thereon to the Administrative Lender and Lenders pursuant to this
Agreement.
(d) As soon as available, but in any event within 90 days following the end
of each fiscal year, a copy of an annual consolidated operating budget of the
Borrower and its Subsidiaries for the succeeding fiscal year.
Section 6.3 Compliance Certificates. At the time financial statements are
furnished pursuant to Sections 6.1 and 6.2 hereof, a Compliance Certificate:
<PAGE>
(a) setting forth at the end of such period, certifications and
arithmetical calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the requirements of Sections 7.1, 7.6, 7.9,
7.10, 7.11 and 7.12 hereof, which shall be substantially in the form of Exhibit
D hereto;
(b) setting forth the aggregate amount of outstanding Advances and
Reimbursement Obligations and certifying as to compliance herewith; and
(c) stating that, to the best of his or her knowledge after due inquiry, no
Default has occurred as at the end of such period, or if a Default has occurred,
disclosing each such Default and its nature, when it occurred, whether it is
continuing and the steps being taken with respect to such Default.
Section 6.4 Copies of Other Reports and Notices.
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Borrower or any Subsidiary by accountants in
connection with any annual, interim or special audit, including without
limitation any report prepared in connection with the annual audit referred to
in Section 6.2 hereof, and, if requested by the Administrative Lender, any other
comment letter submitted to management in connection with any such audit, (ii)
each financial statement, report, notice or proxy statement sent by the Borrower
or any Subsidiary to stockholders generally, (iii) each regular, periodic or
other report and any registration statement (other than statements on Form S-8)
or prospectus (or material written communication in respect of any thereof)
filed by the Borrower or any Subsidiary with any securities exchange, with the
Securities and Exchange Commission or any successor agency, and (iv) all press
releases concerning material financial aspects of the Borrower or any
Subsidiary;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of the Borrower or any
Subsidiary in excess of $500,000 in the aggregate has given notice or taken any
action with respect to a breach, failure to perform, claimed default or event of
default thereunder, (ii) any party to any Capitalized Lease Obligations has
given notice or taken any action with respect to a breach, failure to perform,
claimed default or event of default thereunder, (iii) any occurrence or non-
occurrence of any event which constitutes or which with the passage of time or
giving of notice or both could constitute a material breach by the Borrower or
any Subsidiary under any material agreement or instrument other than this
Agreement to which the Borrower or any Subsidiary is a party or by which any of
their properties may be bound, or (iv) any event, circumstance or condition
which could reasonably be expected to have a Material Adverse Effect, a written
notice specifying the details thereof (or the nature of any claimed default or
event of
<PAGE>
default) and what action is being taken or is proposed to be taken with
respect thereto;
(c) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any Governmental Authority relating to any order,
ruling, law, information or policy that relates to a breach of or noncompliance
with Applicable Laws, or might result in the payment of money by the Borrower or
any Subsidiary in an amount of $1,000,000 or more in the aggregate, or otherwise
have a Material Adverse Effect, or result in the loss or suspension of any
Necessary Authorization;
(d) Promptly upon receipt from any governmental agency, or any government,
political subdivision or other entity, any material notice, correspondence,
hearing, proceeding or order regarding or affecting the Borrower, any
Subsidiary, or any of their properties or businesses; and
(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the assets, business, liabilities, financial position,
projections, results of operations or business prospects of the Borrower and its
Subsidiaries, as the Administrative Lender or any Lender may reasonably request.
Section 6.5 Notice of Litigation, Default and Other Matters. Prompt
notice of the following events after the Borrower has knowledge or notice
thereof:
(a) The commencement of all proceedings and investigations by or before any
Governmental Authority, and all actions and proceedings in any court or before
any arbitrator involving claims for damages (including punitive damages) in
excess of $1,000,000 in the aggregate (after deducting the amount with respect
to the Borrower or any Subsidiary is insured), against or in any other way
relating directly to the Borrower, any Subsidiary, or any of their properties or
businesses;
(b) Promptly upon the happening of any condition or event which constitutes
a Default, a written notice specifying the nature and period of existence
thereof and what action is being taken or is proposed to be taken with respect
thereto; and
(c) Any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or prospective business
of the Borrower or any Subsidiary, other than changes in the ordinary course of
business which have not had and are not likely to have a Material Adverse
Effect.
<PAGE>
Section 6.6 ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after the Borrower or any
member of its Controlled Group knows or has reason to know that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after the
Borrower or any member of its Controlled Group knows or has reason to know that
any other ERISA Event with respect to any Plan of the Borrower or any member of
its Controlled Group has occurred or a request for a minimum funding waiver
under Section 412 of the Code with respect to any Plan of the Borrower or any
member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within three Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
the Borrower or any member of its Controlled Group with the United States
Department of Labor or the Internal Revenue Service, copies of each annual
report (including Schedule B thereto, if applicable) with respect to each Plan
of which Borrower or any member of its Controlled Group is the "plan sponsor";
(d) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA, and a statement from the chief
financial officer of the Borrower or such member of its Controlled Group setting
forth details as to the events giving rise to such potential withdrawal
liability and the action which the Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
(e) Notification within 30 days of any material increases in the benefits
of any existing Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, or the commencement of contributions to any Plan to which the
Borrower or any member of its Controlled Group was not previously contributing
which would in either case result in a material liability to the Borrower;
(f) Notification within three Business Days after the
<PAGE>
Borrower or any member of its Controlled Group knows or has reason to know that
the Borrower or any such member of its Controlled Group has filed or intends to
file a notice of intent to terminate any Plan under a distress termination
within the meaning of Section 4041(c) of ERISA and a copy of such notice; and
(g) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any member of its Controlled Group with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
ARTICLE 7
Negative Covenants
So long as any of the Obligations are outstanding and unpaid or the
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 Indebtedness. The Borrower shall not, and shall not permit
any Subsidiary to, create, assume, incur or otherwise become or remain obligated
in respect of, or permit to be outstanding, or suffer to exist any Indebtedness,
except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable incurred in the ordinary course of business;
(c) Guaranties to the extent permitted under Section 7.5 hereof;
(d) Capitalized Lease Obligations and Indebtedness incurred to purchase
assets in the ordinary course of business, together with Guaranties permitted
pursuant to Section 7.5(c) hereof, not to exceed in aggregate amount 5% of Net
Worth at any time of determination;
(e) Indebtedness existing on the Agreement Date which is described on
Schedule 6 hereto, including renewals (but no increases) thereof;
(f) Subordinated Debt;
(g) Indebtedness under the Prudential Borrower Notes and the Prudential
Chaparral Notes;
(h) Indebtedness under the Senior Notes;
<PAGE>
(i) Unsecured Indebtedness in an aggregate principal amount outstanding not
to exceed 20% of Net Worth at any time; and
(j) Indebtedness in respect of tax-exempt financing not to exceed
$75,000,000 in aggregate principal amount outstanding at any time.
Section 7.2 Liens. The Borrower shall not, and shall not permit any
Subsidiary to, create, assume, incur, permit or suffer to exist, directly or
indirectly, any Lien on any of its assets, whether now owned or hereafter
acquired, except Permitted Liens. Other than in respect of the Prudential
Borrower Notes, the Prudential Chaparral Notes and the Senior Notes, the
Borrower shall not, and shall not permit any Subsidiary to, enter into a, or be
subject to, a Negative Pledge Agreement.
Section 7.3 Investments. The Borrower shall not, and shall not permit any
Subsidiary to, make any Investment, except that the Borrower may purchase or
otherwise acquire and own:
(a) Marketable, direct obligations of, or guaranteed by, the United States
of America or any agency thereof and maturing in three years or less of the date
of purchase;
(b) U.S. corporate debt obligations and certificates of deposits, bankers'
acceptances repurchase agreements, remarketed certificates of participations and
loan participations of domestic banks, variable rate demand notes and Eurodollar
time deposits, each maturing not more than 1 year from the date of creation,
issuance or purchase, and having a rating of P-1/A-1 or Baa3/BBB- or equivalent
by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., a New York corporation, respectively;
(c) Investments in one or more Subsidiaries or Persons which become
Subsidiaries (i) that are subject to the provisions hereof, and (ii)(A) that are
or immediately become party to the Subsidiary Guaranty or (B) the Investment in
which does not exceed $2,000;
(d) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms or which have been converted to a note receivable;
(e) Shares of any money-market mutual or similar fund listed on Schedule 7
or any institutional grade money market fund of Fidelity, Federated or Dreyfus,
or that is otherwise acceptable to the Determining Lenders;
(f) Investments in existence on the Agreement Date which are described on
Schedule 5 hereto;
(g) Venture Investments to the extent permitted pursuant to
<PAGE>
Section 7.6 hereof; and
(h) Investments which are Acquisitions permitted pursuant to Section 7.15
hereof.
Section 7.4 Liquidation, Merger, New Subsidiaries. The Borrower shall
not, and shall not permit any Subsidiary to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or dissolution)
or otherwise wind up; or sell, lease, abandon, transfer or otherwise dispose of
all or any part of its assets, properties or business, other than assets sold in
the ordinary course of business; or
(b) enter into any merger or consolidation other than in respect of an
Acquisition permitted pursuant to Section 7.15 hereof.
Section 7.5 Guaranties. The Borrower shall not, and shall not permit any
Subsidiary to, at any time make or issue any Guaranty, or assume, be obligated
with respect to, or permit to be outstanding any Guaranty, of any obligation of
any other Person except (a) the Subsidiary Guaranty, (b) the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection,
(c) Guaranties in respect of the Prudential Borrower Notes, the Prudential
Chaparral Notes and the Senior Notes, and (d) other Guaranties, not to exceed,
together with the Indebtedness permitted pursuant to Section 7.1(d) hereof, in
aggregate amount 5% of Net Worth at any time of determination.
Section 7.6 Treasury Stock Purchases and Venture Investments. The
Borrower shall not, and shall not permit any Subsidiary to, directly or
indirectly make, acquire or own any Treasury Stock Purchases or Venture
Investments in an aggregate amount, for all Treasury Stock Purchases and Venture
Investments made after the Agreement Date, in excess of 10% of Net Worth at any
time; provided, however, notwithstanding the immediately preceding clause to the
contrary, the Borrower shall make no Treasury Stock Purchase or Venture
Investment unless there shall exist no Default prior to or after giving effect
to any such proposed Treasury Stock Purchase or Venture Investment.
Section 7.7 Affiliate Transactions. The Borrower shall not, and shall not
permit any Subsidiary to, at any time engage in any transaction with an
Affiliate, nor make an assignment or other transfer of any of its assets or
properties to any Affiliate, on terms materially less advantageous to the
Borrower or Subsidiary than would be the case if such transaction had been
effected with a non-Affiliate (other than advances to employees in the ordinary
course of business).
<PAGE>
Section 7.8 Compliance with ERISA. The Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, or permit any member of its
Controlled Group to directly or indirectly, (a) terminate any Plan so as to
result in any material (in the opinion of the Determining Lenders) liability to
the Borrower or any member of its Controlled Group taken as a whole, (b) permit
to exist any ERISA Event, or any other event or condition which presents the
risk of a material (in the opinion of the Determining Lenders) liability of the
Borrower or any member of its Controlled Group taken as a whole, (c) make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any material (in the opinion of
the Determining Lenders) liability to the Borrower or any member of its
Controlled Group taken as a whole, (d) enter into any new Plan or modify any
existing Plan so as to increase its obligations thereunder except in the
ordinary course of business consistent with past practice which could result in
any material (in the opinion of the Determining Lenders) liability to the
Borrower or any member of its Controlled Group taken as a whole, or (e) permit
the present value of all benefit liabilities, as defined in Title IV of ERISA,
under each Plan of the Borrower or any member of its Controlled Group (using the
actuarial assumptions utilized by each such Plan) to exceed the fair market
value of Plan assets allocable to such benefits, all determined as of the most
recent valuation date for each such Plan, by $100,000.
Section 7.9 Leverage Ratio. The Borrower shall not permit the Leverage
Ratio to exceed 3.50 to 1 at the end of any fiscal quarter.
Section 7.10 Fixed Charge Coverage Ratio. The Borrower shall not permit
the Fixed Charge Coverage Ratio to be less than 2.00 to 1 at the end of any
fiscal quarter.
Section 7.11 Capitalization Ratio. The Borrower shall not permit the
Capitalization Ratio to exceed 0.60 to 1 at the end of any fiscal quarter.
Section 7.12 Sale and Leaseback. The Borrower shall not, and shall not
permit any Subsidiary to, enter into any arrangement whereby it sells or
transfers any of its assets, and thereafter rents or leases such assets.
Section 7.13 Sale or Discount of Receivables. The Borrower shall not, and
shall not permit any Subsidiary to, directly or indirectly sell, with or without
recourse, for discount or otherwise, any notes or accounts receivable.
<PAGE>
Section 7.14 Subordinated Debt.
(a) The Borrower shall not, and shall not permit any Subsidiary to, prepay,
pay, redeem, purchase in any manner, or make any payment in respect of, or
transfer any property in payment of or as security for the payment of, or
establish any sinking fund, reserve or analogous fund for the redemption,
retirement, prepayment or repayment of, any principal of, interest on, or any
fees or other amounts related to, any Subordinated Debt; provided, however,
notwithstanding the immediately preceding, the Borrower and any Subsidiary may
make any regularly scheduled payments of interest on Subordinated Debt unless
there shall exist a Default or Event of Default immediately prior to or after
giving effect to any such proposed payment of interest.
(b) The Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly, amend, modify, supplement, waive compliance with, or
assent to noncompliance with, any term, provision or condition of any of the
documents governing or evidencing the Subordinated Debt, which (i) the Lenders
deem material (including, without limitation, relating to events of default,
acceleration rights, interest rates, maturity date, subordination and covenants)
or (ii) places any further restrictions on the Borrower or any Subsidiary, or
increases the obligations of the Borrower or any Subsidiary thereunder, or
confers on the holders thereof any additional rights.
Section 7.15 Acquisitions. The Borrower shall not, and shall not permit
any Subsidiary to, make any Acquisitions; provided, however, if immediately
prior to and after giving effect to the proposed Acquisition there shall not
exist a Default or Event of Default and the Borrower or any such Subsidiary may
make Acquisitions so long as (a) such Acquisition shall not be opposed by the
board of the directors of the Person being acquired, (b) if the aggregate
consideration for any Acquisition (including any Indebtedness or Operating
Leases assumed in connection therewith) exceeds $50,000,000, (i) the Lenders
shall have received written notice at least 15 Business Days prior to the date
of such Acquisition, and (ii) the Administrative Lender shall have received at
least 10 Business Days prior to the date of such Acquisition a Compliance
Certificate setting forth the covenant calculations both immediately prior to
and after giving effect to the proposed Acquisition, (c) the assets, property or
business acquired shall be in the business described in Section 4.1(d) hereof,
and (d) if such Acquisition results in a Subsidiary, (i) such Subsidiary shall
have executed and delivered a Subsidiary Guaranty of the Obligations and (ii)
the Lenders shall have received such board resolutions, officer's certificates
and opinions of counsel as the Administrative Lender shall reasonably request in
connection with the actions described in clause (d)(i) above.
<PAGE>
ARTICLE 8
Default
Section 8.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or non-
governmental body:
(a) Any representation or warranty made under any Loan Document shall prove
to have been incorrect or misleading in any material respect when made or deemed
to have been made;
(b) The Borrower shall default in the payment of (i) any interest under any
Note or any fees payable hereunder or any other costs, fees, expenses or other
amounts payable hereunder or under the Loan Documents, when due, which Default
is not cured within one Business Day from the date such payment became due by
payment of such late amount, or (ii) any principal under any of the Notes when
due;
(c) The Borrower or any Subsidiary shall default in the performance or
observance of any agreement or covenant contained in Section 2.5(c), 5.1, 5.9,
6.6 or Article 7 hereof;
(d) The Borrower or any Subsidiary shall default in the performance or
observance of any other agreement or covenant contained in this Agreement not
specifically referred to elsewhere in this Section 8.1, and such default shall
not be cured within a period of 30 days after the earlier of notice from the
Administrative Lender thereof or actual notice thereof by the Borrower or such
Subsidiary;
(e) There shall occur any default or breach in the performance or
observance of any agreement or covenant (after the expiration of any applicable
grace period) in any of the Loan Documents (other than this Agreement);
(f) There shall be commenced an involuntary proceeding or an involuntary
petition shall be filed in a court having competent jurisdiction seeking (i)
relief in respect of the Borrower or any Subsidiary, or a substantial part of
the property or the assets of the Borrower or such Subsidiary, under Title 11 of
the United States Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy law or similar law, (ii) the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official of the Borrower or any Subsidiary, or of any
substantial part of their respective properties, or (iii) the winding-up or
liquidation of the affairs of the Borrower or any Subsidiary, and any such
proceeding or petition shall continue unstayed and in effect for a period of
<PAGE>
sixty consecutive days;
(g) The Borrower or any Subsidiary shall (i) file a petition, answer or
consent seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Borrower or
any Subsidiary or of any substantial part of their respective properties, (iii)
file an answer admitting the material allegations filed against it in any such
proceeding, (iv) make a general assignment for the benefit of creditors, (v)
become unable, admit in writing its inability, or fail generally, to pay its
debts as they become due, or the Borrower or any Subsidiary shall take any
action in furtherance of any such action;
(h) A final judgment or judgments shall be entered by any court against the
Borrower or any Subsidiary for the payment of money which exceeds $50,000 in the
aggregate, or a warrant of attachment or execution or similar process shall be
issued or levied against property of the Borrower or any Subsidiary which,
together with all other such property of the Borrower and its Subsidiaries
subject to other such process, exceeds in value $50,000 in the aggregate, and if
such judgment or award is not insured or, within 30 days after the entry, issue
or levy thereof, such judgment, warrant or process shall not have been paid or
discharged or stayed pending appeal, or if, after the expiration of any such
stay, such judgment, warrant or process shall not have been paid or discharged;
(i) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other party-in-
interest or disqualified person shall engage in transactions which in the
aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $1,000,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or
any member of its Controlled Group shall incur any accumulated funding
deficiency, as defined in Section 412 of the Code, in the aggregate in excess of
$1,000,000, or request a funding waiver from the Internal Revenue Service for
contributions in the aggregate in excess of $1,000,000; (iii) the Borrower or
any member of its Controlled Group shall incur any withdrawal liability in the
aggregate in excess of $1,000,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA, or any other
liability with respect to a Plan in excess of $1,000,000, unless the amount of
such liability has been funded within the Plan or pursuant to one or more
insurance contracts; (iv) the Borrower or any member of its Controlled Group
shall fail to make a required contribution by the due date under Section 412 of
the Code or Section 302 of ERISA which would result in the imposition of a lien
under Section 412
<PAGE>
of the Code or Section 302 of ERISA; (v) the Borrower, any member of its
Controlled Group or any Plan sponsor shall notify the PBGC of an intent to
terminate, or the PBGC shall institute proceedings to terminate, or the PBGC
shall institute proceedings to terminate, any Plan subject to Title IV of ERISA;
(vi) a Reportable Event shall occur with respect to a Plan subject to Title IV
of ERISA, and within 15 days after the reporting of such Reportable Event to the
Administrative Lender, the Administrative Lender shall have notified the
Borrower in writing that the Determining Lenders have made a determination that,
on the basis of such Reportable Event, there are reasonable grounds for the
termination of such Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Plan and as a
result thereof an Event of Default shall have occurred hereunder; (vii) a
trustee shall be appointed by a court of competent jurisdiction to administer
any Plan or the assets thereof; (viii) the benefits of any Plan shall be
increased, or the Borrower or any member of its Controlled Group shall begin to
maintain, or begin to contribute to, any Plan, without the prior written consent
of the Determining Lenders; or (ix) any ERISA Event with respect to a Plan
subject to Title IV of ERISA shall have occurred, and 30 days thereafter (A)
such ERISA Event, other than such event described in clause (f) of the
definition of ERISA Event herein, (if correctable) shall not have been corrected
and (B) the then present value of such Plan's benefit liabilities, as defined in
Title IV of ERISA, shall exceed the then current value of assets accumulated in
such Plan; provided, however, that the events listed in subsections (v) through
(ix) shall constitute Events of Default only if, as of the date thereof or any
subsequent date, the amount of liability that the Borrower or any member of its
Controlled Group reasonably is likely to incur in the aggregate under Section
4062, 4063, 4064, 4219 or 4023 of ERISA or any other provision of law with
respect to all such Plans, computed by the actuary of the Plan taking into
account any applicable rules and regulations of the PBGC at such time, and based
on the actuarial assumptions used by the Plan, resulting from or otherwise
associated with such event exceeds $1,000,000;
(j) All or any material portion of the Loan Documents shall be the subject
of any proceeding instituted by any Person other than a Lender (except in
connection with any Lender's exercise of any remedies under the Loan Documents),
or there shall exist any litigation or threatened litigation with respect to any
of the Loan Documents, or any Person shall challenge in any manner whatsoever
the validity or enforceability of all or any portion of the Loan Documents;
(k) The Borrower or any Subsidiary shall default in the payment when due
with respect to any Indebtedness in an aggregate amount of $1,000,000 or more
beyond any grace period provided with
<PAGE>
respect thereto, or shall default in the performance of any agreement or
instrument under which such Indebtedness is created or evidenced beyond any
applicable grace period (or any event thereunder shall occur and be continuing),
if the effect of such default or event is to permit or cause the holder of such
Indebtedness (or a trustee on behalf of any such holder) to (i) cause such
Indebtedness to become due prior to its date of maturity or (ii) require the
Borrower or any of its Subsidiaries to purchase or redeem such Indebtedness;
(l) Any material Necessary Authorization shall be revoked; or there shall
occur a material default under any material Necessary Authorization by the
Borrower or any Subsidiary beyond any applicable grace period; or any
proceedings shall in any way be brought by any Person to challenge the validity
or enforceability of any material Necessary Authorization or seeking the
revocation, suspension or cancellation of such material Necessary Authorization
and such proceeding is not contested in good faith by appropriate proceedings;
or
(m) Any provision of any Loan Document shall for any reason cease to be
valid and binding on or enforceable against any party to it (other than the
Administrative Lender or any Lender) in all material respects, or any such party
shall so state in writing; or
(n) A Change of Control shall occur.
Section 8.2 Remedies. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in Section 8.1(f)
or (g) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the commitment to make Advances and issue Letters
of Credit and/or declare the principal of and interest on the Advances and all
Obligations and other amounts owed under the Loan Documents to be forthwith due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything in the Loan Documents to the
contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section 8.1(f)
or (g) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the commitment to make
Advances and issue Letters of Credit shall forthwith terminate, all without any
action by the Administrative Lender, any Lender or any holders of the Notes and
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may (or, upon the direction of the
<PAGE>
Determining Lenders, shall) demand upon the Borrower to, and forthwith upon such
demand (but in the case of an Event of Default specified in Section 8.1(f) or
(g) hereof, without any demand or taking of any other action by the
Administrative Lender or any Lender), the Borrower shall, pay to the
Administrative Lender in same day funds at the office of the Administrative
Lender in such demand for deposit in the L/C Cash Collateral Account, an amount
equal to 102% of the maximum amount available to be drawn under the Letters of
Credit then outstanding.
(d) Subject to the terms and provisions of the Loan Documents, the
Administrative Lender and the Lenders may exercise all of the post-default
rights granted to them under the Loan Documents or under Applicable Law.
(e) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9
Changes in Circumstances
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to any
proposed LIBOR Advance for any Interest Period, any Lender determines that (i)
deposits in dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest Period or (ii) the LIBOR Basis
for such proposed LIBOR Advance does not adequately cover the cost to such
Lender of making and maintaining such proposed LIBOR Advance for such Interest
Period, such Lender shall forthwith give notice thereof to the Borrower,
whereupon until such Lender notifies the Borrower that the circumstances giving
rise to such situation no longer exist, the obligation of such Lender to make
LIBOR Advances shall be suspended.
Section 9.2 Illegality. If any applicable law, rule or regulation, or any
change therein or adoption thereof, or interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender (or
its LIBOR Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency,
shall make it unlawful or impossible for such Lender (or its LIBOR Lending
Office) to make, maintain or fund its LIBOR Advances or Bid Rate Advances, such
Lender shall so notify the Borrower and the Administrative Lender. Before
giving any notice to the Borrower pursuant to this Section, the notifying Lender
shall designate a different LIBOR Lending Office or other lending office if such
designation will avoid the need for giving such notice and will not, in the sole
judgment of the Lender, be materially disadvantageous to the Lender. Upon
<PAGE>
receipt of such notice, notwithstanding anything contained in Article 2 hereof,
the Borrower shall repay in full the then outstanding principal amount of each
LIBOR Advance or Bid Rate Advance owing to the notifying Lender, together with
accrued interest thereon, on either (a) the last day of the Interest Period
applicable to such Advance, if the Lender may lawfully continue to maintain and
fund such Advance to such day, or (b) immediately, if the Lender may not
lawfully continue to fund and maintain such Advance to such day. Concurrently
with repaying each affected LIBOR Advance owing to such Lender, notwithstanding
anything contained in Article 2 hereof, the Borrower shall borrow a Base Rate
Advance from such Lender, and such Lender shall make such Base Rate Advance, in
an amount such that the outstanding principal amount of the Advances owing to
such Lender shall equal the outstanding principal amount of the Advances owing
immediately prior to such repayment, and such Base Rate Advance shall be payable
on the same date or dates as the affected LIBOR Advances of such Lender would
have otherwise been due and payable but for this Section 9.2.
Section 9.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change in or adoption
of any law, rule or regulation, or any interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof or compliance by any Lender (or its
LIBOR Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or compatible agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any Tax
(net of any tax benefit engendered thereby) with respect to its LIBOR
Advances, Bid Rate Advances or its obligation to make such Advances, or
shall change the basis of taxation of payments to a Lender (or to its LIBOR
Lending Office) of the principal of or interest on its LIBOR Advances, Bid
Rate Advances or in respect of any other amounts due under this Agreement,
as the case may be, or its obligation to make such Advances (except for
changes in the rate of tax on the overall net income, net worth or capital
of the Lender and franchise taxes, doing business taxes or minimum taxes
imposed upon such Lender); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender's
LIBOR Lending Office or shall impose on the Lender (or its LIBOR Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any
<PAGE>
other condition affecting its LIBOR Advances or Bid Rate Advances or its
obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances or Bid
Rate Advances, or to reduce the amount of any sum received or receivable by a
Lender (or its LIBOR Lending Office) with respect thereto, by an amount deemed
by a Lender to be material, then, within 15 days after demand by a Lender, the
Borrower agrees to pay to such Lender such additional amount as will compensate
such Lender for such increased costs or reduced amounts, subject to Section 11.9
hereof. The affected Lender will as soon as practicable notify the Borrower of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will designate
a different LIBOR Lending Office or other lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the sole judgment of the affected Lender made in good faith, be
disadvantageous to such Lender.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be conclusive in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrower may at any time, upon at least five Business Days' prior notice to the
Lender, after reimbursement to the Lender by the Borrower in accordance with
this Section of all costs incurred, prepay in full the then outstanding LIBOR
Advances or Bid Rate Advances of the Lender, together with accrued interest
thereon to the date of prepayment, along with any reimbursement required under
Section 2.9 hereof. Concurrently with prepaying such LIBOR Advances, the
Borrower shall borrow a Base Rate Advance from the Lender, and the Lender shall
make such Base Rate Advance, in an amount such that the outstanding principal
amount of the Advances owing to such Lender shall equal the outstanding
principal amount of the Advances owing immediately prior to such prepayment, and
such Base Rate Advance shall be payable on the same date or dates as the LIBOR
Advances of such Lender would have otherwise been due and payable but for this
Section 9.3.
Section 9.4 Base Rate Advances Rather than LIBOR Advances. If notice has
been given pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation
of a Lender to make LIBOR Advances, or requiring LIBOR Advances of a Lender to
be repaid or prepaid, then, unless and until the Lender notifies the Borrower
that the circumstances giving rise to such repayment no longer apply, all
Advances which would otherwise be made by such Lender as LIBOR Advances shall be
made instead as Base Rate Advances, which shall be payable on the same date or
dates as the LIBOR Advances made by
<PAGE>
the other Lenders.
Section 9.5 Capital Adequacy. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's Commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, upon demand
by such Lender, subject to Section 11.9, the Borrower shall immediately pay to
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender with respect to such circumstances, to the
extent that such Lender reasonably determines in good faith such increase in
capital to be allocable to the existence of such Lender's Commitment hereunder.
A certificate as to such amounts submitted to the Borrower by a Lender
hereunder, shall, in the absence of manifest error, be conclusive and binding
for all purposes.
ARTICLE 10
Agreement Among Lenders
Section 10.1 Agreement Among Lenders. The Lenders agree among themselves
that:
(a) Administrative Lender. Each Lender hereby appoints the Administrative
Lender as its nominee in its name and on its behalf, to receive all documents
and items to be furnished hereunder; to act as nominee for and on behalf of all
Lenders under the Loan Documents; to, except as otherwise expressly set forth
herein, take such action as may be requested by the Determining Lenders,
provided that, unless and until the Administrative Lender shall have received
such requests, the Administrative Lender may take such administrative action, or
refrain from taking such administrative action, as it may deem advisable and in
the best interests of the Lenders; to arrange the means whereby the proceeds of
the Advances of the Lenders are to be made available to the Borrower; to
distribute promptly to each Lender information, requests and documents received
from the Borrower, and each payment (in like funds received) with respect to any
of such Lender's Advances, fee or other amount; and to deliver to the Borrower
requests, demands, approvals and consents received from the Lenders.
Administrative Lender agrees to promptly distribute to each Lender, at such
Lender's address set forth below information, requests, documents and payments
received from the Borrower. The
<PAGE>
Administrative Lender shall have no trustee or other fiduciary relationship in
respect of any Lender by reason of this Agreement or any other Loan Document.
The duties of the Administrative Lender are mechanical and administrative in
nature.
(b) Replacement of Administrative Lender. Should the Administrative Lender
or any successor Administrative Lender ever cease to be a Lender hereunder, or
should the Administrative Lender or any successor Administrative Lender ever
resign as Administrative Lender, or should the Administrative Lender or any
successor Administrative Lender ever be removed with cause by the Determining
Lenders, then the Lender appointed by the other Lenders shall forthwith become
the Administrative Lender, and the Borrower and the Lenders shall execute such
documents as any Lender may reasonably request to reflect such change. Any
resignation or removal of the Administrative Lender or any successor
Administrative Lender shall become effective upon the appointment by the Lenders
of a successor Administrative Lender; provided, however, that if the Lenders
fail for any reason to appoint a successor within 60 days after such removal or
resignation, the Administrative Lender or any successor Administrative Lender
(as the case may be) shall thereafter have no obligation to act as
Administrative Lender hereunder. Notwithstanding any Administrative Lender's
resignation or removal hereunder, the provisions of this Article shall continue
to inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Lender hereunder.
(c) Expenses. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Documents if Administrative Lender
does not receive reimbursement therefor from other sources within 60 days after
the date incurred, unless payment of such fees is being diligently disputed by
such Lender or the Borrower in good faith. Any amount so paid by the Lenders to
the Administrative Lender shall be returned by the Administrative Lender pro
rata to each paying Lender to the extent later paid by the Borrower or any other
Person on the Borrower's behalf to the Administrative Lender.
(d) Delegation of Duties. The Administrative Lender may execute any of its
duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) Reliance by Administrative Lender. The Administrative Lender and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably
<PAGE>
believed by it or them in good faith to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters, upon
opinions of counsel selected the Administrative Lender. The Administrative
Lender may, in its reasonable judgment, deem and treat the payee of any Note as
the owner thereof for all purposes hereof.
(f) Limitation of Administrative Lender's Liability. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Lender shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Lender
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Lender shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Documents, or for any
representation, warranty, document, certificate, report or statement made herein
or furnished in connection with any Loan Documents, or be under any obligation
to any Lender to ascertain or to inquire as to the performance or observation of
any of the terms, covenants or conditions of any Loan Documents on the part of
the Borrower. TO THE EXTENT NOT REIMBURSED BY THE BORROWER, EACH LENDER HEREBY
JOINTLY AND SEVERALLY INDEMNIFIES AND HOLDS HARMLESS THE ADMINISTRATIVE LENDER,
PRO RATA ACCORDING TO ITS SPECIFIED PERCENTAGE, FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND/OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY
BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THE ADMINISTRATIVE LENDER (IN
ITS CAPACITY AS ADMINISTRATIVE LENDER AND NOT AS A LENDER) IN ANY WAY WITH
RESPECT TO ANY LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THE
ADMINISTRATIVE LENDER IN ITS CAPACITY AS ADMINISTRATIVE LENDER AND NOT AS A
LENDER UNDER THE LOAN DOCUMENTS (INCLUDING ANY NEGLIGENT ACTION OF THE
ADMINISTRATIVE LENDER), EXCEPT TO THE EXTENT THE SAME RESULT FROM GROSS
NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE LENDER.
(g) Liability Among Lenders. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
(h) Rights as Lender. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the
<PAGE>
Administrative Lender shall have the same rights as a Lender and may exercise
the same as though it were not the Administrative Lender, and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include the
Administrative Lender in its individual capacity. The Administrative Lender or
any Lender may accept deposits from, act as trustee under indentures of, and
generally engage in any kind of business with, the Borrower and any of its
Affiliates, and any Person who may do business with or own securities of the
Borrower or any of its Affiliates, all as if the Administrative Lender were not
the Administrative Lender hereunder and without any duty to account therefor to
the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements referred to in Sections
4.1(j), 6.1 and 6.2 hereof, and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Lender or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
Section 10.3 Benefits of Article. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders; consequently, no
Person shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Lender or any Lender to comply
with such provisions.
ARTICLE 11
Miscellaneous
Section 11.1 Notices.
(a) All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been given on the date personally delivered
or sent by telecopy (answerback received), or three days after deposit in the
mail, designated as certified mail, return receipt requested, postage-prepaid,
or one day after being entrusted to a reputable commercial overnight delivery
service, or one day after being delivered to the telegraph office or sent out by
telex addressed to the party to which such notice is directed at its address
determined as provided in this Section. All notices and other communications
under this Agreement shall be given to the parties hereto at the following
addresses:
<PAGE>
(i) If to the Borrower, at:
Texas Industries, Inc.
1341 West Mockingbird Lane
Dallas, Texas 75247
Attn: Treasurer
with a copy to:
Texas Industries, Inc.
1341 West Mockingbird Lane
Dallas, Texas 75247
Attn: Vice President-General Counsel
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Southwest Corporate Banking
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 Expenses. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances and the issuance of Letters of Credit
hereunder, including without limitation the reasonable fees and disbursements of
Special Counsel;
(b) all reasonable out-of-pocket expenses and attorneys' fees of the
Administrative Lender in connection with the administration of the transactions
contemplated in this Agreement and the other Loan Documents and the preparation,
negotiation, execution and delivery of any waiver, amendment or consent by the
Lenders relating to this Agreement or the other Loan Documents; and
(c) all costs, out-of-pocket expenses and attorneys' fees of the
Administrative Lender and each Lender (including reasonable allocated costs of
in-house counsel of any Lender) incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Documents, and all costs and out-of-pocket expenses
of collection
<PAGE>
if default is made in the payment of the Notes, which in each case
shall include without limitation fees and expenses of consultants, counsel for
the Administrative Lender and any Lender, and administrative fees for the
Administrative Lender.
Section 11.3 Waivers. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Lender or any Lender in exercising any right shall operate as
a waiver of such right. The Lenders expressly reserve the right to require
strict compliance with the terms of this Agreement in connection with any
funding of a request for an Advance and the Issuing Bank expressly reserves the
right to require strict compliance with the terms of this Agreement in
connection with any issuance of a Letter of Credit. In the event that any
Lender decides to fund an Advance or the Issuing Bank decides to issue a Letter
of Credit at a time when the Borrower is not in strict compliance with the terms
of this Agreement, such decision by such Lender shall not be deemed to
constitute an undertaking by the Lender to fund any further requests for
Advances or by the Issuing Bank to issue any additional Letters of Credit or
preclude the Lenders from exercising any rights available under the Loan
Documents or at law or equity. Any waiver or indulgence granted by the Lenders
shall not constitute a modification of this Agreement, except to the extent
expressly provided in such waiver or indulgence, or constitute a course of
dealing by the Lenders at variance with the terms of the Agreement such as to
require further notice by the Lenders of the Lenders' intent to require strict
adherence to the terms of the Agreement in the future. Any such actions shall
not in any way affect the ability of the Administrative Lender or the Lenders,
in their discretion, to exercise any rights available to them under this
Agreement or under any other agreement, whether or not the Administrative Lender
or any of the Lenders are a party thereto, relating to the Borrower.
<PAGE>
Section 11.4 Determination by the Lenders Conclusive and Binding. Any
material determination required or expressly permitted to be made by the
Administrative Lender or any Lender under this Agreement shall be made in its
reasonable judgment and in good faith, and shall when made, absent manifest
error, be conclusive and binding on all parties.
Section 11.5 Set-Off. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit, in each case whether matured or unmatured) and any
other Indebtedness at any time held or owing by such Lender or holder to or for
the credit or the account of the Borrower, against and on account of the
Obligations and other liabilities of the Borrower to such Lender or holder,
irrespective of whether or not (a) the Lender or holder shall have made any
demand hereunder, or (b) the Lender or holder shall have declared the principal
of and interest on the Advances and other amounts due hereunder to be due and
payable as permitted by Section 8.2 and although such obligations and
liabilities, or any of them, shall be contingent or unmatured. Any sums
obtained by any Lender or by any assignee, participant or subsequent holder of
any Note shall be subject to pro rata treatment of all Obligations and other
liabilities hereunder.
Section 11.6 Assignment.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.
(c) A Lender may at any time sell participations in all or any part of its
Advances (collectively, "Participations") to any banks or other financial
institutions ("Participants") provided that such Participation shall not confer
on any Person (other than the parties hereto) any right to vote on, approve or
sign amendments or waivers, or any other independent benefit or any legal or
equitable right, remedy or other claim under this Agreement or any other Loan
Documents, other than the right to vote on, approve, or sign amendments or
waivers or consents with respect to items that would result in (i) any increase
in the commitment of
<PAGE>
any Participant; or (ii)(A) the extension of the date of maturity of, or (B) the
extension of the due date for any payment of principal, interest or fees
respecting, or (C) the reduction of the amount of any installment of principal
or interest on or the change or reduction of any mandatory reduction required
hereunder, or (D) a reduction of the rate of interest on, the Advances, the
Letters of Credit, or the Reimbursement Obligations, or change in Applicable
Margin; or (iii) the release of security for or guaranty of the Obligations; or
(iv) the reduction of any fees payable hereunder. Notwithstanding the foregoing,
the Borrower agrees that the Participants shall be entitled to the benefits of
Article 9 and Section 11.5 hereof as though they were Lenders and the Lenders
may provide copies of all financial information received from the Borrower to
such Participants. To the fullest extent it may effectively do so under
Applicable Law, the Borrower agrees that any Participant may exercise any and
all rights of banker's lien, set-off and counterclaim with respect to this
Participation as fully as if such Participant were the holder of the Advances in
the amount of its Participation. Any Lender selling a Participation hereunder
shall give prompt notice thereof to the Borrower and the Administrative Lender.
(d) Each Lender may assign to one or more financial institutions or funds
organized under the laws of the United States, or any state thereof, or under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country,
which is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business (each, an "Assignee") its rights
and obligations under this Agreement and the other Loan Documents; provided,
however, that (i) each such assignment shall be subject to the prior written
consent of the Administrative Lender and Borrower, which consent shall not be
unreasonably withheld (provided, however, notwithstanding anything herein to the
contrary, no consent of the Borrower shall be required for any assignment during
any time that an Event of Default has occurred and is continuing), (ii) each
such assignment shall be of a constant, and not a varying, percentage of the
Lender's rights and obligations under this Agreement (excluding, however, any
Bid Rate Advances), (iii) the amount of such assigning Lender's portion of the
Commitment, Advances and Reimbursement Obligations being assigned pursuant to
each such assignment (determined as of the date of the assignment with respect
to such assignment) shall in no event be less than the lesser of (A)
$10,000,000, or (B) the applicable Lender's portion of the Commitment, (iv) the
applicable Lender, Administrative Lender and applicable Assignee shall execute
and deliver to the Administrative Lender an Assignment and Acceptance Agreement
(an "Assignment Agreement") in substantially the form of Exhibit E hereto,
together with the Notes subject to such assignment, (v) the Assignee or the
Lender executing the Assignment as the case may be, shall deliver to the
Administrative Lender a processing fee of
<PAGE>
$3,500, and (vi) unless waived by the Borrower, the Administrative Lender shall
give the Borrower notice of any proposed assignment no later than 10 days prior
to any assignment by any Lender. Upon such execution, delivery and acceptance
from and after the effective date specified in each Assignment, which effective
date shall be at least three Business Days after the execution thereof, (A) the
Assignee thereunder shall be party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment, have
the rights and obligations of a Lender hereunder and (B) the applicable Lender
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment, relinquish such rights and be released from such
obligations under this Agreement, except those rights that expressly survive
termination of this Agreement.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a Lender and an
Assignee, and any Note subject to such assignment, the Borrower shall, within
three Business Days after its receipt of such Assignment Agreement, at its own
expense, execute and deliver to the Administrative Lender in exchange for the
surrendered Note a new Note to the order of such Assignee in an amount equal to
the portion of the Advances, Reimbursement Obligations and Commitment assigned
to it pursuant to such Assignment Agreement and a new Note to the order of the
assigning Lender in an amount equal to the portion of the Advances and
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note, shall be dated the effective date of such Assignment Agreement and shall
otherwise be in substantially the form of Exhibit A hereto.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.6, disclose to
the assignee or Participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower.
(h) Except as specifically set forth in this Section 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan documents.
<PAGE>
(i) Notwithstanding anything in this Section 11.6 to the contrary, no
Assignee or Participant shall be entitled to receive any greater payment under
Section 2.15 or Section 9.3 than such assigning or participating Lender would
have been entitled to receive with respect to the interest assigned or
participated to such Assignee or Participant.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Severability. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.9 Interest and Charges. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and if principal
is paid in full, any remaining excess shall be paid to the Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrower and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate,
allocate and spread in equal parts, the total amount of interest throughout the
entire contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however, that if the
Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, the Lenders shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount of the Obligations owing, and, in such event, the
Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section shall control every other provision of all agreements pertaining to
the transactions contemplated by or contained in the Loan Documents.
<PAGE>
Section 11.10 Headings. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this Agreement or
any other Loan Document may not be amended, modified or waived except by the
written agreement of the Borrower and the Determining Lenders; provided,
however, that no such amendment, modification or waiver shall be made (a)
without the consent of all Lenders, if it would (i) increase the Commitment or
the Specified Percentage of any Lender, or (ii) extend the date of maturity of,
extend the due date for any payment of principal or interest on, reduce the
amount of any installment of principal or interest on, or reduce the rate of
interest on, any Advance, the Reimbursement Obligations or other amount owing
under any Loan Documents, or (iii) release any security for or guaranty of the
Obligations (except pursuant to this Agreement), or (iv) reduce the fees payable
hereunder, or (v) revise this Section 11.11, or (vi) waive the date for payment
of any of the Obligations, or (vii) amend the definition of Determining Lenders
or otherwise alter the percentage of Lenders necessary to take action under any
of the Loan Documents; (b) without the consent of the Administrative Lender, if
it would alter the rights, duties or obligations of the Administrative Lender;
or (c) without the consent of the Issuing Bank, if it would alter the rights,
duties or obligations of the Issuing Bank. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be waived orally but
only by an instrument in writing signed by the Administrative Lender and, in the
case of an amendment, by the Borrower.
Section 11.12 Exception to Covenants. Neither the Borrower nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for
<PAGE>
any payment made upon the Issuing Bank's gross negligence or willful misconduct;
or (d) any other circumstances whatsoever in making or failing to make payment
under any Letter of Credit, except that the Borrower shall have a claim against
the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the
extent of any direct, but not consequential, damages suffered by the Borrower
that the Borrower proves were caused by (i) the Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit or (ii) the
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
Section 11.14 Confidentiality. Each Lender and the Administrative Lender
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) 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 non-public information supplied to it by the Borrower pursuant to
this Agreement which is identified by the Borrower as being confidential at the
time the same is delivered to the Lenders or the Administrative Lender, provided
that nothing herein shall limit the disclosure of any such information (a) to
the extent required by statute, rule, regulation or judicial process, (b) to
counsel for any Lender or the Administrative Lender, (c) to bank examiners,
auditors or accountants of any Lender, (d) to the Administrative Lender, any
other Lender or any affiliate of any Lender, or any other officer, director,
employee, agent or advisor of any Lender or any affiliate of any Lender, (e) in
connection with any litigation to which any one or more of Lenders is a party,
(f) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document; provided, further, that, unless
specifically prohibited by Applicable Law or court order, each Lender shall,
prior to disclosure thereof, notify the Borrower of any request for disclosure
of any such not-public information (i) by any governmental agency or
representative thereof (other than any such request in connection with an
examination of such Lender's financial condition by such governmental agency) or
(ii) pursuant to legal process, or (g) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) agrees to handle such information
confidentially.
Section 11.15 No Duties of Co-Agents. The Borrower and the Lenders
acknowledge that the Co-Agents have no duties,
<PAGE>
responsibilities or liabilities in their capacities as Co-Agents hereunder.
SECTION 11.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO ARTICLE 5069-15.10(B), TITLE 79,
REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED, IT IS AGREED THAT THE
PROVISIONS OF CHAPTER 15, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, AS
AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AGREES THAT
THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE
JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE PERFORMABLE IN
DALLAS COUNTY, TEXAS.
SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
================================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first set
forth above.
TEXAS INDUSTRIES, INC.
By:
-------------------------
Richard M. Fowler
Vice President - Finance
<PAGE>
EXHIBIT 10.3
TEXAS INDUSTRIES, INC.
----------------------
$80,000,000 7.15% SENIOR NOTES, SERIES A, DUE APRIL 15, 2006
- -----------------------------------------------------------------------
$40,000,000 7.20% SENIOR NOTES, SERIES B, DUE APRIL 15, 2007
- -----------------------------------------------------------------------
$10,000,000 7.28% SENIOR NOTES, SERIES C, DUE APRIL 15, 2009
- -----------------------------------------------------------------------
$45,000,000 7.395% SENIOR NOTES, SERIES D, DUE APRIL 15, 2012
- -----------------------------------------------------------------------
$25,000,000 7.59% SENIOR NOTES, SERIES E, DUE APRIL 15, 2017
- -----------------------------------------------------------------------
NOTE AGREEMENT
--------------
Dated as of December 18, 1997
-----------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
(Not Part of Agreement)
-----------------------
Page
----
1. AUTHORIZATION OF ISSUE OF NOTES........................................ 1
2. PURCHASE AND SALE OF NOTES............................................. 2
3. CONDITIONS............................................................. 2
3A(1). CERTAIN DOCUMENTS............................................. 2
3A(2). OPINION OF PURCHASER'S SPECIAL COUNSEL........................ 3
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT.................... 3
3A(4). PURCHASE PERMITTED BY APPLICABLE LAWS......................... 3
3A(5). PAYMENT OF SPECIAL COUNSEL FEES............................... 4
3A(6). PRIVATE PLACEMENT NUMBERS..................................... 4
3A(7). PRIOR OR SIMULTANEOUS DEPOSIT BY OTHER PURCHASERS............. 4
3A(8). PROCEEDINGS................................................... 4
3B(1). CLOSING DOCUMENTS AND OFFICER'S CERTIFICATE................... 4
3B(2). INTERCREDITOR AGREEMENT....................................... 4
3B(3). CHAPARRAL TO BE WHOLLY OWNED.................................. 4
3B(4). ASSUMPTION OF CHAPARRAL DEBT.................................. 5
3B(5). ESCROW AGREEMENT CERTIFICATE.................................. 5
3B(6). PRIOR OR SIMULTANEOUS PURCHASE BY OTHER PURCHASERS............ 5
3B(7). PROCEEDINGS................................................... 5
4. PREPAYMENTS............................................................ 5
4A. MANDATORY PREPAYMENTS OF SERIES A AND B NOTES...................... 5
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT.................. 5
4C. NOTICE OF OPTIONAL PREPAYMENT...................................... 6
4D. PARTIAL PAYMENTS PRO RATA.......................................... 6
4E. RETIREMENT OF NOTES................................................ 6
5. AFFIRMATIVE COVENANTS.................................................. 6
5A. FINANCIAL STATEMENTS............................................... 6
5B. INFORMATION REQUIRED BY RULE 144A.................................. 8
5C. INSPECTION OF PROPERTY............................................. 8
5D. MAINTENANCE OF PROPERTIES.......................................... 8
5E. INSURANCE.......................................................... 9
5F. COMPLIANCE WITH LAW................................................ 9
5G. CORPORATE EXISTENCE, ETC........................................... 9
6. NEGATIVE COVENANTS..................................................... 9
6A. DIVIDEND LIMITATION................................................ 9
6B. LIENS, DEBT, AND OTHER RESTRICTIONS................................10
6B(1). LIENS.........................................................10
6B(2). DEBT..........................................................12
6B(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES.......13
6B(4). SALE OF STOCK, OTHER EQUITY INTERESTS AND DEBT
OF SUBSIDIARIES...............................................14
6B(5). MERGER AND SALE OF ASSETS.....................................15
6B(6). SALE AND LEASE-BACK...........................................17
6B(7). SUBSIDIARY RESTRICTIONS.......................................17
6C. ISSUANCE OF STOCK OR OTHER EQUITY INTERESTS BY SUBSIDIARIES........17
7. EVENTS OF DEFAULT......................................................18
7A. ACCELERATION.......................................................18
7B. RESCISSION OF ACCELERATION.........................................21
7C. NOTICE OF ACCELERATION OR RESCISSION...............................21
<PAGE>
7D. OTHER REMEDIES.....................................................21
8. REPRESENTATIONS, COVENANTS AND WARRANTIES..............................22
8A. ORGANIZATION.......................................................22
8B. FINANCIAL STATEMENTS...............................................22
8C. ACTIONS PENDING....................................................22
8D. OUTSTANDING DEBT...................................................22
8E. TITLE TO PROPERTIES................................................22
8F. TAXES..............................................................23
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS...........................23
8H. OFFERING OF NOTES..................................................23
8I. USE OF PROCEEDS....................................................24
8J. ERISA..............................................................25
8K. GOVERNMENTAL CONSENT...............................................25
8L. ENVIRONMENTAL COMPLIANCE...........................................25
8M. DISCLOSURE.........................................................25
9. REPRESENTATIONS OF THE PURCHASERS......................................26
9A. NATURE OF PURCHASE.................................................26
9B. SOURCE OF FUNDS....................................................26
10. DEFINITIONS............................................................27
10A. YIELD-MAINTENANCE TERMS...........................................27
10B. OTHER TERMS.......................................................28
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS...................34
11. MISCELLANEOUS..........................................................35
11A. PLACE OF PAYMENT..................................................35
11B. HOME OFFICE PAYMENT...............................................35
11C. EXPENSES..........................................................35
11D. CONSENT TO AMENDMENTS.............................................36
11E. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES....36
11F. PERSONS DEEMED OWNERS; PARTICIPATIONS.............................37
11G. SUBSTITUTION OF PURCHASER.........................................37
11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT......37
11I. SUCCESSORS AND ASSIGNS............................................37
11J. DISCLOSURE TO OTHER PERSONS.......................................37
11K. NOTICES...........................................................38
11L. PAYMENTS DUE ON NON-BUSINESS DAYS.................................38
11M. SATISFACTION REQUIREMENT..........................................38
11N. GOVERNING LAW.....................................................38
11O. SEVERABILITY......................................................39
11P. DESCRIPTIVE HEADINGS..............................................39
11Q. COUNTERPARTS......................................................39
SCHEDULE I
SCHEDULE 6B(2) -- LIENS AND DEBT
SCHEDULE 6B(3) -- EXISTING INVESTMENTS
SCHEDULE 8G -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A-1 -- FORM OF SERIES A NOTE
EXHIBIT A-2 -- FORM OF SERIES B NOTE
EXHIBIT A-3 -- FORM OF SERIES C NOTE
EXHIBIT A-4 -- FORM OF SERIES D NOTE
EXHIBIT A-5 -- FORM OF SERIES E NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
<PAGE>
EXHIBIT C -- FORM OF GUARANTY AGREEMENT
EXHIBIT D -- FORM OF AMENDED AND RESTATED INTERCREDITOR AGREEMENT
EXHIBIT E -- FORM OF ESCROW AGREEMENT
<PAGE>
TEXAS INDUSTRIES, INC.
1341 West Mockingbird Lane
DALLAS, TEXAS 75247-6913
As of December 18, 1997
TO EACH OF THE PURCHASERS
LISTED IN THE ATTACHED SCHEDULE I
$80,000,000 7.15% Senior Notes, Series A
$40,000,000 7.20% Senior Notes, Series B
$10,000,000 7.28% Senior Notes, Series C
$45,000,000 7.395% Senior Notes, Series D
$25,000,000 7.59% Senior Notes, Series E
Ladies and Gentlemen:
The undersigned, TEXAS INDUSTRIES, INC. (the "COMPANY"), hereby agrees with
you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF NOTES.
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue
of (i) its senior promissory notes in the aggregate principal amount of
$80,000,000, to be dated the date of issue thereof, to mature April 15, 2006, to
bear interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of 7.15% per
annum and on overdue payments at the rate specified therein, and to be
substantially in the form of Exhibit A-1 attached hereto (the "SERIES A NOTES"),
(ii) its senior promissory notes in the aggregate principal amount of
$40,000,000, to be dated the date of issue thereof, to mature April 15, 2007, to
bear interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of 7.20% per
annum and on overdue payments at the rate specified therein, and to be
substantially in the form of Exhibit A-2 attached hereto (the "SERIES B NOTES"),
(iii) its senior promissory notes in the aggregate principal amount of
$10,000,000, to be dated the date of issue thereof, to mature April 15, 2009, to
bear interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of 7.28% per
annum and on overdue payments at the rate specified therein, and to be
substantially in the form of Exhibit A-3 attached hereto (the "SERIES C NOTES"),
(iv) its senior promissory notes in the aggregate principal amount of
$45,000,000, to be dated the date of issue thereof, to mature April 15, 2012, to
bear interest on the unpaid balance thereof from the date thereof until the
principal thereof
<PAGE>
shall have become due and payable at the rate of 7.395% per annum and on overdue
payments at the rate specified therein, and to be substantially in the form of
Exhibit A-4 attached hereto (the "SERIES D NOTES"), and (v) its senior
promissory notes in the aggregate principal amount of $25,000,000, to be dated
the date of issue thereof, to mature April 15, 2017, to bear interest on the
unpaid balance thereof from the date thereof until the principal thereof shall
have become due and payable at the rate of 7.29% per annum and on overdue
payments at the rate specified therein, and to be substantially in the form of
Exhibit A-5 attached hereto (the "SERIES E NOTES"). The term "NOTES" as used
herein shall include each Series A Note, Series B Note, Series C Note, Series D
Note or Series E Note issued pursuant to this Agreement and each such Note
delivered in substitution or exchange for any other Note pursuant to any
provision of this Agreement. Capitalized terms used herein have the meanings
specified in paragraph 10.
PARAGRAPH 2. PURCHASE AND SALE OF NOTES.
2. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you,
and subject to the terms and conditions herein set forth, you hereby agree to
purchase from the Company, Notes of the respective series and in the respective
aggregate principal amounts indicated with respect to you in Schedule I hereto.
The closing of such sale and purchase shall initially be escrowed as provided
more fully hereinafter and in an Escrow Agreement of even date herewith between
the Company, each of you and the Escrow Agent, in the form of Exhibit E hereto
(the "ESCROW AGREEMENT"). The date of such escrowed closing (the "CLOSING DATE")
shall be December 18, 1997. The purchase price of all such Notes shall be 100%
of the principal amount thereof. On the Closing Date the Company will deliver to
the Escrow Agent, at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce
Tower, Houston, Texas 77002, Notes registered in your name or the name of your
nominee as you may have specified by timely notice to the Company, evidencing
the aggregate principal amount of the Notes of each series whose purchase is
being funded by you into escrow on the Closing Date and in the denomination or
denominations specified in Schedule I attached hereto, against your payment of
the purchase price thereof into escrow by transfer of immediately available
funds in the amount of such purchase price for credit to the Escrow Account,
account # 01793561 at Texas Commerce Bank National Association, Dallas, Texas
(ABA No. 113 000 609).
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS. Your obligation to deposit into escrow on the Closing
Date the purchase price of the Notes to be acquired by you is subject to the
satisfaction, on or before the Closing Date, of the conditions specified in
Paragraph 3A, and your obligation to complete the purchase of and payment for
such Notes is further subject to the satisfaction, by 1:00 p.m. Houston time, on
the Business Day next preceding the Escrow Break Date, of the conditions
specified in Paragraph 3B.
<PAGE>
3A. CLOSING DATE CONDITIONS.
3A(1). CERTAIN DOCUMENTS. The Escrow Agent shall have received fully
executed originals of each of the following, each dated the Closing Date, unless
otherwise specified below:
(i) The Notes to be purchased by you.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company approving this Agreement and the Notes, and of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary of
the Company certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement, the Escrow Agreement and the
Notes and the other documents to be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and
bylaws of the Company.
(v) A favorable opinion of Robert C. Moore, Vice President-General
Counsel of the Company, addressed to you and satisfactory to you and
substantially in the form of Exhibit B-1 attached hereto and as to such
other matters as you may reasonably request.
(vi) Certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
which name the Company or any Subsidiary (under its present name and any
previous name) as debtor and which are filed in the State of Texas.
(vii) A Guaranty Agreement in the form of Exhibit C attached hereto
(the "GUARANTY AGREEMENT").
3A(2). OPINION OF PURCHASER'S SPECIAL COUNSEL. The Escrow Agent shall
have received from Andrews & Kurth L.L.P., who are acting as special counsel for
you in connection with this transaction, a favorable opinion dated the Closing
Date, addressed to you and satisfactory to you as to such matters incident to
the matters herein contemplated as you may reasonably request.
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 shall be true on and as of the Closing
Date, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on
<PAGE>
the Closing Date no Event of Default or Default; and the Company shall have
delivered to the Escrow Agent an Officer's Certificate, dated the Closing Date,
to both such effects.
3A(4). PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the Company
of, and the purchase of and payment for the Notes to be purchased by you on the
terms and conditions herein provided (including the use of the proceeds of such
Notes by the Company) shall not violate any applicable law or governmental
regulation (including, without limitation, section 5 of the Securities Act or
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and shall not subject you to any tax, penalty, liability or other onerous
condition under or pursuant to any applicable law or governmental regulation,
and the Escrow Agent shall have received such certificates or other evidence as
you may request to establish compliance with this condition.
3A(5). PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions
of paragraph 11C, the Company shall have paid the fees, charges and
disbursements of your special counsel and any local counsel engaged by you or
your special counsel referred to in paragraph 3A(2) to the extent reflected in a
statement of any such counsel rendered to the Company prior to or on the Closing
Date.
3A(6). PRIVATE PLACEMENT NUMBERS. Standard & Poor's CUSIP Service
Bureau (in accordance with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have issued a private placement
number for each series of Notes (collectively, the "PRIVATE PLACEMENT NUMBER")
to be purchased by you on the Closing Date. All fees and expenses incurred in
connection with obtaining the Private Placement Number shall have been paid by
the Company.
3A(7). PRIOR OR SIMULTANEOUS DEPOSIT BY OTHER PURCHASERS. Each of the
other Purchasers shall have made funds available to the Escrow Agent in an
amount equal to the purchase price of the Note or Notes to be purchased by it.
3A(8). PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby on the Closing
Date and all documents incident thereto shall be satisfactory in substance and
form to you, and you shall have received all such counterpart originals or
certified or other copies of such documents as you may reasonably request.
3A(9). ADDITIONAL CLOSING DATE OPINIONS. You shall have received (i) a
favorable opinion of Robert C. Moore, Vice President-General Counsel of the
Company, dated the Closing Date, addressed to you and satisfactory to you and
substantially in the form of Exhibit B-2 attached hereto, and (ii) a favorable
opinion of Andrews & Kurth L.L.P., dated the Closing Date, addressed to you and
satisfactory to you as to such matters incident to the matters herein
contemplated as you may reasonably request. (The opinions referred to in this
subparagraph shall be delivered, and not placed in the escrow contemplated by
the Escrow Agreement.)
3B. FURTHER CONDITIONS.
<PAGE>
3B(1). CLOSING DOCUMENTS AND OFFICER'S CERTIFICATE. You shall have
received executed originals of all closing documents delivered to the Escrow
Agent on the Closing Date (other than Notes issued to other Purchasers),
together with a certificate of a Responsible Officer, dated the Release
Condition Satisfaction Date, to the effect that (i) the representations and
warranties made in paragraph 8 are true on and as of the Release Condition
Satisfaction Date as if made on and as of such date, (ii) the certificates
delivered to the Escrow Agent on the Closing Date pursuant to Paragraph
3A(1)(ii), (iii), (iv) and (vi), 3A(3) and 3A(4), if any, may be relied upon as
of the Release Condition Satisfaction Date as if dated and delivered on said
date, and (iii) the conditions specified in the following Paragraphs 3B(3) and
(4) have been satisfied.
3B(2). INTERCREDITOR AGREEMENT. You shall have received a fully executed
Amended and Restated Intercreditor Agreement in the form of Exhibit D attached
hereto, dated on or prior to the Release Condition Satisfaction Date.
3B(3). CHAPARRAL TO BE WHOLLY OWNED. All of the issued and outstanding
shares of stock of Chaparral shall be owned directly or indirectly by the
Company.
3B(4). ASSUMPTION OF CHAPARRAL DEBT. The Company shall have assumed or
otherwise be liable for Chaparral's unsecured Senior Notes due 2004 in the
outstanding principal amount of $56,000,000 and Chaparral's First Mortgage Notes
due 2000 in the outstanding principal amount of $8,182,330 and Chaparral shall
have ceased to be obligated with respect to such Debt.
3B(5). ESCROW AGREEMENT CERTIFICATE. The Company shall have delivered
to the Escrow Agent, with a copy to you, the Officer's Certificate contemplated
by subsection 3(d) of the Escrow Agreement.
3B(6). PRIOR OR SIMULTANEOUS PURCHASE BY OTHER PURCHASERS. Each of the
other Purchasers shall have accepted delivery of the Note or Notes to be
purchased by it on or prior to the Closing Date.
3B(7). PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby on the Release
Condition Satisfaction Date and all documents incident thereto shall be
satisfactory in substance and form to you, and you shall have received all such
counterpart originals or certified or other copies of such documents as you may
reasonably request.
3C. AGREEMENT OF COMPANY. In consideration of each Purchaser's agreement
to employment of the escrow closing procedure provided for herein and in the
Escrow Agreement, the Company hereby covenants and agrees with and for the
benefit of the Purchasers as follows:
<PAGE>
3C(1). BEST EFFORTS UNDERTAKING. The Company shall use its best efforts
to satisfy (or to cause satisfaction of), by 1:00 p.m., Houston time, on the
Business Day next preceding the Escrow Break Date, each further condition
specified in Paragraph 3B.
3C(2). DELIVERY OF CERTIFICATES. Without limiting the generality of
Paragraph 3C(1), if the conditions specified in Paragraphs 3B(3) and 3B(4) shall
be satisfied by 1:00 p.m., Houston time, on the Business Day next preceding the
Escrow Break Date, the Company shall, concurrently with the satisfaction thereof
(or, if not satisfied substantially simultaneously, concurrently with the
satisfaction of the later thereof to be satisfied), deliver as specified in
Paragraphs 3B(1) and 3B(5) the certificates referred to therein.
PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS.
4A. MANDATORY PREPAYMENTS OF SERIES A AND B NOTES . Subject to the
proviso to the next succeeding sentence, on April 15, 2004 the Company will
prepay $20,000,000 aggregate principal amount (or such lesser principal amount
as shall then be outstanding) of the Series A Notes and on April 15, 2005 the
Company will prepay $40,000,000 aggregate principal amount (or such lesser
principal amount as shall then be outstanding) of the Series A Notes. Each such
prepayment shall be at 100% of the principal amount so prepaid, with interest
accrued thereon to the prepayment date but without payment of the Yield-
Maintenance Amount or any other premium, and shall be applied to the prepayment
of each outstanding Series A Note, allocated ratably among all such Notes in
accordance with the respective outstanding principal amounts thereof and without
regard to series; provided that upon any partial prepayment of the Series A
Notes pursuant to paragraph 4B or purchase of such Notes permitted by paragraph
4E, the principal amount of each required prepayment of such Notes becoming due
under this paragraph 4A on and after the date of such prepayment or purchase
shall be reduced in the same proportion as the aggregate unpaid principal amount
of such Notes is reduced as a result of, and giving effect to, such prepayment
or purchase.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each series shall be subject to prepayment, in whole at any time or from time to
time in part (in integral multiples of $1,000,000), at the option of the
Company, at 100% of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield-Maintenance Amount, if any, with respect to each
Note.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder of
each Note irrevocable written notice of any prepayment pursuant to paragraph 4B
not less than 10 Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes held by
such holder, to be prepaid on such date and stating that such prepayment is to
be made pursuant to paragraph 4B. Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice, together
with interest thereon to the prepayment date and
<PAGE>
together with the Yield-Maintenance Amount, if any, with respect thereto, shall
become due and payable on such prepayment date. The Company shall, on or before
the day on which it gives written notice of any prepayment pursuant to paragraph
4B, give telephonic notice of the principal amount of the Notes to be prepaid
and the prepayment date to each holder which shall have designated a recipient
of such notices in the Purchaser Schedule attached hereto or by notice in
writing to the Company.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the Notes
pursuant to paragraph 4B, the principal amount so prepaid shall be allocated to
all Notes at the time outstanding, without regard to series (including, for the
purpose of this paragraph 4D only, all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A or B) in proportion
to the respective outstanding principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A or paragraph 4B or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly, Notes held by any holder except by means of an offer by the Company
or such Subsidiary or Affiliate to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes held by each other holder of Notes at the time
outstanding, without regard to series, upon the same terms and conditions. Any
Notes so prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
paragraph 4D.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid, the Company covenants that
5A. FINANCIAL STATEMENTS. The Company will deliver to each holder in
triplicate:
(i) as soon as practicable and in any event within sixty (60) days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income and cash
flows of the Company and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period in the preceding fiscal year, all
in reasonable detail, in accordance with generally accepted accounting
<PAGE>
principles and satisfactory in form to the Required Holders and certified
by an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments; provided, however, that delivery
pursuant to clause (iii) below of copies of the Quarterly Report on Form
10-Q of the Company for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (i) with respect to consolidated financial statements if such
financial statements are included in such report;
(ii) as soon as practicable and in any event within 105 days after
the end of each fiscal year, consolidated statements of income and cash
flows and a consolidated statement of stockholders' equity of the Company
and its Subsidiaries for such year, and a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail, in accordance with
generally accepted accounting principles and satisfactory in form to the
Required Holders and, reported on by independent public accountants of
recognized national standing selected by the Company whose report shall be
without limitation as to the scope of the audit and satisfactory in
substance to the Required Holders; provided, however, that delivery
pursuant to clause (iii) below of copies of the Annual Report on Form 10-K
of the Company for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (ii)
if such financial statements are included in such report;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary;
(v) promptly after the filing or receiving thereof, copies of all
material reports and notices which the Company or any Subsidiary files
under ERISA with the Internal Revenue Service or the PBGC or the U.S.
Department of Labor or which the Company or any Subsidiary receives from
such corporation; and
(vi) with reasonable promptness, such other information respecting
the condition or operations, financial or otherwise, of the Company or any
Subsidiary as such holder may reasonably request.
<PAGE>
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each holder an Officer's Certificate
demonstrating (with computations in reasonable detail) compliance by the Company
and its Subsidiaries with the provisions of paragraphs 6A, 6B(l), 6B(2), 6B(3)
and 6B(5) and stating that there exists no Event of Default or Default, or, if
any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to each holder a certificate of such
accountants stating that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any Event of Default or
Default, or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
holder an Officer's Certificate specifying the nature and period of existence
thereof and what action the Company proposes to take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of the holder of any Note, provide such holder, and any qualified institutional
buyer designated by such holder, such financial and other information as such
holder may reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the Securities Act in
connection with the resale of Notes, except at such times as the Company is
subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act. For the purpose of this paragraph 5B, the term "qualified institutional
buyer" shall have the meaning specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company will permit any Person designated
by any Significant Holder in writing, at the Company's expense during the
continuance of a Default or Event of Default and otherwise at such Significant
Holder's expense, to visit and inspect any of the properties of the Company and
its Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and its independent public accountants,
all at such reasonable times and as often as such Significant Holder may
reasonably request.
5D. MAINTENANCE OF PROPERTIES. The Company will and will cause each of
its Subsidiaries to maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at
<PAGE>
all times, provided that this paragraph 5D shall not prevent the Company or any
such Subsidiary from discontinuing the operation and the maintenance of any of
its properties if such discontinuance would not, individually or in the
aggregate, have a materially adverse effect on the business, operations,
affairs, financial condition, properties or assets of the Company and its
Subsidiaries taken as a whole.
5E. INSURANCE. The Company will and will cause each of its Subsidiaries
to maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
5F. COMPLIANCE WITH LAW. The Company will and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations would not reasonably
be expected, individually or in the aggregate, to have a materially adverse
effect on the business, operations, affairs, financial condition, properties or
assets of the Company and its Subsidiaries taken as a whole.
5G. CORPORATE EXISTENCE, ETC. The Company will at all times preserve
and keep in full force and effect its corporate existence. Subject to paragraph
6B(5), the Company will at all times preserve and keep in full force and effect
the corporate existence of each of its Subsidiaries (unless merged into the
Company or a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise would not, individually or in the aggregate, have
a materially adverse effect on the business, operations, affairs, financial
condition, properties or assets of the Company and its Subsidiaries taken as a
whole.
PARAGRAPH 6. NEGATIVE COVENANTS.
6. NEGATIVE COVENANTS. So long as any Note shall remain unpaid, the
Company covenants that:
6A. DIVIDEND LIMITATION. The Company will not directly or indirectly
declare, order, pay, make or set apart any dividend on any class of its stock at
any time after the date hereof, make any other distribution on account of any
class of its stock, or redeem,
<PAGE>
purchase or otherwise acquire, directly or indirectly, any shares of its stock
(all of the foregoing being herein called "RESTRICTED PAYMENTS") unless after
giving effect to such Restricted Payment, (I) no Event of Default or Default
shall exist, (II) the Company could incur at least $1.00 of additional Debt,
(III) a Subsidiary could incur at least $1.00 of additional Debt pursuant to
paragraph 6B(2)(vii)(a), and (IV) the Company could incur at least $1.00 of
additional Debt secured by a Lien pursuant to paragraph 6B(l)(x).
6B. LIENS, DEBT, AND OTHER RESTRICTIONS. The Company will not and will
not permit any Subsidiary to:
6B(1). LIENS. Create, assume or suffer to exist any Lien upon or with
respect to any of its properties or assets, whether now owned or hereafter
acquired, or any income or profits therefrom, except
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and for which reserves or other appropriate provision,
if any, as shall be required by generally accepted accounting principles
shall have been made therefor,
(ii) other statutory Liens incidental to the conduct of its business
or the ownership of its property and assets which are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit or guaranteeing the obligations of a Person (including, without
limitation mechanics and materialmen's liens and landlord liens), and which
do not in the aggregate materially detract from the value of its property
or assets or materially impair the use thereof in the operation of its
business,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or a Subsidiary,
(iv) Liens on property of the Company described in Schedule 6B(2)
attached hereto and securing Debt permitted by clause (iii) of paragraph
6B(2),
(v) any Lien created to secure all or any part of the purchase
price, or to secure Debt incurred or assumed to pay all or any part of the
purchase price, of property acquired by the Company or a Subsidiary after
December 18, 1997, or the construction or improvement of fixed assets
useful in carrying on the business of the Company or a Subsidiary and
incurred after December 18, 1997, provided that no such Lien shall encumber
property acquired with the proceeds of a sale of assets made in reliance on
paragraph 6B(5)(viii), and provided further that (a) any such Lien shall
attach solely to the item or items of property so acquired and, if required
by the terms of the instrument originally creating such Lien, other
property which is an improvement to or is acquired for specific use in
connection with such acquired property or which is thereto unimproved real
property being improved by such acquired property or upon which the fixed
asset is being
<PAGE>
constructed, and (b) the principal amount of Debt secured by any such Lien
and any Liens permitted by clause (vi) shall at no time exceed an amount
equal to 100% of the lesser of (I) the cost to the Company or such
Subsidiary of the property so acquired and (II) the fair market value of
such property (as determined in good faith by the Board) at the time of
such acquisition, (c) any such Lien shall be created within 180 days after,
in the case of property, its acquisition, or, in the case of construction
or improvements, completion or the date of the initiation of its commercial
operation, or in the case of a Sale Lease-Back Transaction with respect a
manufacturing facility being initially placed into commercial operation by
the Company or any Subsidiary, the date on which such manufacturing
facility is placed in commercial operation, and (d) in the case of any Lien
securing a Capitalized Lease Obligation, the fixed asset which is the
subject of the lease, if previously owned by the Company, shall have been
sold or otherwise disposed of in accordance with paragraph 6B(5) (other
than in reliance on clause (viii));
(vi) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or
its becoming a Subsidiary, or any Lien existing on any property acquired by
the Company or any Subsidiary at the time such property is so acquired
(whether or not the Debt secured thereby shall have been assumed), provided
that no such Lien shall encumber property acquired with the proceeds of a
sale of assets made in reliance on paragraph 6B(5)(viii), provided further
that no such Lien shall have been created or assumed in contemplation of
such consolidation or merger or such Person's becoming a Subsidiary or such
acquisition of property, and provided further that each such Lien shall at
all times be confined solely to the item or items of property so acquired
and, if required by the terms of the instrument originally creating such
Lien, other property which is an improvement to or is acquired for specific
use in connection with such acquired property;
(vii) any Lien renewing, extending, refunding or replacing any Lien
permitted by clause (iv), (v) or (vi) above, provided that the principal
amount of Debt secured by such Lien is not increased or the maturity
thereof reduced, such Lien is not extended to other property, and any
incurrence of Debt in connection with such renewal, extension, refunding or
replacing such Lien shall be permitted by paragraph 6B(2);
(viii) any attachment or judgment Lien, unless the time for the
appeal of such judgment it secures shall not have expired or such judgment
shall not have been discharged or execution thereof stayed pending appeal,
or shall not have been discharged within sixty (60) days after the
expiration of any such stay;
(ix) survey exceptions or encumbrances, easements or reservations,
or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of the activities of the Company and
its Subsidiaries or which customarily
<PAGE>
exist on properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially impair their
use in the operation of the business of the Company and its Subsidiaries;
(x) other Liens on the property of the Company or its Subsidiaries,
provided that no such Lien shall be created, incurred or assumed unless,
immediately after giving effect thereto, the aggregate amount of Debt
secured by this clause (x) shall not exceed fifteen percent (15%) of
Consolidated Net Worth; and
(xi) other Liens, provided that the Company shall or shall cause the
Notes to be provided equal and ratable security with or prior to all other
indebtedness secured by such Liens so long as any indebtedness shall be
secured by such Liens and will deliver to the holders of the Notes an
opinion of counsel acceptable to the Required Holders that the Notes are so
secured, which opinion shall be without qualification relating to
fraudulent transfer. For purposes of this paragraph, equal and ratable
security shall mean that (a) the assets subject to such other Liens also
secure the Notes and (b) with respect to any proceeds from such assets,
either (I) payments of principal, interest and Yield-Maintenance Amount or
other premium, if any, and any fees and expenses due under the Notes or
this Agreement, shall each be accorded the same priority as the highest
priority accorded fees, expenses, premium, interest, principal, or any
other fee, payment or charge with respect to any other indebtedness secured
by such Lien or (II) the Required Holders of the Notes and the holders of
any other indebtedness secured by such Lien shall have entered into an
intercreditor agreement with respect to the sharing of any such proceeds.
6B(2). DEBT. Create, incur, assume, guarantee or otherwise become
directly or indirectly liable with respect thereto, any Debt, except
(i) Debt of the Company represented by the Notes,
(ii) Debt of the Company and any Subsidiary secured by Liens
permitted by the provisions of paragraph 6B(l), provided that at the time
of incurrence, including any rollover of any Debt the interest rate of
which is based upon the London interbank offered rate (LIBOR), the rate
offered on any certificate of deposit or the Fed Funds Rate, and
immediately after giving effect thereto the Debt of the Company and its
Subsidiaries would not exceed 60% of Consolidated Total Capitalization.
(iii) Debt of the Company and its Subsidiaries described in Schedule
6B(2) attached hereto,
(iv) Debt of any Subsidiary to the Company or any wholly-owned
Subsidiary,
<PAGE>
(v) Debt of a Person existing at the time it becomes a
Subsidiary, provided that such Debt shall not include Debt of any Person
that becomes a Subsidiary pursuant to an acquisition in which proceeds of a
sale of assets made in reliance on paragraph 6B(5)(viii) are used, and
provided, further that, at the time of incurrence, including any rollover
of any Debt the interest rate of which is based upon the London interbank
offered rate (LIBOR), the rate offered on any certificate of deposit or the
Fed Funds Rate, and immediately after giving effect thereto the Debt of the
Company and its Subsidiaries would not exceed 60% of Consolidated Total
Capitalization ,
(vi) Debt of a Subsidiary created in connection with, or with a
view to compliance by such Subsidiary with the requirements of any program,
law, statute or regulation of any governmental authority, which is
applicable to such Subsidiary and which provides material financial or tax
benefits to such Subsidiary which are not available to the Company or
available to the Company only on terms which the Board of Directors
determines are not as favorable as those available to the Subsidiary,
provided that at the time of incurrence, including any rollover of any Debt
the interest rate of which is based upon the London interbank offered rate
(LIBOR), the rate offered on any certificate of deposit or the Fed Funds
Rate, and immediately after giving effect thereto the Debt of the Company
and its Subsidiaries would not exceed 60% of Consolidated Total
Capitalization,
(vii) other Debt of the Company (other than Debt to any Subsidiary)
and its Subsidiaries provided that at the time of incurrence, including any
rollover of any Debt the interest rate of which is based upon the London
interbank offered rate (LIBOR), the rate offered on any certificate of
deposit or the Fed Funds Rate, and immediately after giving effect thereto
(a) if such Debt is Debt of a Subsidiary, the aggregate amount of
Subsidiary Debt does not exceed 15% of Consolidated Net Worth and (b) the
Debt of the Company and its Subsidiaries would not exceed 60% of
Consolidated Total Capitalization, and
(viii) any extension, renewal or replacement of Debt described in
clauses (iii) and (v), provided that at the time of incurrence, including
any rollover of any Debt the interest rate of which is based upon the
London interbank offered rate (LIBOR), the rate offered on any certificate
of deposit or the Fed Funds Rate, and immediately after giving effect
thereto the Debt of the Company and its Subsidiaries would not exceed 60%
of Consolidated Total Capitalization.
6B(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES. Make
any loan or advance to, or extend credit (other than credit extended in the
normal course of business to any Person who is not an Affiliate of the Company)
to, or guarantee, endorse or otherwise be or become contingently liable,
directly or indirectly, in connection with the obligations, stock or dividends
of, or own, purchase or acquire any stock, obligations or
<PAGE>
securities of, or any other interest in, or make any capital contribution to,
any Person, except that
(i) the Company or any wholly-owned Subsidiary may make or permit
to remain outstanding loans or advances to any Subsidiary, and any
Subsidiary may make or permit to remain outstanding loans or advances to
the Company or any wholly-owned Subsidiary;
(ii) the Company or any wholly-owned Subsidiary may own, purchase
or acquire stock, other equity interests, obligations or securities of a
Subsidiary or of a corporation which immediately after such purchase or
acquisition will be a Subsidiary;
(iii) the Company or any Subsidiary may own, purchase or acquire (a)
certificates of deposit, bankers acceptances and time deposits of
commercial banks and trust companies organized under the laws of the United
States (having capital, surplus and undivided profits of at least in excess
of $100,000,000 and senior unsecured long-term debt rated A or better by
S&P or A2 or better by Moody's) which mature within one year of the date of
issuance (b) certificates of deposit, acceptances and time deposits of
commercial banks and trust companies (other than those specified in clause
(a)) organized under the laws of the United States with which the Company
has a relationship, provided that such investments do not exceed
$10,000,000 in the aggregate, (c) commercial paper rated A-1 by S&P or P-1
by Moody's, (d) obligations of the United States Government or any agency
thereof, and obligations guaranteed by the United States Government, in
each case due within three years from the date of purchase and payable in
the United States in United States dollars, (e) repurchase agreements with
respect to any investment described in clauses (a) and (d) hereof entered
into with a bank or trust company described in clause (a) if such
repurchase agreements are by their terms to be preferred by the repurchase
obligor and such repurchase agreements are deposited with institutions
described in clause (a), and (f) money market funds classified as a current
asset according to generally accepted accounting principles and managed by
a bank or trust company described by clause (a) which invests substantially
all of its assets in investments described in clauses (a) and (d);
(iv) loans and advances in the ordinary course of business to
officers, directors and employees for expenses incidental to carrying on
the business of the Company or any Subsidiary;
(v) investments of the Company and its Subsidiaries existing as of
the Closing Date and described on Schedule 6B(3); and
(vi) other investments; provided that, at the time such investment
is made, after giving effect to such investment, (a) no Event of Default or
Default shall exist, (b) the Company could incur at least $1.00 of
additional Debt, (c) a
<PAGE>
Subsidiary could incur at least $1.00 of additional Debt pursuant to
paragraph 6B(2)(vii)(a), and (d) the Company could incur at least $1.00 of
additional Debt secured by a Lien pursuant to paragraph 6B(l)(x).
6B(4). SALE OF STOCK, OTHER EQUITY INTERESTS AND DEBT OF SUBSIDIARIES.
Sell or otherwise dispose of, or part with control of, any shares of stock,
other equity interests or Debt of any Subsidiary, except to the Company or a
wholly-owned Subsidiary, and except that all shares of stock and Debt of any
Subsidiary at the time owned by or owed to the Company and all Subsidiaries may
be sold as an entirety for a cash consideration which represents the fair value
(as determined in good faith by the Board of Directors of the Company) at the
time of sale of the shares of stock, other equity interests and Debt so sold,
provided that such sale shall be treated as the sale of the assets of such
Subsidiary and such sale of assets shall be permitted by paragraph 6B(5), and
provided further that, at the time of such sale, such Subsidiary shall not own,
directly or indirectly, any shares of stock, other equity interests or Debt of
the Company or any shares of stock, other equity interests or Debt of the
Company or any other Subsidiary (unless all of the shares of stock, other equity
interests and Debt of such other Subsidiary owned, directly or indirectly, by
the Company and all Subsidiaries are simultaneously being sold as permitted by
this Paragraph 6B(4)).
6B(5). MERGER AND SALE OF ASSETS. Merge or consolidate with or into any
other Person or convey, lease, transfer or otherwise dispose of all or any part
of its assets to any Person except that:
(i) any Subsidiary may merge with the Company (provided that the
Company shall be the continuing or surviving corporation) or with any one
or more other wholly-owned Subsidiaries (provided that the wholly-owned
Subsidiary(ies) shall be the continuing or surviving corporation(s));
(ii) any Subsidiary may sell, lease, transfer or otherwise dispose
of any of its assets to the Company or another wholly-owned Subsidiary;
(iii) the Company may lease, sell or transfer or otherwise dispose
of its assets to its Subsidiaries, provided that, to the extent such assets
constitute a material portion of the assets of the Company and its
Subsidiaries, taken as a whole, the Subsidiaries receiving such assets
shall assume or guarantee the Notes pursuant to a written agreement in form
and substance reasonably satisfactory to the Required Holders;
(iv) any Subsidiary may merge or consolidate with any other
corporation, provided that, immediately after giving effect to such merger
or consolidation (a) the continuing or surviving corporation of such merger
or consolidation shall constitute a Subsidiary, and (b) immediately after
giving effect to such merger (I) no Event of Default or Default shall
exist, (II) the Company could incur at least $1.00 of additional Debt,
(III) a Subsidiary could incur at least
<PAGE>
$1.00 of additional Debt pursuant to paragraph 6B(2)(vii)(a), and (IV) the
Company could incur at least $1.00 of additional Debt secured by a Lien
pursuant to paragraph 6B(1)(x);
(v) the Company may consolidate with or merge into any other
Solvent corporation (including a Subsidiary) if (a) the surviving
corporation is a corporation organized and existing under the laws of a
state of the United States of America, the District of Columbia, Canada or
a province thereof, with substantially all of its assets located and a
majority of its business conducted within the continental United States or
Canada, (b) if the Company is not the surviving Corporation, the surviving
corporation expressly assumes, by an agreement reasonably satisfactory in
substance and form to the Required Holders (which agreement may require the
delivery in connection with such assumption of such opinions of counsel as
the Required Holders may reasonably require), the obligations of the
Company under this Agreement and under the Notes and (c) immediately after
giving effect to such transaction (and such assumption), (I) no Default or
Event of Default shall exist, (II) the surviving corporation could incur at
least $1.00 of additional Debt, (III) a Subsidiary could incur at least
$1.00 of additional Debt pursuant to paragraph 6B(2)(vii)(a), and (IV) the
surviving corporation could incur at least $1.00 of additional Debt secured
by a Lien pursuant to paragraph 6B(1)(x);
(vi) the Company and any Subsidiary may sell or otherwise dispose
of inventory in the ordinary course of business;
(vii) the Company or any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to any Person, provided that (a)(1)
such assets together with (2) all other assets of the Company and its
Subsidiaries sold, leased, transferred or otherwise disposed of during the
preceding 12-month period and (3) the assets of all Subsidiaries the stock,
other equity interests or Debt of which has been sold or otherwise disposed
of during the preceding 12-month period pursuant to paragraph 6B(4) (in
each transaction measured by depreciated book value), do not represent more
than 15% of Consolidated Total Assets as reflected on the most recent
annual or quarterly consolidated balance sheet, (b)(1) such assets together
with (2) all other assets of the Company and its Subsidiaries sold, leased,
transferred or otherwise disposed of since the issuance of the Notes and
(3) the assets of all Subsidiaries the stock, other equity interests or
Debt of which has been sold or otherwise disposed of since the issuance of
the Notes pursuant to paragraph 6B(4) (in each transaction measured by
depreciated book value), do not represent more than 30% of Consolidated
Total Assets as reflected on the most recent annual or quarterly
consolidated balance sheet and (c) in the opinion of the Board of Directors
of the Company, or of such Subsidiary which is so disposing of assets, the
disposition is for fair value and is in the best interests of the Company
and any such Subsidiary, as the case may be, and provided further that
there shall be (I) no Default or Event of Default (II) the
<PAGE>
Company could incur at least $1.00 of additional Debt, (III) a Subsidiary
could incur at least $1.00 of additional Debt pursuant to paragraph
6B(2)(vii)(a), and (IV) the Company could incur at least $1.00 of
additional Debt secured by a Lien pursuant to paragraph 6B(1)(x);
(viii) the Company or any Subsidiary may sell assets as set forth in
clause (vii) but in excess of the limitations set forth in clauses (vii)(a)
and (b) if the proceeds of such sale are immediately after the consummation
of such sale deposited and invested in an escrow account with a depository
institution or trust company having capital surplus and undivided profits
aggregating at least $100,000,000 acting as escrow agent (which institution
or trust company shall have acknowledged that it has no right of set off
with respect to such proceeds), and are applied within 18 months of the
date of sale to the purchase of the assets utilized in the general nature
of the business, taken on a consolidated basis of the Company and its
Subsidiaries as of the date hereof; and
(ix) the Company may distribute assets to the Company's
shareholders pursuant to paragraph 6A.
6B(6). SALE AND LEASE-BACK. Enter into any Sale Lease-Back Transaction,
unless (a) the Lien created as a result of such transaction, would be permitted
under paragraph 6B(1)(v); or (b) after giving effect to the Attributable Debt
incurred in connection with such transaction and the substantially concurrent
application of any proceeds received by the Company or its Subsidiaries from
such transaction the Lien created as a result of such transaction would be
permitted under paragraph 6B(l)(x); or (c) the Company (i) shall (A) immediately
after the consummation of such transaction deposit an amount equal to the fair
market value of the subject property (as determined in good faith by the Board
of Directors of the Company) at the time of the effective date of such Sale
Lease-Back Transaction (the "FAIR MARKET VALUE") in an escrow account with a
depository institution or trust company having capital, surplus and undivided
profits aggregating at least $100,000,000, acting as escrow agent, which
depository institution or trust company shall invest such amount in investments
as defined in investments provided for in paragraph 6B(3)(iii) until such amount
is applied pursuant to clause (ii) below, and (B) within five (5) days after
making such deposit furnish each holder of Notes with a written notice that it
will offer to prepay Debt pursuant to clause (ii) below, and (ii) within 180
days following the effective date of such transaction, have the escrow agent (x)
make a written offer to the holders of the Notes to apply an amount equal to the
Fair Market Value to prepay the Notes (without any Yield-Maintenance Amount) and
(y) prepay amounts outstanding under the Company's bank facility, pro rata based
on the amounts then outstanding. Any amounts not accepted by the holders of the
Notes within thirty (30) days of receipt of such offer shall be (i) used by the
escrow agent to reduce the amount outstanding under the Company's bank facility
or (ii) to the extent there are amounts remaining after the payment of all
amounts outstanding under such bank facility, shall be returned by the escrow
agent to the Company.
<PAGE>
6B(7). SUBSIDIARY RESTRICTIONS. Except as set forth on Schedule 6B(7),
enter into, or be otherwise subject to, any contract, agreement or other binding
obligation that limits the amount of, or otherwise restricts (i) the payment of
dividends or other redemptions or distributions with respect to its capital
stock by any Subsidiary, (ii) the repayment by any Subsidiary of intercompany
loans or advances, or (iii) other intercompany transfers of property or other
assets by Subsidiaries.
6C. ISSUANCE OF STOCK OR OTHER EQUITY INTERESTS BY SUBSIDIARIES. The
Company covenants that it will not permit any Subsidiary to issue, sell or
otherwise dispose of any shares of any class of its stock (other than directors'
qualifying shares) or other equity interests except to the Company or another
Subsidiary.
6D. SUBSIDIARY GUARANTEES. The Company will not cause, suffer or permit
any Subsidiary that is not at the time a party to the Guaranty Agreement to
Guarantee to any creditor or potential creditor the payment or collection of:
(i) any outstanding Debt or other obligation of the Company to such
creditor; or
(ii) any Debt or other obligation of the Company that may be incurred
by it under an agreement containing a commitment of such creditor or
potential creditor to extend credit to the Company or otherwise to become
its obligee;
unless such Subsidiary (a "NEW GUARANTEEING SUBSIDIARY") shall deliver to each
holder of a then outstanding Note
(A) an executed copy of an addendum, in form and substance
satisfactory to the Required Holders, whereby such New Guaranteeing
Subsidiary agrees to become a party to the Guaranty Agreement and the
Intercreditor Agreement (each as then in effect), with the same force and
effect as if it had been an original Subsidiary guarantor party thereto (a
"GUARANTY ADDENDUM");
(B) a resolution of the board of directors or other governing body
of such New Guaranteeing Subsidiary approving the form of such Guaranty
Addendum and the Guaranty Agreement, the Intercreditor Agreement and this
Agreement (each as then in effect) and authorizing such New Guaranteeing
Subsidiary's execution, delivery and performance of such Guaranty Addendum,
and performance of the Guaranty Agreement; and
(C) a favorable opinion, in form, scope and substance satisfactory
to the Required Holders, of counsel satisfactory to the Required Holders,
with respect to such Guaranty Addendum, the Guaranty Agreement as modified
thereby, and such other matters as the Required Holders or their counsel
may reasonably request.
<PAGE>
PARAGRAPH 7. EVENTS OF DEFAULT.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than five (5) days after the date due; or
(iii) the Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any other obligation for money borrowed (or any Capitalized
Lease Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto, or the Company or any Subsidiary fails to perform or observe any
other agreement, term or condition contained in any agreement under which
any such obligation is created (or if any other event thereunder or under
any such agreement shall occur and be continuing) and the effect of such
failure or other event is to cause, or to permit the holder or holders of
such obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due (or to be repurchased by the Company
or any Subsidiary) prior to any stated maturity, provided that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing or
permitting acceleration (or resale to the Company or any Subsidiary) shall
occur and be continuing exceeds Three Million Dollars ($3,000,000); or
(iv) any representation or warranty made by the Company herein or by
the Company or any of its officers in any writing furnished in connection
with or pursuant to this Agreement shall be false in any material respect
on the date as of which made; or
(v) the Company fails to perform or observe any agreement,
covenant, term or condition contained herein (other than as provided in
clauses (i) and (ii) above) and such failure shall not be remedied within
thirty (30) days after any Responsible Officer obtains actual knowledge
thereof; or
<PAGE>
(vi) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(vii) any decree or order for relief in respect of the Company or any
Subsidiary
is entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
law, whether now or hereafter in effect (the "BANKRUPTCY LAW"), of any
jurisdiction; or
(viii) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(ix) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
thirty (30) days; or
(x) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
<PAGE>
(xii) any judgment or order, or series of judgments or orders, in an
amount in excess of $3,000,000 (exclusive of any amount covered by
insurance policies, but only to the extent the issuers of such policies are
solvent and are not contesting coverage and have not indicated that they
intend to contest coverage) is rendered against the Company or any
Subsidiary and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within ninety (90) days
after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within ninety (90) days after the expiration of
any such stay, such judgment is not discharged; or
(xiii) the Company or any ERISA Affiliate, in its capacity as an
employer under a Multiemployer Plan, makes a complete or partial withdrawal
from such Multiemployer Plan resulting in the incurrence by such
withdrawing employer of a withdrawal liability in an amount exceeding
$10,000,000;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, all of the Notes at the time outstanding shall automatically become
immediately due and payable together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, and (c) if such event is not an Event of Default
specified in clause (vii), (viii) or (ix) of this paragraph 7A with respect to
the Company, the Required Holders may at its or their option, by notice in
writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
The Company acknowledges, and the parties hereto agree, that each holder of
a Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provision for payment of the Yield-Maintenance Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph 7A,
the Required Holders may, by
<PAGE>
notice in writing to the Company, rescind and annul such declaration and its
consequences if (i) the Company shall have paid all overdue interest on the
Notes, the principal of and Yield-Maintenance Amount, if any, payable with
respect to any Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal and
Yield-Maintenance Amount at the rate specified in the Notes, (ii) the Company
shall not have paid any amounts which have become due solely by reason of such
declaration, (iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration, shall have
been cured or waived pursuant to paragraph 11C, and (iv) no judgment or decree
shall have been entered for the payment of any amounts due pursuant to the Notes
or this Agreement. No such rescission or annulment shall extend to or affect
any subsequent Event of Default or Default or impair any right arising
therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
PARAGRAPH 8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and each
Subsidiary is duly organized or formed and validly existing in good standing
under the laws of the jurisdiction in which it is organized or formed. The
execution, delivery and performance by the Company of this Agreement and the
Notes are within the Company's corporate powers and have been duly authorized by
all necessary corporate action.
8B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company: (i) a consolidated balance sheet of the Company and its
Subsidiaries as at May 31 in each of the years 1994 through 1997, inclusive, and
consolidated statements of income, and cash flows of the Company and its
Subsidiaries for each such year, all reported on by Ernst & Young L.L.P.; and
(ii) a consolidated balance sheet of the Company and its
<PAGE>
Subsidiaries as at August 31, 1997 and consolidated statements of income,
stockholders' equity and cash flows for the three-month period ended on such
date, prepared by the Company. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the Company and its Subsidiaries
required to be shown in accordance with such principles. The balance sheets
fairly present the condition of the Company and its Subsidiaries as at the dates
thereof, and the statements of income, and cash flows fairly present the results
of the operations of the Company and its Subsidiaries and their cash flows for
the periods indicated. There has been no material adverse change in the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole since May 31, 1997.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which would result in any material adverse change in the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole. There is no action, suit, investigation or
proceeding pending or threatened against the Company or any of its Subsidiaries
which purports to affect the validity or enforceability of this Agreement or any
Note.
8D. OUTSTANDING DEBT. Neither the Company nor any of its Subsidiaries
has outstanding any Debt except as permitted by paragraph 6B(2). There exists
no default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries
has good and indefeasible title to respective real properties (other than
properties which it leases) and good title to all of their other respective
properties and assets, including the properties and assets reflected in the
balance sheet as at May 31, 1997 referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6B(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect.
8F. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles and such
taxes as the failure of the Company or its Subsidiaries to
<PAGE>
pay would not result in any material adverse change in the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement or subject to
any charter or other corporate restriction which materially and adversely
affects its business, property or assets, or financial condition. Neither the
execution nor delivery of this Agreement or the Notes, nor the offering,
issuance and sale of the Notes, nor fulfillment of nor compliance with the terms
and provisions hereof and of the Notes will conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default under, or
result in any violation of, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its Subsidiaries pursuant to,
the charter or by-laws of the Company or any of its Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing, Debt of the Company or such Subsidiary,
any agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Debt of the Company of the type to be evidenced by the Notes
except as set forth in the agreements listed in Schedule 8G attached hereto.
The Company has delivered to each Purchaser, and to Andrews & Kurth L.L.P.,
copies of (i) each instrument evidencing Debt of the Company or any of its
Subsidiaries in an outstanding principal amount in excess of $1,000,000, and
each agreement relating thereto, in each case as in effect on the date of this
Agreement, and (ii) the offering materials with respect to the proposed
acquisition of the outstanding shares of capital stock of Chaparral not
currently owned beneficially and of record, directly or indirectly, by it, in
each case certified by an appropriate officer of the Company as true, correct
and complete.
8H. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than institutional investors, and neither the
Company nor any agent acting on its behalf has taken or will take any action
which would subject the issuance or sale of the Notes to the provisions of
section 5 of the Securities Act or to the provisions of any securities or Blue
Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. (i) The proceeds of the Notes shall be used by
the Company (A) to refinance existing indebtedness, (B) to fund the acquisition
of the outstanding minority interest in Chaparral, (C) to fund capital
expenditures and (D) for general corporate purposes. (ii) Neither the Company
or any of its Subsidiaries nor any agent acting on behalf of the Company or any
of its Subsidiaries has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation G, T, U or X or any other
regulation of the Board or to violate the Exchange Act, in each case as in
<PAGE>
effect now or as the same may hereafter be in effect. "MARGIN STOCK" (as
defined in said Regulations G, T, and U) does not, and giving effect to the
acquisition of all of the stock of Chaparral will not, constitute 25% or more of
the assets of the Company and its Subsidiaries, and the Company does not intend
or foresee that such margin stock will constitute 25% or more of such assets at
any time during the term of this Agreement. The parties acknowledge that no
Purchaser is relying upon as collateral any margin stock, whether issued by the
Company, currently owned by the Company or any of its Subsidiaries or intended
to be acquired by the Company or any of its Subsidiaries. The Company warrants
and covenants that it shall not take any action that would result, in the
absence of the application of the following sentence, in any credit that may be
(or that may have been) advanced under this Agreement being classified as
purpose credit directly or indirectly secured by margin stock within the meaning
of Regulation G. Notwithstanding any term contained in this Agreement to the
contrary, if any purpose credit extended under this Agreement should
nevertheless ever be deemed to be indirectly secured by margin stock, then,
during such time that such condition exists: (a) the Company (without regard to
any restriction contained in this Agreement) may sell, pledge or otherwise
dispose of the Excess Portion of margin stock (and the exercise of such right
shall not constitute cause for accelerating the maturity of the Obligations);
and (b) the Company shall not utilize any of its assets that are not margin
stock to acquire any margin stock directly or indirectly. As used in this
Section 8I: (I) "REGULATION G" means those regulations concerning credit
provided for the purpose of purchasing or carrying margin stock set forth at
Part 207 of Volume 12 of the Code of Federal Regulations, as the same may be
amended from time to time; (II) "INDIRECTLY SECURED" and "PURPOSE CREDIT" shall
have the meanings ascribed to those phrases in Section 207.2 of Regulations G;
(III) "EXCESS PORTION OF MARGIN STOCK" means that portion of the margin stock
directly or indirectly owned by the Company (and, where the value of all margin
stock so owned by the Company exceeds the Regulation G Limit, the Company shall
promptly identify to the holders of the Notes particular shares from among them
which shall be included in such portion exceeding the Regulation G Limit) that
has a value, when added to the value of all other margin stock indirectly
securing the credit extended under this Agreement, that would cause the total
value of the margin stock indirectly securing the credit to exceed the
Regulation G Limit; (IV) "REGULATION G LIMIT" means that amount equal to twenty-
five percent (25%) of the value of the Company's properties or assets that are
then subject to any restriction in this Agreement on the disposition thereof or
the creation of Liens thereon; and (V) "BOARD" means the Board of Governors of
the Federal Reserve System.
8J. ERISA . No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan
<PAGE>
which is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the issuance and sale of the
Notes will be exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of your representation in paragraph
9B.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Closing
Date with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions hereof or of the Notes.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all
of their respective properties and facilities have complied at all times and in
all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations relating to protection of the environment except, in any such case,
where failure to comply would not result in a material adverse effect on the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Company in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to the Company or any of
its Subsidiaries which materially adversely affects or in the future may (so far
as the Company can now foresee) materially adversely affect the business,
property or assets, or financial condition of the Company or any of its
Subsidiaries and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to you by or on behalf of the
Company prior to the date hereof in connection with the transactions
contemplated hereby.
<PAGE>
PARAGRAPH 9. REPRESENTATIONS OF THE PURCHASERS.
9. REPRESENTATIONS OF THE PURCHASERS. You represent as follows:
9A. NATURE OF PURCHASE. You are not acquiring the Notes hereunder with
a view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act, provided that the disposition of your property
shall at all times be and remain within your control.
9B. SOURCE OF FUNDS. At least one of the following statements is an
accurate representation as to the source (a "SOURCE") to which the Notes to be
purchased by you are, and to which such Notes, at the time of issuance thereof,
will be, allocated:
(i) the Source constitutes your "insurance company general
account" (as such term is defined under Section V of the United States
Department of Labor's Prohibited Transaction Class Exemption ("PTCE") 95-
60), and you satisfy all of the applicable requirements for relief under
Sections I and IV of PTCE 95-60; or
(ii) the Source is either (a) an insurance company pooled separate
account, within the meaning of PTCE 90-1 (issued January 29, 1990), or (b)
a bank collective investment fund, within the meaning of the PTCE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this clause (ii) prior to the execution and delivery of
this Agreement, no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than 10%
of all assets allocated to such pooled separate account or collective
investment fund; or
(iii) the Source constitutes assets of an "investment fund" within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I (c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (a) the identity
of such QPAM and (b) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this clause (iii) prior to the execution and delivery
of this Agreement; or
<PAGE>
(iv) the Source is a governmental plan; or
(v) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which, or the names of the employers whose employees are
covered by such plan or plans (within the meaning of Section 3(14)(C) of
ERISA), have been identified to the Company in writing pursuant to this
clause (v) prior to the execution and delivery of this Agreement; or
(vi) the Source is an insurance company separate account maintained
solely in connection with the fixed contractual obligations of the
insurance company under which the amounts payable, or credited, to any
employee benefit plan (or its related trust) and to any participant or
beneficiary of such plan (including any annuitant) are not affected in any
manner by the investment performance of the separate account; or
(vii) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this paragraph 9B, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
PARAGRAPH 10. DEFINITIONS.
10. DEFINITIONS. For the purpose of this Agreement, the terms defined
in the recitals and in paragraphs 1 and 2 shall have the respective meanings
specified therein, and the following terms shall have the meanings specified
with respect thereto below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
10A. YIELD-MAINTENANCE TERMS.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City or Dallas, Texas are required or
authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted
<PAGE>
financial practice and at a discount factor (applied on the same periodic basis
as that on which interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) each Remaining Scheduled Payment of
such Called Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
<PAGE>
10B. OTHER TERMS.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"ATTRIBUTABLE DEBT" shall mean at the time of determination, the
present value (discounted at the interest rate, compounded semi-annually, equal
to the weighted average yield to maturity of the Notes then outstanding
hereunder, such average being weighted by the principal amount of the Notes of
each series) of the obligation of a lessee for net rental payments during the
remaining term of any lease (including any period for which such lease has been
extended) entered into in connection with a Sale and Leaseback Transaction (as
defined herein).
"BANKRUPTCY LAW" shall have the meaning specified in clause (vii) of
paragraph 7A.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"CHAPARRAL" shall mean Chaparral Steel Company and its subsidiaries.
"CLOSING DATE" shall have the meaning specified in paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning specified in the recitals hereto.
"CONSOLIDATED NET WORTH" shall mean shareholders' equity determined in
accordance with generally acceptable accounting principles including preferred
stock (other than preferred stock subject to mandatory redemption prior to
maturity of all of the Notes), of the Company and its Subsidiaries.
"CONSOLIDATED TOTAL ASSETS" shall mean the total assets of the Company
and its Subsidiaries which would be shown as assets on a consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance with generally
accepted accounting principals, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
<PAGE>
"CONSOLIDATED TOTAL CAPITALIZATION" shall mean the sum of Consolidated
Net Worth and Total Debt.
"CONTROL" shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of voting securities, equity interests, trust interest or partnership
interests, by contract or otherwise).
"DEBT" with respect to any Person shall mean, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of preferred stock subject to mandatory redemption prior to the
maturity of all of the Notes;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under
any conditional sale or other title retention agreement with respect to any
such property);
(c) Capitalized Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and
other financial institutions (whether or not representing obligations for
borrowed money); and
(f) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (e) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (f) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under generally accepted accounting principles.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW ACCOUNT" shall mean the Texas Industries Corp. Senior Notes
Escrow Account referred to in subsection 3(G) of the Escrow Agreement.
"ESCROW AGENT" shall have the meaning specified in the Escrow
Agreement.
"ESCROW AGREEMENT" shall have that certain Escrow Agreement dated as
of the date hereof executed by the Company, the Purchasers and the Escrow Agent
in the form of Exhibit E attached hereto.
"ESCROW BREAK DATE" shall have the meaning specified in the Escrow
Agreement.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FED FUNDS RATE" shall mean the rate charged in the interbank market
for excess balances in reserve accounts at Federal Reserve Banks.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies
<PAGE>
or for any transportation or services regardless of the non-delivery or non-
furnishing thereof, in any such case if the purpose or intent of such agreement
is to provide assurance that such obligation will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect thereof. The amount of
any Guarantee shall be equal to the outstanding principal amount of the
obligation guaranteed or such lesser amount to which the maximum exposure of the
guarantor shall have been specifically limited.
"GUARANTY ADDENDUM" shall have the meaning specified in paragraph 6D.
"GUARANTY AGREEMENT" shall have the meaning specified in paragraph
3A(vii).
"INTERCREDITOR AGREEMENT" shall have the meaning specified in
paragraph 3A(viii).
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NEW GUARANTEEING SUBSIDIARY" shall have the meaning specified in
paragraph 6D.
"NOTES" shall have the meaning specified in paragraph 1.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
<PAGE>
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PRIVATE PLACEMENT NUMBERS" shall have the meaning specified in
paragraph 3F.
"PTCE" shall have the meaning specified in paragraph 9B.
"PURCHASERS" shall mean each of the financial institutions whose names
are set forth in the signature pages of this Agreement, and "PURCHASER" shall
mean one of the Purchasers.
"RELEASE CONDITION SATISFACTION DATE" shall have the meaning specified
in the Escrow Agreement.
"REQUIRED HOLDERS"shall mean the holder or holders of at least 51% of
the aggregate principal amount of the Notes from time to time outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"RESTRICTED PAYMENTS" shall have the meaning specified in paragraph
6A.
"SALE LEASE-BACK TRANSACTION" shall mean arrangement with any lender
or investor or to which such lender or investor is a party providing for the
leasing by the Company or any Subsidiary of real or personal property for a term
greater than one year which has been or is to be sold or transferred by the
Company or any Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or rental obligations of the Company or any Subsidiary.
"S&P" shall mean Standard & Poor's Rating Group, a division of McGraw
Hill, Inc.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A NOTES" shall have the meaning specified in paragraph 1.
"SERIES B NOTES" shall have the meaning specified in paragraph 1.
"SERIES C NOTES" shall have the meaning specified in paragraph 1.
<PAGE>
"SERIES D NOTES" shall have the meaning specified in paragraph 1.
"SERIES E NOTES" shall have the meaning specified in paragraph 1.
"SIGNIFICANT HOLDER" shall mean (i) you, so long as you shall hold any
Note, or (ii) any other holder of at least 2.5% of the aggregate principal
amount of the Notes from time to time outstanding.
"SOLVENT" shall mean that (i) a Person's aggregate assets, at a fair
valuation, are greater than the aggregate amount of such Person's liabilities
and (ii) such Person is able to pay its debts as they come due.
"SOURCE" shall have the meaning specified in paragraph 9B.
"SUBSIDIARY" shall mean any corporation, association or business
entity organized under the laws of any state of the United States, Canada, or
any province of Canada or Mexico which conducts the major portion of its
business in and makes the major portion of its sales to Persons located in the
United States, Canada or Mexico, and (i) in the case of a corporation, at least
51% of the total combined voting power of all classes of Voting Stock of which
shall, at the time as of which any determination is being made, be owned by the
Company either directly or through Subsidiaries or (ii) in other cases, the
Company and one or more of its Subsidiaries owns sufficient equity or voting
interests in such entity to enable the Company or any of its Subsidiaries or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
entity, or any partnership or joint venture if at least a 51% interest in the
profits or capital thereof is owned by the Company or one or more of its
Subsidiaries or the Company and one or more of its Subsidiaries (unless such
partnership can and does ordinarily take major business actions without the
prior approval of the Company or one or more of its Subsidiaries).
"SUBSIDIARY DEBT" shall mean Debt of any Subsidiary other than (a)
Debt permitted by paragraphs 6B(2)(ii), (iii), (iv), (v) and (vi), and (b)
Guaranties by, and co-obligations of, Subsidiaries in respect of indebtedness
with respect to which the Company is directly liable, so long as the holders of
the Notes shall have received a substantially identical guaranty from such
Subsidiary, or such Subsidiary shall have become co-obligated, in respect of the
Company's obligations under notes, in each case on terms and conditions
reasonably satisfactory to the Required Holders, including but not limited to
(i) an opinion in form and substance satisfactory to the Required Holders of
counsel satisfactory to the Required Holders that the guaranty of the Notes is
enforceable in accordance with its terms and does not constitute a fraudulent
transfer or (ii) an intercreditor agreement with respect to payments made
pursuant to the guaranties of such Subsidiary shall have been entered into by
the Required Holders on behalf of the holders of the Notes and each other
beneficiary of a guaranty issued by such Subsidiary.
<PAGE>
"TOTAL DEBT" shall mean all Debt of the Company and its Subsidiaries.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by you under this Agreement.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
<PAGE>
PARAGRAPH 11. MISCELLANEOUS.
11. MISCELLANEOUS.
11A. PLACE OF PAYMENT. Subject to paragraph 11B, payments of principal,
Yield-Maintenance Amount, if any, and interest becoming due and payable on the
Notes shall be made in New York, New York at the principal office of Morgan
Guaranty Trust Company of New York in such jurisdiction. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
11B. HOME OFFICE PAYMENT. So long as you or your nominee shall be the
holder of any Note, and notwithstanding anything contained in paragraph 11A or
in such Note to the contrary, the Company will pay all sums becoming due on such
Note for principal, Yield-Maintenance Amount, if any, and interest by the method
and at the address specified for such purpose below your name in Schedule I, or
by such other method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to paragraph 11A. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to
paragraph 11E. The Company will afford the benefits of this paragraph 11B to any
institutional investor that is a Transferee and that has made the same agreement
relating to such Note as you have made in this paragraph 11B.
11C. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you and any
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by you or such Transferee in connection with this
Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted, and (ii)
the costs and expenses, including attorneys' fees, incurred by you or such
Transferee in enforcing (or determining whether or how to enforce) any rights
under this Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the transactions contemplated hereby or by reason of your or such
Transferee's having acquired any Note, including without limitation costs and
expenses incurred in any
<PAGE>
bankruptcy case. The obligations of the Company under this paragraph 11C shall
survive the transfer of any Note or portion thereof or interest therein by you
or any Transferee and the payment of any Note.
11D. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holders except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
on or any Yield-Maintenance Amount payable with respect to any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Note at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 11D, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any
such consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein
and in the Notes, the term "THIS AGREEMENT" and references thereto shall mean
this Agreement as it may from time to time be amended or supplemented.
11E. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The
Notes are issuable as registered notes without coupons in denominations of at
least $1,000,000, and integral multiples of $100,000 in excess thereof, except
as may be necessary to reflect any principal amount not evenly divisible by
$100,000. The Company shall keep at its principal office a register in which
the Company shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the principal
office of the Company, the Company shall, at its expense, execute and deliver
one or more new Notes of the same series and of a like aggregate principal
amount, registered in the name of such transferee or transferees. At the option
of the holder of any Note of any series, such Note may be exchanged for other
Notes of the same series and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Note to be exchanged at the
principal office of the Company. Whenever any Notes are so surrendered for
exchange, the Company shall, at its expense, execute and deliver the Notes which
the holder making the exchange is entitled to receive. Every Note surrendered
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the holder of
such Note or such holder's attorney duly authorized in writing. Any Note or
Notes issued in exchange for any Note or upon transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were carried by the Note
so exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the holder of any Note of any series of the loss, theft, destruction or
mutilation of such Note and, in the case of any such loss, theft or
<PAGE>
destruction, upon receipt of such holder's unsecured indemnity agreement, or in
the case of any such mutilation upon surrender and cancellation of such Note,
the Company will make and deliver a new Note, of the same series, in lieu of the
lost, stolen, destroyed or mutilated Note.
11F. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided that no purchaser or holder of any such
participation shall have any rights under this Agreement, or the Note in which
such participation is granted, against the Company or any Subsidiary (all of
which rights shall be and remain in the holder granting such participation).
11G. SUBSTITUTION OF PURCHASER. You shall have the right to substitute
any one of your Affiliates as the purchaser of the Notes that you have agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both you and such Affiliate, shall contain such Affiliate's agreement
to be bound by this Agreement and shall contain a confirmation by such Affiliate
of the accuracy with respect to it of the representations set forth in paragraph
9. Upon receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this paragraph 11G), such word shall be deemed to refer
to such Affiliate in lieu of you. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
you all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "you" is used in this Agreement
(other than in this paragraph 11G), such word shall no longer be deemed to refer
to such Affiliate, but shall refer to you, and you shall have all the rights of
an original holder of the Notes under this Agreement.
11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
11I. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
<PAGE>
11J. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that the holder
of any Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in connection with or
pursuant to this Agreement to (i) such holder's directors, officers, employees,
agents and professional consultants, (ii) any other holder of any Note, (iii)
any Person to which such holder offers to sell such Note or any part thereof,
(iv) any Person to which such holder sells or offers to sell a participation in
all or any part of such Note, (v) any Person from which such holder offers to
purchase any security of the Company, (vi) any federal or state regulatory
authority having jurisdiction over such holder, (vii) the National Association
of Insurance Commissioners or any similar organization or (viii) any other
Person to which such delivery or disclosure may be necessary or appropriate (a)
in compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process or informal investigative
demand or (c) in connection with any litigation to which such holder is a party.
11K. NOTICES. All notices or other communications provided for hereunder
(except for the telephonic notice required by paragraph 4C) shall be in writing
and sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to you, addressed to you at the address specified
for such communications in the Purchaser Schedule attached hereto, or at such
other address as you shall have specified to the Company in writing, (ii) if to
any other holder of any Note, addressed to such other holder at such address as
such other holder shall have specified to the Company in writing or, if any such
other holder shall not have so specified an address to the Company, then
addressed to such other holder in care of the last holder of such Note which
shall have so specified an address to the Company, and (iii) if to the Company,
addressed to it at 1341 West Mockingbird Lane, Dallas, Texas 75247-6913,
Attention: Treasurer, with a separate copy Attention: General Counsel, or at
such other address as the Company shall have specified to the holder of each
Note in writing; provided, however, that any such communication to the Company
may also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any officer of
the Company.
11L. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or Yield
Maintenance Amount or other premium, if any, or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day. If the date for any payment is extended to the next succeeding
Business Day by reason of the preceding sentence, the period of such extension
shall be included in the computation of the interest payable on such Business
Day.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holders, the determination
of such satisfaction shall
<PAGE>
be made by you or the Required Holders, as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF NEW YORK. This Agreement may not be changed orally, but
(subject to the provisions of paragraph 11D) only by an agreement in writing
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
11O. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11P. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument .
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
TEXAS INDUSTRIES, INC.
By:
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
<PAGE>
EXHIBIT 15
Board of Directors
Texas Industries, Inc.
We are aware of the incorporation by reference in the Registration Statement
Number 2-95879 on Form S-8, Post-Effective Amendment Number 9 to Registration
Statement Number 2-48986 on Form S-8, and Registration Statement Number 33-
53715 on Form S-8 of Texas Industries, Inc., and in the related Prospectuses of
our report dated March 20, 1998, relating to the unaudited condensed
consolidated interim financial statements of Texas Industries, Inc., which are
included in its Form 10-Q for the quarter ended February 28, 1998.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the Registration Statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
---------------------------------------
April 10, 1998
Dallas, Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED FEBRUARY 28, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> FEB-20-1998
<CASH> 4,428
<SECURITIES> 0
<RECEIVABLES> 159,252
<ALLOWANCES> 7,173
<INVENTORY> 166,571
<CURRENT-ASSETS> 368,545
<PP&E> 1,180,589
<DEPRECIATION> 633,258
<TOTAL-ASSETS> 1,117,368
<CURRENT-LIABILITIES> 147,013
<BONDS> 369,404
0
0
<COMMON> 25,067
<OTHER-SE> 492,482
<TOTAL-LIABILITY-AND-EQUITY> 1,117,368
<SALES> 861,168
<TOTAL-REVENUES> 861,168
<CGS> 683,116
<TOTAL-COSTS> 683,116
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,531
<INTEREST-EXPENSE> 14,418
<INCOME-PRETAX> 106,439
<INCOME-TAX> 35,252
<INCOME-CONTINUING> 66,787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,787
<EPS-PRIMARY> 3.18
<EPS-DILUTED> 3.08
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAY-31-1998 MAY-31-1998
<PERIOD-START> JUN-01-1997 JUN-01-1997
<PERIOD-END> AUG-31-1997 NOV-30-1997
<CASH> 16,688 23,279
<SECURITIES> 0 0
<RECEIVABLES> 141,048 131,496
<ALLOWANCES> 3,211 3,126
<INVENTORY> 148,067 149,798
<CURRENT-ASSETS> 343,549 341,991
<PP&E> 1,047,205 1,073,118
<DEPRECIATION> 612,907 619,743
<TOTAL-ASSETS> 882,003 900,329
<CURRENT-LIABILITIES> 123,627 121,317
<BONDS> 161,452 156,603
0 0
0 0
<COMMON> 25,067 25,067
<OTHER-SE> 451,417 473,888
<TOTAL-LIABILITY-AND-EQUITY> 882,003 900,329
<SALES> 297,060 579,747
<TOTAL-REVENUES> 297,060 579,747
<CGS> 232,474 455,042
<TOTAL-COSTS> 232,474 455,042
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 714 926
<INTEREST-EXPENSE> 4,373 8,213
<INCOME-PRETAX> 39,223 77,990
<INCOME-TAX> 12,975 26,051
<INCOME-CONTINUING> 24,710 48,159
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 24,710 48,159
<EPS-PRIMARY> 1.18 2.30
<EPS-DILUTED> 1.16 2.23
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> MAY-31-1997 MAY-31-1997 MAY-31-1997 MAY-31-1997
<PERIOD-END> AUG-31-1996 NOV-30-1996 FEB-28-1997 MAY-31-1997
<CASH> 11,310 16,715 4,003 19,834
<SECURITIES> 0 0 0 0
<RECEIVABLES> 119,519 117,784 114,581 125,286
<ALLOWANCES> 3,162 2,522 2,975 2,503
<INVENTORY> 159,241 168,712 173,244 167,146
<CURRENT-ASSETS> 326,127 338,075 325,738 344,376
<PP&E> 961,617 979,895 990,370 999,423
<DEPRECIATION> 574,416 582,871 593,298 600,646
<TOTAL-ASSETS> 812,019 834,929 824,284 847,923
<CURRENT-LIABILITIES> 108,820 103,725 99,954 101,382
<BONDS> 151,186 176,498 184,699 176,056
0 0 0 0
0 0 0 0
<COMMON> 12,534 12,534 25,067 25,067
<OTHER-SE> 427,506 429,648 400,128 427,744
<TOTAL-LIABILITY-AND-EQUITY> 812,019 834,929 824,284 847,923
<SALES> 245,942 480,318 696,936 973,824
<TOTAL-REVENUES> 245,942 480,318 696,936 973,824
<CGS> 192,691 376,827 554,956 767,030
<TOTAL-COSTS> 192,691 376,827 554,956 767,030
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 229 519 954 1,284
<INTEREST-EXPENSE> 4,698 9,313 14,165 18,885
<INCOME-PRETAX> 32,120 60,948 78,978 123,222
<INCOME-TAX> 10,827 20,437 26,767 41,189
<INCOME-CONTINUING> 19,884 37,787 47,913 75,474
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 19,884 37,787 47,913 75,474
<EPS-PRIMARY> .89 1.70 2.18 3.48
<EPS-DILUTED> .87 1.66 2.14 3.42
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> MAY-31-1996 MAY-31-1996 MAY-31-1996 MAY-31-1996
<PERIOD-END> AUG-31-1995 NOV-30-1995 FEB-29-1996 MAY-31-1996
<CASH> 11,989 25,405 23,279 28,055
<SECURITIES> 0 0 0 0
<RECEIVABLES> 109,429 112,118 120,979 116,876
<ALLOWANCES> 3,558 3,761 3,800 3,114
<INVENTORY> 128,749 131,012 136,611 150,526
<CURRENT-ASSETS> 297,697 300,396 307,867 324,917
<PP&E> 910,961 924,710 952,332 937,880
<DEPRECIATION> 560,502 570,030 577,156 562,575
<TOTAL-ASSETS> 758,983 758,562 785,417 801,063
<CURRENT-LIABILITIES> 104,124 105,171 100,382 105,572
<BONDS> 171,146 160,723 173,600 160,209
0 0 0 0
598 598 598 0
<COMMON> 12,534 12,534 12,534 12,534
<OTHER-SE> 346,604 367,276 382,602 407,488
<TOTAL-LIABILITY-AND-EQUITY> 758,983 758,562 785,417 801,063
<SALES> 232,104 476,365 711,405 967,449
<TOTAL-REVENUES> 232,104 476,365 711,405 967,449
<CGS> 183,095 373,688 564,088 756,715
<TOTAL-COSTS> 183,095 373,688 564,088 756,715
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 316 520 697 1,019
<INTEREST-EXPENSE> 5,211 10,335 15,039 19,960
<INCOME-PRETAX> 28,795 65,576 93,134 135,041
<INCOME-TAX> 10,338 23,592 32,979 47,256
<INCOME-CONTINUING> 17,131 38,583 54,587 79,954
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 17,131 38,583 54,587 79,954
<EPS-PRIMARY> .78 1.75 2.47 3.61
<EPS-DILUTED> .76 1.71 2.42 3.53
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S AUDITED MAY 31, 1995 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<CASH> 25,988
<SECURITIES> 0
<RECEIVABLES> 102,694
<ALLOWANCES> 3,249
<INVENTORY> 125,384
<CURRENT-ASSETS> 292,774
<PP&E> 897,845
<DEPRECIATION> 550,706
<TOTAL-ASSETS> 753,055
<CURRENT-LIABILITIES> 105,171
<BONDS> 185,274
0
598
<COMMON> 12,534
<OTHER-SE> 329,977
<TOTAL-LIABILITY-AND-EQUITY> 753,055
<SALES> 830,526
<TOTAL-REVENUES> 830,526
<CGS> 681,824
<TOTAL-COSTS> 681,824
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,678
<INTEREST-EXPENSE> 20,117
<INCOME-PRETAX> 77,881
<INCOME-TAX> 25,700
<INCOME-CONTINUING> 48,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,017
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.94
</TABLE>
