$5,000,000
SENIOR LOAN AGREEMENT
(BRIDGE FACILITY)
DATED AS OF JULY 6, 1998
BY AND BETWEEN
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
AS BORROWER
AND
PRUDENTIAL SECURITIES CREDIT CORPORATION
AS LENDER
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms....................................... 1
SECTION 1.02. Computation of Time Periods................................. 15
SECTION 1.03. Accounting Terms............................................ 15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances................................................ 15
SECTION 2.02. [Reserved].................................................. 15
SECTION 2.03. Repayment................................................... 15
SECTION 2.04. Prepayments................................................. 15
SECTION 2.05. Interest.................................................... 16
SECTION 2.06. Fees........................................................ 16
SECTION 2.07. Increased Costs, Etc........................................ 16
SECTION 2.08. Payments and Computations................................... 17
SECTION 2.09. Taxes....................................................... 18
SECTION 2.10. Sharing of Payments, Etc.................................... 20
SECTION 2.11. Use of Proceeds............................................. 20
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Borrowing........................... 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.............. 24
SECTION 4.02. Survival of Representations and Warranties.................. 29
SECTION 4.03. Ranking..................................................... 29
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants....................................... 29
SECTION 5.02. Negative Covenants.......................................... 31
SECTION 5.03. Reporting Requirements...................................... 34
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default........................................... 36
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc............................................. 39
SECTION 7.02. Notice, Etc................................................. 39
SECTION 7.03. No Waiver; Remedies......................................... 40
SECTION 7.04. Costs and Expenses; Indemnification......................... 40
SECTION 7.05. Right of Set-off............................................ 42
SECTION 7.06. Binding Effect.............................................. 43
SECTION 7.07. Assignments and Participations.............................. 43
SECTION 7.08. Governing Law; Submission to Jurisdiction................... 44
SECTION 7.09. Execution in Counterparts................................... 44
SECTION 7.10. Confidentiality............................................. 45
SECTION 7.11. Waiver of Jury Trial........................................ 45
Exhibit A - Form of Note
Exhibit B - Form of Guaranty
Exhibit C - Form of Security Agreement Amendments
Exhibit D - Form of Stock Pledge Agreement Amendments
Exhibit E - Form of Assignment and Option Agreement
Schedule 3.01(c) - Liabilities
Schedule 3.01(f) - Permitted Debt
Schedule 4.01(b) - Subsidiaries
Schedule 5.02(a) - Permitted Liens
ii
SENIOR LOAN AGREEMENT
SENIOR LOAN AGREEMENT dated as of July 6, 1998 among BOOTS & COOTS
INTERNATIONAL WELL CONTROL, INC., a Delaware corporation (the "BORROWER"), and
PRUDENTIAL SECURITIES CREDIT CORPORATION ("PRUDENTIAL").
PRELIMINARY STATEMENTS:
WHEREAS, the Borrower intends to borrow (x) up to $40,000,000 of
subordinated debt (the "SUB DEBT") and/or (y) up to $45,000,000 of senior bank
debt (the "BANK DEBT"); and
WHEREAS, the Borrower intends to issue up to $10,000,000 in preferred stock
to certain purchasers in a private placement offering (the "PREFERRED
OFFERING"); and
WHEREAS, the Borrower has requested that Prudential fund advances for the
purposes set forth in Section 2.11 hereof pending the borrowing of the Sub Debt
or the Bank Debt; and
WHEREAS, Prudential is willing to agree to provide such financing on the
terms and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVANCE" has the meaning specified in Section 2.01.
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"APPLICABLE MARGIN" means (x) for the period from the Closing Date to
the ninetieth day after the Closing Date, 5.5% per annum, (y) for the
period from the ninety-first day after the Closing Date to the one hundred
twentieth day after the Closing Date, 7.5% per annum, and (z) for each
thirty day period beginning on the one hundred twenty-first day after the
Closing Date, an additional 1.0% above the rate applicable on the day
immediately preceding the first day of such thirty day period until the
Notes are repaid in full.
"ASSET DISPOSITION" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions)
by the Borrower or any Subsidiary or Affiliate of the Borrower, including
any disposition by means of a merger, consolidation or similar transaction,
of (i) any shares of capital stock of a Subsidiary or Affiliate, (ii) all
or substantially all of the assets of any division or line of business of
the Borrower or any Subsidiary or Affiliate of the Borrower or (iii) any
other assets of the Borrower or any Subsidiary or Affiliate of the Borrower
outside the ordinary course of business of the Borrower or any Subsidiary
or Affiliate of the Borrower.
"ASSIGNMENT AND OPTION AGREEMENT" means the Assignment and Option
Agreement between Larry H. Ramming, the Borrower and the Lender dated the
date hereof.
"BANK DEBT" has the meaning specified in the preamble hereto.
"BORROWER" has the meaning specified in the preamble hereto.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in New York City.
"CAPITALIZED LEASES" has the meaning specified in clause (e) of the
definition of Debt.
"CAPITAL STOCK" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interests
in, the equity of such Person, but excluding any debt securities
convertible into such equity.
"CASH EQUIVALENTS" means any of the following, to the extent owned by
the Borrower free and clear of all Liens and having a maturity of not
greater than 90 days from the date of issuance thereof: (a) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or obligations unconditionally guaranteed
by the full faith and credit of the Government of the United States, (b)
insured certificates of deposit of or time deposits with any commercial
bank that is a Lender or a member of the Federal Reserve System, issues (or
the parent of which issues) commercial paper rated as described in clause
(c), is organized under the laws of
2
the United States or any State thereof and has combined capital and surplus
of at least $1 billion, or (c) commercial paper issued by any corporation
organized under the laws of any State of the United States and rated at
least "Prime-1" (or the then equivalent grade) by Moody's Investors
Services, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's
Rating Group.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
(a) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will
be deemed to have "beneficial ownership" of all securities that such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 50%
of the voting power of all classes of Voting Stock of the Borrower;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Borrower, was
approved by a vote of 66-2/3% 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; or
(c) The Borrower is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with the
provisions of clause (d) or (e) of Section 5.02.
"CLOSING DATE" means the date on which all conditions set forth in
Section 3.01 have been satisfied or waived by all of the Lenders and the
Advance or Advances contemplated by Section 2.01 have been made.
"COMMITMENT" means, with respect to Prudential, $5,000,000 or, if
Prudential has assigned all or a portion of its Commitment, the amount set
forth for such assignee in the Register maintained by Prudential pursuant
to Section 7.07(b) as such assignee's "Commitment".
"COMMON STOCK" means fully paid and nonassessable whole shares of
common stock, par value $.00001 per share, of the Borrower.
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"CONFIDENTIAL INFORMATION" means information that the Borrower
furnishes to any Lender in a writing designated as confidential, but does
not include any such information that is or becomes generally available to
the public or that is or becomes available to any Lender from a source
other than the Borrower that is not, to the best of such Lender's
knowledge, acting in violation of a confidentiality agreement with the
Borrower.
"CONSOLIDATED" refers to the consolidation of accounts of the Borrower
and its Subsidiaries in accordance with GAAP.
"CONTROL EVENT" means:
(i) the execution by the Borrower or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events which,
individually or in the aggregate, may reasonably be expected to result in a
Change in Control;
(ii) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control; or
(iii) the making of any written offer by any person (as such term is
used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect
on the Closing Date) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the Closing
Date) to the holders of the Common Stock of the Borrower, which offer if
accepted by the requisite number of holders, would result in a Change in
Control.
"DEBT" of any Person means, without duplication,
(a) all indebtedness of such Person for borrowed money;
(b) all Obligations of such Person for the deferred purchase price of
property or services;
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments;
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property);
(e) all Obligations of such Person as lessee under leases that have
been or should be, in accordance with GAAP, recorded as capital leases
("CAPITALIZED LEASES");
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(f) all Obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities;
(g) all Obligations of such person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of or
other ownership or profit interest in such Person or any other Person or
any warrants, rights or options to acquire such capital stock;
(h) all Obligations of such Person in respect of Hedge Agreements;
(i) all Debt of others referred to in clauses (a) through (h) above
guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply funds
for the payment or purchase of such Debt, (ii) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Debt or to
assure the holder of such Debt against loss, (iii) to supply funds to or in
any other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against
loss; and
(j) all Debt referred to in clauses (a) through (h) above secured by
(or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such Debt.
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"ENVIRONMENTAL ACTION" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of non-
compliance or violation, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
Environmental Law and (b) any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from alleged injury or
threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAW" means any federal, state or local law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award relating to the environment, health, safety or Hazardous Materials,
including, without limitation,
5
CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Clean Water Act, the Toxic Substances Control Act,
the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Occupational
Safety and Health Act.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" of any Person means any other Person that for
purposes of Title IV of ERISA is a member of such Person's controlled
group, or under common control with such Person, within the meaning of
Section 414 of the Internal Revenue Code.
"ERISA EVENT" with respect to any Person means (a) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA, with respect
to any Plan of such Person or any of its ERISA Affiliates unless the 30-day
notice requirement with respect to such event has been waived by the PBGC;
(b) the provision by the administrator of any Plan of such Person or any of
its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a
plan amendment referred to in Section 4041(e) of ERISA); (c) the cessation
of operations at a facility of such Person or any of its ERISA Affiliates
in the circumstances described in Section 4062(e) of ERISA; (d) the
withdrawal by such Person or any of its ERISA Affiliates from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (e) the failure by such Person
or any of its ERISA Affiliates to make a payment to a Plan required under
Section 302(f)(1) of ERISA; (f) the adoption of an amendment to a Plan of
such Person or any of its ERISA Affiliates requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan of such Person
or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that could constitute grounds for the termination of, or the appointment of
a trustee to administer, such Plan.
"EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"EURODOLLAR RATE" means, for each Interest Period shall mean (x) the
London interbank offered rate for United States of America Dollar deposits
for a period equal in length to such Interest Period that appears as of
11:00 A.M. (London time) on the second Business Day next preceding the
first day of such Interest Period on the display page
6
designated as Page 3750 on the Telerate Monitor (or such other page or
service as shall replace the Telerate Monitor for the purposes of
displaying the London interbank offered rate for United States of America
Dollar deposits), divided by (y) 1 minus the applicable Eurodollar Rate
Reserve Percentage for such Interest Period. If (i) on the date on which
the Borrower shall seek to determine the Eurodollar Rate for an Interest
Period, no quotation is given on Telerate Monitor page 3750, or (ii) the
Borrower shall have failed to give at least two Business Days' prior
written notice to request the advance of funds hereunder, the Eurodollar
Rate shall be equal to the Lender's cost of funds for United States Dollar
deposits for a period comparable to such Interest Period on the date of
determination for amounts approximately equal to the then-outstanding
principal balance of the Note.
The period between the date hereof and the date of payment in full of
the principal amount hereof shall be divided into successive periods of
three calendar months (each, an "INTEREST PERIOD"), with each such Interest
Period ending on the last day of a calendar month, except that the initial
Interest Period shall begin on the Closing Date and end on the last day of
the calendar month occurring three months after the last day of the
calendar month in which the Closing Date occurs. Each subsequent Interest
Period shall begin on the last day of the preceding Interest Period;
provided, that, (i) any Interest Period that would otherwise end on a day
that is not a Business Day shall, subject to clauses (ii) and (iii) below,
be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day; (ii) any Interest Period 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, subject to clause (iii), end on the last
Business Day of a calendar month; and (iii) any Interest Period that would
otherwise end after the Maturity Date shall end on the Maturity Date.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
7
"EXECUTIVE LOAN" means the loan outstanding on the Closing Date made
by Mr. Larry H. Ramming to the Borrower pursuant to that certain promissory
note effective April 30, 1998 in the original principal amount of
$7,000,000.
"FACILITY" means, at any time, the aggregate amount of the Lenders'
Commitments at such time.
"GAAP" has the meaning specified in Section 1.03.
"GUARANTOR" means each of IWC Services, Inc., a Texas corporation,
Code 3, Inc., a Texas corporation, Hell Fighters, Inc., a Texas
corporation, ITS Supply Corporation, a Delaware corporation, ABASCO, Inc.,
a Texas corporation and IWC Engineering, Inc. a Texas corporation and each
other Subsidiary that executes and delivers a Guaranty Supplement as
required under this Agreement.
"GUARANTY" has the meaning specified in Section 3.01(h)(xiv).
"GUARANTY SUPPLEMENT" means a guaranty supplement in the form of Annex
A to the Guaranty.
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and radon gas, (b) any
substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar
import, under any Environmental Law and (c) any other substance exposure to
which is regulated under any Environmental Law.
"HEDGE AGREEMENTS" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements.
"INSUFFICIENCY" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"INTEREST PERIOD" shall have the meaning specified in the defined term
"Eurodollar Rate."
"INVESTMENT" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations
8
or other securities of such Person, any capital contribution to such Person
or any other investment in such Person, to such Person or any other
investment in such Person, including, without limitation, any arrangement
pursuant to which the investor incurs Debt of the types referred to in
clauses (i) and (j) of the definition of "DEBT" in respect of such Person.
"LENDERS" means, on the Closing Date and thereafter, Prudential and
each assignee that shall become a party hereto from time to time.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty, each
Guaranty Supplement, the Security Agreements, the Security Agreement
Amendments, the Stock Pledge Agreements, the Stock Pledge Agreement
Amendments, and the Assignment and Option Agreement, and each other
document or instrument executed and delivered in connection therewith.
"LOAN PARTY" means each party to a Loan Document other than the
Lenders.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower and its Subsidiaries taken as a
whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and any of its
Subsidiaries taken as a whole, (b) the rights and remedies of any Lender
under any Loan Document, or (c) the ability of the Borrower or any other
Person to perform its Obligations under any Loan Document.
"MATERIAL CONTRACT" means, with respect to any Person, each contract
to which such Person is a party involving aggregate consideration payable
to or by such Person of $50,000 or more in any year or otherwise material
to the business, condition (financial or otherwise), operations,
performance, properties or prospects of such Person.
"MATURITY DATE" means the date occurring six months after the Closing
Date.
"MULTIEMPLOYER PLAN" of any Person means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which such Person or any of its
ERISA Affiliates is
9
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" of any Person means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and at least one
Person other than such Person and its ERISA Affiliates or (b) was so
maintained and in respect of which such Person or any of its ERISA
Affiliates could have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"NET CASH PROCEEDS" means, with respect to any sale, lease, transfer
or other disposition of any asset or the sale or issuance of any Debt or
capital stock, any securities convertible into or exchangeable for capital
stock or any warrants, rights or options to acquire capital stock by any
Person, the aggregate amount of cash received from time to time by or on
behalf of such Person in connection with such transaction after deducting
therefrom only (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees and other
similar fees and commissions and (b) the amount of taxes payable in
connection with or as a result of such transaction and (c) the amount of
any Debt secured by a Lien on such asset that, by the terms of such
transaction, is required to be prepaid upon such disposition, in each case
to the extent, but only to the extent, that the amounts so deducted are, at
the time of receipt of such cash, actually paid to a Person that is not an
Affiliate and are properly attributable to such transaction or to the asset
that is the subject thereof.
"NOTE" means a promissory note of the Borrower payable to the order of
any Lender, in substantially the form of Exhibit A hereto, evidencing the
indebtedness of the Borrower to such Lender resulting from the Advance made
by such Lender.
"OBLIGATION" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured
or unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section 6.01(f).
Without limiting the generality of the foregoing, the Obligations of the
Borrower under the Loan Documents include (a) the obligation to pay
principal, interest, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by the Borrower under
any Loan Document and (b) the obligation to reimburse any amount in respect
of any of the foregoing that any Lender, in its sole discretion, may elect
to pay or advance on behalf of the Borrower.
"OTHER TAXES" has the meaning specified in Section 2.09(b).
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"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced:
(a) Liens for taxes, assessments and governmental charges or levies
to the extent not required to be paid under Section 5.01(b)
hereof;
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing
obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations;
(c) easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered
thereby unmarketable or materially adversely affect the use of
such property for its present purposes;
(d) Liens arising in the ordinary course of the Borrower's or any of
its Subsidiaries' business by operation of law, but only if
payment in respect of any such Lien is not at the time required,
or the Debt secured by any such Lien is being contested in good
faith and by proper proceedings and appropriate reserves are being
maintained as to such contested Debt, and such Liens do not
materially detract from the value of the property of the Borrower
or such Subsidiary and do not materially impair the use thereof in
the operation of the Borrower's or such Subsidiary's business;
(e) purchase money Liens or purchase money security interests upon or
in any property acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or to secure Debt incurred solely
for the purpose of financing the acquisition of such property;
(f) Liens securing Debt of a Subsidiary of the Borrower to the
Borrower or to another Subsidiary and Liens securing Debt of the
Borrower to any Subsidiary of the Borrower to the extent such Debt
is permitted to exist hereunder;
(g) Liens arising by virtue of the rendition, entry or issuance
against the Borrower or any of its Subsidiaries, or any property
of the Borrower or any of its Subsidiaries, of any judgment, writ,
order, or decree that involves the payment of money in an amount
that exceeds the uncontested insurance
11
available therefor by $100,000 or more for so long as any such
Lien is in existence for less than 20 consecutive days after it
first arises or is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being
maintained;
(h) Liens incurred or deposits made in the ordinary course of business
to secure the performance of tenders, bids, leases, contracts,
statutory obligations and other similar obligations or arising as
a result of progress payments under government contracts; and
(i) such other Liens as appear on Schedule 5.02(a) hereto, to the
extent provided therein.
"PERSON" means any individual, partnership, corporation (including a
business trust), limited liability company or partnership, joint stock
company, trust, unincorporated organization, association, joint venture or
other entity, or a government or any political subdivision or agency
thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PREFERRED OFFERING" has the meaning specified in the preamble hereto.
"PREFERRED STOCK" means, with respect to any corporation, capital
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"PRUDENTIAL" has the meaning specified in the preamble hereto.
"REDEEMABLE" means, with respect to any capital stock, Debt or other
right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a
condition not solely within the control of the issuer or (b) is redeemable
at the option of the holder.
"REGISTER" has the meaning specified in Section 7.07(b).
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED LENDERS" means at any time Lenders owed or holding more than
50% of the sum of the aggregate principal amount of the Advances
outstanding at such time,
12
or, if no such principal amount is outstanding at such time, Lenders
holding more than 50% of the aggregate Commitments at such time.
"SALE-AND-LEASEBACK TRANSACTION" means a transaction or series of
transactions pursuant to which the Borrower or any Subsidiary shall sell or
transfer to any Person (other than the Borrower or a Subsidiary) any
property, whether now owned or hereafter acquired, and, as part of the same
transaction or series of transactions, the Borrower or any Subsidiary shall
rent or lease as lessee (other than pursuant to a Capitalized Lease), or
similarly acquire the right to possession or use of, such property or one
or more properties which it intends to use for the same purpose or purposes
as such property.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES OFFERING" means the public or private issuance or sale by
the Borrower, any Subsidiary of the Borrower, or any Affiliate of the
Borrower or any Subsidiary thereof, of any equity or debt securities, any
securities convertible into or exchangeable for any equity or debt
securities or any warrants, rights or options to acquire or subscribe for
any equity or debt securities.
"SECURITY AGREEMENTS" means the Security Agreements between the
Borrower and Geneva Associates, L.L.C., as collateral agent for itself and
Main Street Merchant Partners II, L.P., and between each of the Guarantors
and Geneva Associates, L.L.C., as collateral agent for itself and Main
Street Merchant Partners II, L.P., in each case dated January 2, 1998
except with respect to Code 3, Inc., which is dated March 5, 1998, as
amended through the date hereof.
"SECURITY AGREEMENT AMENDMENTS" means the First and Second Amendments
to the Security Agreements dated the date hereof between each of the
Borrower and the Guarantors and the Lender.
"SINGLE EMPLOYER PLAN" of any Person means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and no Person other
than such Person and its ERISA Affiliates or (b) was so maintained and in
respect of which such Person or any of its ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that
13
it will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities at any
time shall be computed as the amount that, in the light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be excepted to become an actual or matured liability.
"STOCK PLEDGE AGREEMENTS" means the Stock Pledge Agreement dated
January 2, 1998 between the Borrower and Geneva Associates, L.L.C., as
collateral agent for itself and Main Street Merchant Partners II, L.P., as
amended through the date hereof, and the Stock Pledge Agreement dated March
5, 1998 between IWC Services, Inc. and Geneva Associates, L.L.C., as
collateral agent for itself and Main Street Merchant Partners II, L.P., as
amended through the date hereof.
"STOCK PLEDGE AGREEMENT AMENDMENTS" means the First Amendment to Stock
Pledge Agreement between IWC Services, Inc. and the Lender dated the date
hereof and the Second Amendment to Stock Pledge Agreement between the
Borrower and the Lender dated the date hereof.
"SUB DEBT" has the meaning specified in the preamble hereto.
"SUBSIDIARY" of any Person means any corporation, limited liability
company, partnership, joint venture, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"THIRD AMENDMENT" means the Third Amendment to Note Purchase Agreement
between Larry H. Ramming and the Borrower of even date herewith to the Note
Purchase Agreement dated as of January 2, 1998 among the Borrower, Main
Street Merchant Partners II, L.P. and Geneva Associates, L.L.C.
"TAXES" has the meaning specified in Section 2.09(a).
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective
14
of whether or not, at the time, stock of any other class or classes has, or
might have, voting power by reason of the happening of any contingency).
"WELFARE PLAN" means a welfare plan, as defined in Section 3(1) of
ERISA.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE ADVANCES. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make a single advance (an "ADVANCE") to
the Borrower on the Closing Date in an amount not to exceed such Lender's
Commitment. Amounts borrowed under this Section 2.01 and repaid or prepaid may
not be reborrowed.
SECTION 2.02. [RESERVED].
SECTION 2.03. REPAYMENT. The Borrower shall repay to the Lenders the
aggregate outstanding principal amount of the Advances on the Maturity Date.
SECTION 2.04. PREPAYMENTS. (a) OPTIONAL. The Borrower may, upon at
least two Business Days' notice to the Lenders stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrower shall, prepay the outstanding aggregate principal amount of the
Advances in whole or ratably in part; provided, however, that each partial
prepayment shall be in an aggregate principal amount of $1,000,000 or an
integral multiple of $1,000,000 in excess thereof.
(b) MANDATORY. (i) The Borrower shall, on the date of receipt of the Net
Cash Proceeds from any Securities Offering or issuance of Debt, including,
without limitation, the Sub Debt, the Bank Debt or the Preferred Offering,
prepay an aggregate principal amount of the Advances equal to the amount of such
Net Cash Proceeds (not to exceed the outstanding principal amount of the
Advances).
15
(ii) The Borrower shall, on the date of receipt of the Net Cash
Proceeds from any Asset Disposition, prepay an aggregate principal amount
of the Advances equal to the amount of such Net Cash Proceeds.
(iii) Upon the occurrence of a Change of Control, the Borrower shall
on the date of such Change of Control, prepay all Advances outstanding at
such time in an amount equal to 101% of the principal amount thereof and
cancel the Commitments in whole.
(c) INTEREST. All prepayments under subsections (a) and (b) above
shall be made together with accrued interest to the date of such prepayment on
the aggregate principal amount prepaid.
SECTION 2.05. INTEREST. (a) ORDINARY INTEREST. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at a rate per annum equal at all times during each Interest Period for such
Advance to the sum of (i) the Eurodollar Rate for such Interest Period for such
Advance plus (ii) the Applicable Margin in effect during such Interest Period,
payable in arrears on the last day of such Interest Period.
(b) Notwithstanding anything to the contrary set forth in clause (a) above,
the interest rate applicable to any Advances shall not exceed, at any time, the
lesser of (i) 18% per annum and (ii) the maximum amount permitted by applicable
law.
(c) DEFAULT INTEREST. Upon the occurrence and during the continuance of a
Default, the Borrower shall pay interest on (i) the unpaid principal amount of
each Advance owing to each Lender, payable in arrears on the dates referred to
in clause (a) above, at a rate per annum equal at all times to 2% per annum
above the rate per annum then required to be paid on such Advance and (ii) the
amount of any interest, fee or other amount payable hereunder which is not paid
when due, from the date such amount shall be due until such amount shall be paid
in full, payable in arrears on the date such amount shall be paid in full and on
demand, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on Advances pursuant to clause (a) above.
SECTION 2.06. FEES. The Borrower shall pay to Prudential on the Closing
Date for its own account a funding fee in the amount of $200,000, and such other
reasonable out-of-pocket fees and expenses as may from time to time be agreed
between the Borrower and Prudential.
SECTION 2.07. INCREASED COSTS, ETC. (a) If, due to either (i) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Lender of maintaining the Advances, then the
Borrower shall from time to time, upon demand by
16
such Lender, pay to such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such increased
cost, submitted to the Borrower and Prudential by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law 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 such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of such type, then, upon demand by such
Lender, the Borrower shall pay to such Lender, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender in the
light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and Prudential by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(c) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender to perform its
obligations hereunder to maintain Advances hereunder, then, on notice thereof
and demand therefor by such Lender to the Borrower, each Advance will
automatically, upon such demand, be due and payable.
SECTION 2.08. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment under any Loan Document not later than 1:00 P.M. (New York City
time) on the day when due in U.S. dollars to each Lender in same day funds at
each such Lender's account as designated to the Borrower by each such Lender in
writing.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due under any Loan Document held by
such Lender, to charge from time to time against any and all of the Borrower's
accounts with such Lender any amount so due.
(c) All computations of interest and fees shall be made on the basis
of a year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by Prudential of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding
17
Business Day, and such extension of time shall in such case be included in the
computation of such payment; provided, however, that, if such extension would
cause payment of interest on or principal of Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
SECTION 2.09. TAXES. (a) Any and all payments by the Borrower hereunder
or under the Notes shall be made, in accordance with Section 2.08, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender, net income taxes that are
imposed by the United States and franchise taxes and net income taxes that are
imposed on such Lender by the state or foreign jurisdiction under the laws of
which such Lender is organized or any political subdivision thereof and, in the
case of each Lender, franchise taxes and net income taxes that are imposed on
such Lender by the state or foreign jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (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 or under any
Note to any Lender, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.09) such Lender receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
under the other Loan Documents (hereinafter referred to as "OTHER TAXES").
(c) The Borrower shall indemnify each Lender for the full amount of
Taxes and Other Taxes, and for the full amount of taxes imposed by any
jurisdiction on amounts payable under this Section 2.09, paid by such Lender and
any liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to each Lender, at its address referred to in Section
7.02, the original receipt of payment thereof or a certified copy of such
receipt. In the case of any payment hereunder or under the Notes by the
Borrower through an account or branch outside the United States or on behalf of
the Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to each Lender, at such address,
an opinion of counsel acceptable to Prudential stating that such payment is
exempt from Taxes. For purposes of this subsection (d) and subsection (e), the
terms
18
"UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date of its execution and delivery of
this Agreement in the case of Prudential, and on the date on which it became a
Lender, in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower (but only so long thereafter as such Lender
remains lawfully able to do so), provide the Borrower with Internal Revenue
Service form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled to
benefits under an income tax treaty to which the United States is a party that
reduces the rate of withholding tax on payments under this Agreement or the
Notes or certifying that the income receivable pursuant to this Agreement or the
Notes is effectively connected with the conduct of a trade or business in the
United States. If the form provided by a Lender at the time such Lender first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date on which a Lender assignee becomes
a party to this Agreement, the Lender assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. If any form or
document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information; provided, however, that the
Borrower shall have no obligation to "gross-up" under subsection (a) (with
respect to the Lender contemplated by clauses (x) - (z) below) in any case where
(x) the Lender is a person other than the Lender originally named herein and (y)
at the time the new Lender acquires, through assignment or otherwise, an
interest in the Advance, the Lender is unable to deliver either a Form 1001 or a
Form 4224 to the Borrower and (z) the assignor of such interest or other person
from whom the new Lender acquired its interest was, at such time of such
assignment or other transfer, able to deliver such forms.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in subsection (e)
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e)), such Lender shall not be entitled to
indemnification under subsection (a) or (c) with respect to Taxes imposed by the
United States; provided, however, that should a Lender become subject to Taxes
because of its failure to deliver
19
a form required hereunder, the Borrower shall take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.
(g) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.09 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.10. SHARING OF PAYMENTS, ETC. If any Lender shall obtain at
any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) (a) on account of Obligations due and
payable to such Lender hereunder and under the other Loan Documents at such time
in excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lenders hereunder and
under the other Loan Documents at such time) of payments on account of the
Obligations due and payable to all Lenders hereunder and under the other Loan
Documents at such time obtained by all the Lenders at such time or (b) on
account of Obligations owing (but not due and payable) to such Lender hereunder
and under the other Loan Documents at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing to such
Lender at such time to (ii) the aggregate amount of the Obligations owing (but
not due and payable) to all Lenders hereunder and under the other Loan Documents
at such time) of payments on account of the Obligations owing (but not due and
payable) to all Lenders hereunder and under the other Loan Documents at such
time obtained by all the Lenders at such time, such Lender shall forthwith
purchase from the other Lenders such participations in the Obligations due and
payable or owing to them, as the case may be, as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each other
Lender shall be rescinded and such other Lender shall repay to the purchasing
Lender the purchase price to the extent of such other Lender's ratable share
(according to the proportion of (i) the purchase price paid to such Lender to
(ii) the aggregate purchase price paid to all lenders) of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such other Lender's required repayment to (ii) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.10 may, to the fullest extent
permitted by law, exercise all of 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 2.11. USE OF PROCEEDS. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) (i) to repay
all amounts due and payable under the Promissory Note dated July 31, 1997, made
by IWC Services, Inc., a Texas corporation ("IWC SERVICES") in the face amount
of $2,066,597 and approximately $300,000 owed to LaSalle Cattle Company, Ltd.
pursuant to a Stock Purchase Agreement dated December 1997 between the
20
Borrower and LaSalle Cattle Company, Ltd., pursuant to which the Company
acquired all of the stock of ITS Supply Corporation and (ii) for working capital
purposes (but only to the extent of any excess over the amounts paid under
clause (i) of this Section 2.11).
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO BORROWING. The obligation of each
Lender to make an Advance on the Closing Date is subject to the following
conditions precedent:
(a) The Lenders shall be reasonably satisfied with the corporate and
legal structure and capitalization of each Loan Party, including the terms
and conditions of the charter, bylaws and each class of Capital Stock of
each Loan Party and of each agreement or instrument relating to such
structure or capitalization.
(b) No Material Adverse Change shall have occurred since March 31,
1998, and no material inaccuracy in the financial statements prepared as of
such date and delivered to the Lenders pursuant to clause (d) of this
Section 3.01 shall exist.
(c) Since March 31, 1998, the Borrower shall not have incurred any
liability or obligation whatsoever, whether accrued, absolute, contingent
or otherwise, except as disclosed to the Lenders in the most recent
Consolidated financial statements of the Borrower and its Subsidiaries, and
the footnotes thereto, and except for liabilities or obligations incurred
by the Borrower and its Subsidiaries taken as a whole in the ordinary
course of business or which are not material to the Borrower and its
Subsidiaries taken as a whole or as otherwise disclosed in Schedule 3.01(c)
hereto. The Borrower and its Subsidiaries shall have no material
liabilities except those set forth in such financial statements or
disclosed in the footnotes thereto.
(d) Prior to the Closing Date, each of the Lenders shall have received
(i) audited consolidated financial statements of the Borrower and its
Subsidiaries for the three-year period ended June 30, 1997 and the six
months ended December 31, 1997; and (ii) unaudited financial statements for
the Borrower and its Subsidiaries as of and for the three months ended
March 31, 1998.
(e) There shall not have occurred any material disruption or material
adverse change, as determined in the sole judgment of each of the Lenders,
in the financial or capital markets generally, or in the markets for
subordinated debt or equity securities in particular or affecting
syndication or funding of the Advance hereunder (or the refinancing such
Advances).
21
(f) The Lenders shall be satisfied (i) that all Debt, other than the
Executive Loan or the Debt identified on Schedule 3.01(f), has been
prepaid, redeemed or defeased in full or otherwise satisfied and
extinguished and that all Liens securing such Debt shall have been
unconditionally and irrevocably released and (ii) that, pursuant to a
Subordination Agreement and the Third Amendment, the Obligations of the
Borrower in respect of the Executive Loan are (x) subordinate in right of
payment to the Obligations of the Borrower under the Loan Documents and (y)
unsecured.
(g) The Lenders shall have completed a due diligence investigation of
the Borrower and its Subsidiaries in scope, and with results, reasonably
satisfactory to the Lenders, and nothing shall have come to the attention
of the Lenders during the course of such due diligence investigation to
lead them to believe that any disclosure made to them by the Borrower or
any Subsidiary or other Affiliate thereof was or has become misleading,
incorrect or incomplete in any material respect; without limiting the
generality of the foregoing, the Lenders shall have been given such access
to the management, records, books of account, contracts and properties of
the Borrower, its Subsidiaries and other Affiliates as they shall have
requested.
(h) Prudential shall have received on or before the Closing Date, the
following, each dated such day (unless otherwise specified), in form and
substance satisfactory to each Lender (unless otherwise specified) and
(except for the Notes) in sufficient copies for each Lender:
(i) The Notes to the order of the Lenders;
(ii) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving the Loan Documents to which it
is a party, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to such Loan
Documents;
(iii) A copy of the articles or certificate of incorporation, as
applicable, of each Loan Party and each amendment thereto, certified
(as of a date reasonably near the Closing Date) by the Secretary of
State of the State of incorporation of such Loan Party as being a true
and correct copy thereof;
(iv) With respect to each Loan Party, a copy of a certificate of
the appropriate governmental authority of the State of its
incorporation, dated reasonably near the Closing Date, certifying that
such Loan Party is duly incorporated and in good standing under the
laws of such State;
(v) A copy of a certificate of the Secretary of State of, with
respect to the Borrower, the State of Texas and, with respect to ITS
Supply Corporation, the State of Texas in each case, dated reasonably
near the Closing Date, stating that
22
such Loan Party is duly qualified and in good standing as a foreign
corporation in each such State;
(vi) A certificate of each Loan Party, signed on behalf of such
Loan Party by its Chairman and Chief Executive Officer, President or a
Vice President and its Secretary or any Assistant Secretary, dated the
Closing Date (the statements made in which certificate shall be true
on and as of the Closing Date), certifying as to (A) the absence of
any amendments to the charter of such Loan Party since the date of the
Secretary of State's certificate referred to in clause (iii) above,
(B) a true and correct copy of the bylaws of such Loan Party as in
effect on the Closing Date, (C) the due incorporation and good
standing of such Loan Party as a corporation organized under the laws
of the State of its incorporation, and the absence of any proceeding
for the dissolution or liquidation of such Loan Party, (D) the truth
of the representations and warranties contained in each of the Loan
Documents as though made on and as of the Closing Date and (E) after
giving effect to the Advance pursuant to Section 2.01, the absence of
any event occurring and continuing, or resulting from the Advance or
the application of the proceeds therefrom, that constitutes a Default;
(vii) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of the
officers of such Loan Party authorized to sign the Loan Documents to
which it is or will be a party and the other documents to be delivered
thereunder;
(viii) Such financial, business and other information regarding
the Borrower and its Subsidiaries as the Lenders shall have reasonably
requested including, without limitation, information as to possible
contingent liabilities, tax matters, environmental matters and
obligations under ERISA and such other approvals, opinions or
documents as any Lender may reasonably request as to the legality,
validity, binding effect or enforceability of the Loan Documents;
(ix) Letters and certificates, in form and substance satisfactory
to the Lenders, attesting to the Solvency of the Borrower after giving
effect to the transactions contemplated hereby, from its chief
financial officer;
(x) A letter, in form and substance satisfactory to Prudential,
from the Borrower to Hein & Associates LLP, its independent certified
public accountants, advising such accountants that the Lenders have
been authorized to exercise all rights of the Borrower to require such
accountants to disclose any and all financial statements and any other
information of any kind that they may have with respect to the
Borrower and its Subsidiaries and directing such accountants to comply
with any reasonable request of any Lender for such information.
23
(xi) Favorable opinions of counsel to the Loan Parties, in each
case in form and substance satisfactory to Prudential.
(xii) A guaranty in substantially the form of Exhibit B (as
amended from time to time in accordance with its terms, a "GUARANTY"),
duly executed by each Guarantor.
(xiii) The Security Agreement Amendments, the Stock Pledge
Agreement Amendments and the Assignment and Option Agreement, in each
case, duly executed by the parties thereto, in substantially the form
of Exhibits C, D and E, respectively.
(xiv) Each Lender shall have received such other approvals,
opinions or documents as any Lender may reasonably request.
(xv) Certificates representing the Collateral (as defined in the
Stock Pledge Agreements) accompanied by undated stock powers executed
in blank.
(xvi) Evidence that all other actions necessary or, in the
opinion of the Lender, desirable to perfect and protect the security
interests created by the Assignment and Option Agreement, Stock Pledge
Agreements and Security Agreements have been taken.
(i) The Borrower shall have paid all reasonable fees and expenses
incurred by or on behalf of each Lender (including the fees and expenses of
counsel to the Lender).
(j) The Borrower shall have received (i) from Prudential Capital and
Investment Services, Inc. written commitments to purchase an aggregate of
at least $30 million of Sub Debt and (ii) from Comerica Bank a written
commitment to provide the Borrower at least $45 million of Bank Debt.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower (i) is a corporation duly organized, validly existing
and good standing under the laws of the jurisdiction of its incorporation,
(ii) is duly qualified and in good standing as a foreign corporation in
each other jurisdiction in which the conduct of its business or ownership
of property requires it to so qualify except where the failure to so
qualify could not reasonably be expected to have a Material Adverse Effect
and
24
(iii) has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted. All
of the outstanding capital stock of the Borrower has been validly issued,
is fully paid and non-assessable.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of the Borrower, showing as of the date hereof (as
to each such Subsidiary) the jurisdiction of its incorporation, the number
of shares of each class of capital stock authorized, and the number
outstanding, on the date hereof and the percentage of the outstanding
shares of each such class owned (directly or indirectly) by the Borrower.
Each such Subsidiary (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which the conduct of its business
or ownership of property requires it to so qualify except where the failure
to so qualify could not reasonably be expected to have a Material Adverse
Effect and (iii) has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now
conducted.
(c) The execution, delivery and performance by the Borrower of this
Agreement, the Notes and each other Loan Document are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene the Borrower's certificate of
incorporation or bylaws, (ii) violate any law (including, without
limitation, the Exchange Act and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970), rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting the Borrower, any of its Subsidiaries or any of
their properties or (iv) result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of the Borrower or
any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries
is in violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which is reasonably likely to
have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery or performance
by the Borrower of this Agreement, the Notes or any other Loan Document, or
(ii) to the best knowledge of the Borrower, the exercise by any Lender of
its rights under the Loan Documents.
(e) This Agreement has been, and each of the Notes and each other Loan
Document when delivered hereunder will have been, duly executed and
delivered by the
25
Loan Party thereto. This Agreement is, and each of the Notes and each other
Loan Document when delivered hereunder will be, the legal, valid and
binding obligation of the Loan Party thereto, enforceable against such Loan
Party in accordance with its terms.
(f) The Consolidated financial statements of the Borrower and its
Subsidiaries for and as of the end of the year ended June 30, 1997,
accompanied by a report of Hein & Associates LLP, independent public
accountants, copies of which have been furnished to each Lender, fairly
present, the Consolidated financial condition of the Borrower and its
Subsidiaries for the period ended on such date, all in accordance with GAAP
applied on a consistent basis, and since March 31, 1998, there has been no
Material Adverse Change.
(g) The Borrower is, individually and together with its Subsidiaries,
Solvent.
(h) All written information, reports and other papers and data
furnished to the Lenders by, on behalf of, or at the direction of the
Borrower or any other Loan Party were, at the time the same were so
furnished, complete and correct in all material respects, to the extent
necessary to give the recipient true and accurate knowledge of the subject
matter, or in the case of financial statements, present fairly, in
accordance with GAAP consistently applied, the financial position of the
Persons involved as at the date thereof and the results of operations for
such periods. Neither the Loan Documents nor any of the schedules,
attachments, written statements, documents, certificates or other items
prepared or supplied to the Lenders by or on behalf of the Borrower with
respect to the transactions contemplated thereby contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact which the Borrower
has not disclosed to the Lenders in writing and of which any of its
officers, directors or executive employees is aware and which has had or
would reasonably be expected to have a Material Adverse Effect.
(i) There is no action, suit, investigation, litigation or proceeding
affecting the Borrower or any of its Subsidiaries, including any
Environmental Action, pending or, to the best knowledge of the Borrower,
threatened before any court, governmental agency or arbitrator that (i) if
determined adversely, could reasonably be expected to have a Material
Adverse Effect, or (ii) purports to affect the legality, validity or
enforceability of this Agreement, any Note or any other Loan Document or
the consummation of the transactions contemplated hereby.
(j) No proceeds of any Advance will be used to acquire any equity
security of a class that is registered pursuant to Section 12 of the
Exchange Act.
(k) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance will be
26
used to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock.
(l) Following application of the proceeds of each Advance, not more
than 25 percent of the value of the assets (either of the Borrower only or
of the Borrower and its Subsidiaries on a Consolidated basis) will be
Margin Stock.
(m) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan of the Borrower or any of its ERISA Affiliates
that has resulted in or is reasonably likely to result in a material
liability of the Borrower or any of its ERISA Affiliates.
(n) Neither the Borrower nor any of its ERISA Affiliates has incurred
or is reasonably expected to incur any Withdrawal Liability with respect to
any Multiemployer Plan.
(o) Neither the Borrower nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan of the Borrower or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or
has been terminated, within the meaning of Title IV of ERISA, and no such
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(p) Neither the business nor the properties of the Borrower or any of
its Subsidiaries are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy or other casualty (whether or not covered
by insurance) that would be reasonably likely to have a Material Adverse
Effect.
(q) The operations and properties of the Borrower and each of its
Subsidiaries comply in all material respects with all Environmental Laws,
all necessary Environmental Permits have been obtained and are in effect
for the operations and properties of the Borrower and its Subsidiaries, the
Borrower and its Subsidiaries are in compliance in all material respects
with all such Environmental Permits, and no circumstances exist that would
be reasonably likely to (i) form the basis of an Environmental Action
against the Borrower or any of its Subsidiaries or any of their properties
that could have a Material Adverse Effect or (ii) cause any such property
to be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law.
(r) Neither the Borrower nor any of its Subsidiaries has transported
or arranged for the transportation of any Hazardous Materials to any
location that is listed or proposed for listing on the National Priorities
List under CERCLA or on the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the
Environmental Protection Agency or any analogous state list, Hazardous
Materials
27
have not been generated, used, treated, handled, stored or disposed of on,
or released or transported to or from, any property of the Borrower or any
of its Subsidiaries or, to the best of its knowledge, any adjoining
property, except in compliance in all material respects with all
Environmental Laws and Environmental Permits, and all other wastes
generated at any such properties have been disposed of in compliance in all
material respects with all Environmental Laws and Environmental Permits.
(s) None of the Borrower or any of its Subsidiaries is in violation of
its respective organizational documents or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Borrower or any
such Subsidiary is a party or by which the Borrower or any such Subsidiary
may be bound or to which any of the property or assets of the Borrower or
any such Subsidiary is subject, except for such violations or defaults that
could not result in a Material Adverse Effect.
(t) The Borrower and each of its Subsidiaries has filed, has caused to
be filed or has been included in all tax returns (Federal, state, local and
foreign) required to be filed and has paid all taxes shown thereon to be
due, together with applicable interest and penalties.
(u) Neither the Borrower nor any of its Subsidiaries is an "investment
company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. Neither the making of any
Advances nor the application of the proceeds or repayment thereof by the
Borrower, nor the consummation of the other transactions contemplated
hereby, will violate any provision of such Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder.
(v) Neither the Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
(w) Each of the Borrower and its Subsidiaries has good and valid title
in fee simple to all real property, and title to all personal property,
owned by each of them and necessary to conduct the business now operated by
them, in each case free and clear of all Liens except Permitted Liens.
(x) Upon execution and delivery of the Security Agreement Amendments,
the Stock Pledge Agreement Amendments and the Assignment and the completion
of the filings and recordings relating to Security Agreement Amendments,
the security interests created in favor of the Collateral Agent (as defined
in the Security Agreement
28
Amendments, the Stock Pledge Agreement Amendments and the Assignment) for
the benefit of the Lender will constitute valid, first priority, perfected
security interests in the Collateral described therein, subject to no other
Liens whatsoever, except Permitted Liens.
SECTION 4.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Section 4.01 shall survive until the
repayment in full of the Advances in full, together with accrued interest
thereon.
SECTION 4.03. RANKING. The Obligations under this Agreement and the
other Loan Documents rank pari passu with or senior to all other unsecured Debt
of the Borrower and senior to all subordinated Debt of the Borrower.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
unless the Required Lenders shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
(b) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay or discharge
any such tax, assessment, charge or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are
being maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(c) COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause each of its
Subsidiaries and all lessees and other Persons occupying its properties to
comply, in all material respects, with all Environmental Laws and
Environmental Permits applicable to its operations and properties; obtain
and renew all Environmental Permits necessary for its operations and
properties; and conduct, and cause each of its Subsidiaries to conduct, any
investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from
29
any of its properties, in accordance with the requirements of all
Environmental Laws; provided, however, that neither the Borrower nor any of
its Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances.
(d) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
Subsidiaries to maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates.
(e) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided,
however, that the Borrower and its Subsidiaries may consummate any merger
or consolidation permitted under Section 5.02(d).
(f) VISITATION RIGHTS. At any reasonable time and from time to time,
upon prior notice to the Borrower, permit any of the Lenders or any agents
or representatives thereof, at the expense of the Borrower, to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(g) KEEPING OF BOOKS. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Borrower and each such Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.
(h) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(i) PERFORMANCE OF MATERIAL CONTRACTS. Perform and observe all the
terms and provisions of each Material Contract to be performed or observed
by it, maintain each such Material Contract in full force and effect,
enforce each such Material Contract in accordance with its terms, take all
such action to such end as may be from time to time requested by any Lender
and, upon request of any Lender, make to each other party to each such
Material Contract such demands and requests for information and reports or
for
30
action as the Borrower is entitled to make under such Material Contract,
and cause each of its Subsidiaries to do so.
(j) TRANSACTIONS WITH AFFILIATES. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
(k) USE OF PROCEEDS. Use the proceeds of the Advances solely for the
purposes described in Section 2.11.
(l) REFINANCING. Use its best efforts to cause the refinancing of the
Facility hereunder as soon as possible but in no event later than the
Maturity Date.
(m) ADDITIONAL GUARANTIES. With respect to any Person that becomes a
domestic Subsidiary of the Borrower after the Closing Date, substantially
contemporaneously with becoming a domestic Subsidiary, the Borrower shall
promptly deliver, or cause to be delivered, to the Lenders:
(i) a Guaranty Supplement duly executed by such Subsidiary; and
(ii) such legal opinions, officers' certificates, financing
statements, applications for registration, directors and shareholders
resolutions and other agreements, instruments and documents as the
Lender may reasonably request in connection with such Guaranty
Supplement.
(m) MATERIAL CONTRACTS. The Borrower shall deliver to Prudential,
within 10 business days after the date of this Agreement, certified copies
of all Material Contracts of the Borrower and its Subsidiaries.
SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder the Borrower will not,
at any time, without the written consent of the Required Lenders or, if required
under Section 7.01, of all of the Lenders:
(a) LIENS, ETC. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file, or permit any of its Subsidiaries to sign or
file, under the Uniform Commercial Code of any jurisdiction, a financing
statement that names the Borrower or any of its Subsidiaries as debtor, or
sign, or permit any of its Subsidiaries to sign, any security agreement
authorizing any secured party thereunder to file such financing statement,
or assign, or permit any of its Subsidiaries to assign, any
31
accounts or other right to receive income, excluding, however, from the
operation of the foregoing restrictions, Permitted Liens.
(b) DEBT. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than:
(i) Debt under the Loan Documents;
(ii) the Executive Loan; and
(iii) Debt listed on Schedule 3.01(f) hereto.
(c) LEASE OBLIGATIONS. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any obligations as lessee for the rental or hire of other real or personal
property of any kind under leases or agreements to lease including
Capitalized Leases having an original term of one year or more that would
cause the direct and contingent liabilities of the Borrower and its
Subsidiaries, on a Consolidated basis, in respect of all such obligations
to exceed $1,100,000 payable in any period of 12 consecutive months,
provided that (i) with respect to the lease to be entered into by the
Borrower relating to the 777 Post Oak office facility located in Houston,
Texas, the Borrower will use its reasonable best efforts to cause the
lessor of such facility to waive all rights that it may have under Texas
law or otherwise to seize, foreclose on or sell any property or assets of
the Borrower located at such facility and any liens, whether statutory or
otherwise, relating to any such property or assets and (ii) with respect to
the lease to be entered into by the Borrower for a plant and office
facility for Abasco, Inc. and relating to Code 3, Inc.'s operations in
Houston, Texas, to obtain the consent of the Lender prior to entering into
any such lease, which consent shall not be unreasonably withheld.
(d) MERGERS, ETC. In a single transaction or series of transactions,
merge into or consolidate with or acquire any Person or permit any Person
to merge into it, or permit any of its Subsidiaries to do so, except that
(i) any Subsidiary of the Borrower may merge into or consolidate with any
other Subsidiary of the Borrower provided that, in the case of any such
consolidation, the Person formed by such consolidation shall be a
Subsidiary of the Borrower, and provided further that in any merger or
consolidation among Subsidiaries of the Borrower involving a Guarantor, the
surviving Person shall be a Guarantor, and (ii) any of the Borrower's
Subsidiaries may merge into the Borrower.
(e) SALES, ETC. OF ASSETS. Sell, lease, transfer or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any assets, or grant any option or other right, except sales in
the ordinary course of its business and sales that do not, individually or
in the aggregate, exceed $50,000 in any year.
32
(f) INVESTMENTS IN OTHER PERSONS. Make or hold, or permit any of its
Subsidiaries to make or hold, any Investment in any Person other than:
(i) Investments by the Borrower and its Subsidiaries in
Subsidiaries that are Guarantors; and
(ii) Investments by the Borrower and its Subsidiaries in
Subsidiaries that are not Guarantors (A) existing on the Closing Date
provided such Investments do not exceed $500,000 and (B) in an
aggregate amount invested from the date hereof not to exceed $250,000.
(g) DIVIDENDS, ETC. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or
any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such, make
any distribution of assets, capital stock, warrants, rights, options,
obligations or securities to its stockholders as such or issue or sell any
capital stock or any warrants, rights or options to acquire such capital
stock, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of the Borrower or
any warrants, rights or options to acquire such capital stock, except that,
so long as no Default shall have occurred and be continuing, the Borrower
may declare and deliver dividends and distributions payable only in common
stock of the Borrower.
(h) CHANGE IN NATURE OF BUSINESS. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) ACCOUNTING CHANGES. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required by GAAP.
(j) AMENDMENTS. Amend its certificate of incorporation or bylaws.
(k) AMENDMENT, ETC. OF MATERIAL CONTRACTS. Cancel or terminate any
Material Contract or consent to or accept any cancellation or termination
thereof, amend or otherwise modify any Material Contract or give any
consent, waiver or approval thereunder, waive any default under or breach
of any Material Contract, agree in any manner to any other amendment,
modification or change of any term or condition of any Material Contract or
take any other action in connection with any Material Contract that would
impair the value of the interest or rights of the Borrower thereunder or
that would impair the interest or rights of any Lender, or permit any of
its Subsidiaries to do any of the foregoing.
33
(l) PARTNERSHIPS. Become a general partner in any general or limited
partnership, or permit any of its Subsidiaries to do so, other than any
Subsidiary the sole assets of which consist of its interest in such
partnership.
(m) TRANSACTIONS WITH AFFILIATES. Enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Borrower, other than on terms and
conditions substantially as favorable to the Borrower as would be
obtainable by the Borrower at the time in a comparable arm's length
transaction with a Person not an Affiliate.
(n) SALE LEASEBACKS. Permit or permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as guarantor
or other surety with respect to any Sale-and-Leaseback Transaction.
SECTION 5.03. REPORTING REQUIREMENTS. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Required Lenders shall otherwise consent in writing, furnish to
the Lenders:
(a) DEFAULT NOTICE. As soon as possible and in any event within two
days after the Borrower becomes aware of the occurrence of each Default
continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto.
(b) MONTHLY FINANCIALS. As soon as available and in any event within
30 days after the end of each month, a Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such month and Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous month and ending with
the end of such month, setting forth in each case in comparative form the
corresponding figures for the preceding month, all in reasonable detail and
duly certified by the chief financial officer of the Borrower.
(c) QUARTERLY FINANCIALS. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
fiscal year of the Borrower, a Consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the
Borrower as having been prepared in accordance with GAAP, together with a
certificate of said officer stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature
34
thereof and the action that the Borrower has taken and proposes to take
with respect thereto.
(d) ANNUAL FINANCIALS. As soon as available and in any event within
90 days after the end of each fiscal year of the Borrower, a copy of the
annual audit report for such year for the Borrower and its Subsidiaries,
including therein a Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and Consolidated statements
of income and cash flows of the Borrower and its Subsidiaries for such
fiscal year, in each case accompanied by an opinion acceptable to the
Required Lenders of Hein & Associates LLP or other independent public
accountants of recognized standing acceptable to the Required Lenders,
together with (i) a certificate of such accounting firm to the Lenders
stating that in the course of the regular audit of the business of the
Borrower and its Subsidiaries, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default has occurred and
is continuing, or if, in the opinion of such accounting firm, a Default has
occurred and is continuing, a statement as to the nature thereof, and (ii)
a certificate of the chief financial officer of the Borrower stating that
no Default has occurred and is continuing or, if a default has occurred and
is continuing, a statement as to the nature thereof and the action that the
Borrower has taken and proposes to take with respect thereto.
(e) ERISA EVENTS. Promptly and in any event within 10 days after the
Borrower or any of its ERISA Affiliates knows or has reason to know that
any ERISA Event with respect to the Borrower or any of its ERISA Affiliates
has occurred, a statement of the chief financial officer of the Borrower
describing such ERISA Event and the action, if any, that the Borrower or
such ERISA Affiliate has taken and proposes to take with respect thereto.
(f) PLAN TERMINATIONS. Promptly and in any event within two Business
Days after receipt thereby by the Borrower or any of its ERISA Affiliates,
copies of each notice from the PBGC stating its intention to terminate any
Plan of the Borrower or any of its ERISA Affiliates or to have a trustee
appointed to administer any such Plan.
(g) PLAN ANNUAL REPORTS. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan of each Loan Party or any of its ERISA
Affiliates.
(h) MULTIEMPLOYER PLAN NOTICES. Promptly and in any event within five
Business Days after receipt thereof by the Borrower or any of its ERISA
Affiliates from the sponsor of a Multiemployer Plan of the Borrower or any
of its ERISA Affiliates, copies of each notice concerning (i) the
imposition of Withdrawal Liability by any such Multiemployer Plan, (ii) the
reorganization or termination, within the meaning of Title IV
35
of ERISA, of any such Multiemployer Plan or (iii) the amount of liability
incurred, or that may be incurred, by the Borrower or any of its ERISA
Affiliates in connection with any event described in clause (i) or (ii).
(i) LITIGATION. Promptly after the commencement thereof, notice of
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(i).
(j) SECURITIES REPORTS. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports that the
Borrower or any of its Subsidiaries sends to its stockholders, and copies
of all regular, periodic and special reports, and all registration
statements, that the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any governmental authority that may
be substituted therefor, or with any national securities exchange.
(k) ENVIRONMENTAL CONDITIONS. Promptly after the occurrence thereof,
notice of any condition or occurrence on any property of the Borrower or
any of its Subsidiaries that results in a material noncompliance by the
Borrower or any of its Subsidiaries with any Environmental Law or
Environmental Permit or could (i) form the basis of an Environmental Action
against the Borrower or any of its Subsidiaries or such property that could
have a Material Adverse Effect or (ii) cause any such property to be
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(l) NOTICE OF CHANGE OF CONTROL. Promptly and in any event within two
days after the occurrence of any Control Event, written notice of such
Control Event.
(m) OTHER INFORMATION. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or any of its Subsidiaries as any
Lender may from time to time reasonably request.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events ("EVENTS
OF DEFAULT") shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of, or interest on,
any Advance, or any Loan Party shall fail to make any other payment under
any Loan Document, in each case when the same becomes due and payable; or
36
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 5.01(e), 5.01(l), 5.02 or 5.03; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to the Borrower by any Lender; or
(e) the Borrower or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect
of any Debt that is outstanding in a principal amount of at least $100,000
in the aggregate (but excluding Debt outstanding hereunder), when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be declared
to be due and payable or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) the Borrower or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for
any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of 30 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or the Borrower
37
or any of its Subsidiaries shall take any corporate action to authorize any
of the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$100,000 shall be rendered against the Borrower or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of
10 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(h) any provision of any Loan Document after delivery thereof pursuant
to Section 3.01 shall for any reason cease to be valid and binding on or
enforceable against any Loan Party a party to such Loan Document, or such
Loan Party shall so state in writing; or
(i) a Change of Control shall have occurred; or
(j) any ERISA Event shall have occurred with respect to a Plan of the
Borrower or any of its ERISA Affiliates and the sum (determined as of the
date of occurrence of such ERISA Event) of the Insufficiency of such Plan
and the Insufficiency of any and all other Plans of the Borrower and its
ERISA Affiliates with respect to which an ERISA Event shall have occurred
and then exist (or the liability of the Borrower and its ERISA Affiliates
related to such ERISA Event) exceeds $100,000; or
(k) the Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower and its ERISA Affiliates as Withdrawal Liability
(determined as of the date of such notification), exceeds $100,000; or
(l) the Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of the Borrower or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or
is being terminated, within the meaning of Title IV of ERISA, and as a
result of such reorganization or termination the aggregate annual
contributions of the Borrower and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will
be increased over the amounts contributed to such Multiemployer Plans for
the plan years of such Multiemployer Plans immediately preceding the plan
year in which such reorganization or termination occurs by an amount
exceeding $100,000;
(m) a Material Adverse Change shall have occurred; or
38
(n) at any time after 30 days after the Closing Date, the Security
Agreements, Stock Pledge Agreements or Assignment and Option Agreement
shall cease to create a valid and perfected first priority security
interest in any of the collateral purported to be covered thereby;
then, and in any such event, Prudential (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower; provided, however, that
upon the occurrence of an Event of Default pursuant to the terms of subsection
(f) of this Section 6.01, (x) the obligation of each Lender to make Advances
shall automatically be terminated and (y) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or any other Loan Document nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following at any
time: (i) waive any of the conditions specified in Section 3.01 or, in the case
of the initial Borrowing, 3.02, (ii) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Notes, or the number of Lenders,
that shall be required for the Lenders or any of them to take any action
hereunder, (iii) amend this Section 7.01 or Section 2.04(b), (iv) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations,
(v) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder or (vi) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder or amend Section 2.06.
SECTION 7.02. NOTICE, ETC. All notices and other communications provided
for hereunder shall be in writing (including telecopy) and mailed, telecopied,
or delivered as follows:
39
(a) if to the Borrower, at 5151 San Felipe, Suite 450, Houston, Texas
77056; Attn: Thomas L. Easley, Vice President and Chief Financial Officer;
telephone: 713-621-7911; telecopier: 713-621-7988;
(b) if to Prudential, at One Seaport Plaza, New York, New York 10292;
Attn: Fred Robustelli; telephone: 212-214-6813; telecopier: 212-214-7938;
with a copy to Prudential Securities Incorporated, One New York Plaza, New
York, New York 10292; Attn: Christopher J. Barber; telephone: (212) 778-
1361; telecopier: (212) 778-5718; and
(c) if to any other Lender, at such address as shall be designated by
such Lender in a written notice to the other parties;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective
when deposited in the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the cable company,
respectively, except that notices and communications to the Lenders pursuant to
Article II or III shall not be effective until received by such Lenders.
SECTION 7.03. NO WAIVER; REMEDIES. No failure on the part of any Lender,
and no delay in exercising, any right under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided under any Loan Document are cumulative and not
exclusive of any remedies provided by law.
SECTION 7.04. COSTS AND EXPENSES; INDEMNIFICATION. (a) The Borrower
agrees to pay on demand (i) all reasonable costs and expenses of the Lenders in
connection with the modification, amendment and syndication of the Loan
Documents (including, without limitation, the reasonable fees and expenses of
counsel for Prudential with respect thereto, with respect to advising the
Lenders as to its rights and responsibilities, or the perfection, protection or
preservation of rights or interests, under the Loan Documents, with respect to
negotiations with the Borrower or with other creditors of the Borrower or any of
its Subsidiaries arising out of any Default or any events of circumstances that
may give rise to a Default and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or other similar
proceedings involving creditors' rights generally and any proceeding ancillary
thereto) and (ii) all costs and expenses of the Lenders in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation,
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally or otherwise (including, without limitation, the reasonable
fees and expenses of counsel for each Lender with respect thereto).
(b) (i) The Borrower agrees that it will indemnify and hold harmless
the Lenders to the fullest extent permitted by law, from and against any
and all losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and
40
disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal or other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the
costs, expenses and disbursements, as and when incurred, of investigating,
preparing or defending any such action, proceeding or investigation
(whether or not in connection with litigation in which any of the Lenders
is a party thereto), directly or indirectly, caused by, relating to, based
upon, arising out of or in connection with (a) this Agreement and the other
Loan Documents, or (b) any untrue statement or alleged untrue statement of
a material fact contained in, or omissions or alleged omissions from any
filing with any governmental agency or similar statements or omissions in
or from any information furnished by the Borrower or any of its
Subsidiaries or Affiliates to any of the Lenders or any other person in
connection with this Agreement and the other Loan Documents; provided,
however, that such indemnity agreement shall not apply to any such loss,
claim, damage, obligation, penalty, judgment, award, liability, cost,
expense or disbursement to the extent it is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have
resulted primarily and directly from the gross negligence or willful
misconduct of any of the Lenders. The Borrower also agrees that the Lenders
shall have no liability (whether direct or indirect, in contract or tort or
otherwise) to the Borrower for or in connection with this Agreement and the
other Loan Documents or the transactions contemplated thereby, except for
any such losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements that are finally
judicially determined by a court of competent jurisdiction (not subject to
further appeal) to have resulted from the bad faith or gross negligence of
any of the Lenders.
(ii) The indemnification provisions in this Section shall be in
addition to any liability which the Borrower may have to the Lenders or the
Persons indemnified below in this sentence and shall extend to the
following: the Lenders, Prudential, their respective affiliated entities,
directors, officers, employees, legal counsel, agents and controlling
persons (within the meaning of the federal securities laws), and none of
such indemnified persons shall be liable for any act or omission of any of
the others. All references to "Lender(s)" in these indemnification
provisions shall be understood to include any and all of the foregoing.
(iii) If any action, suit, proceeding or investigation is commenced,
as to which any indemnified party proposes to demand indemnification, it
shall notify the Borrower with reasonable promptness; provided, however,
that any failure by any indemnified party to so notify the Borrower shall
not relieve the Borrower from its obligations hereunder. Prudential, on
behalf of the Lenders, shall have the right to retain counsel of its choice
to represent the Lenders, and the Borrower shall pay the reasonable fees,
expenses and disbursements of such counsel; and such counsel shall, to the
extent consistent with its professional responsibilities, cooperate with
the Borrower and any counsel designated by the Borrower. The Borrower
shall be liable for any settlement of any claim against any
41
of the Lenders made with the Borrower's written consent, which consent
shall not be unreasonably withheld. The Borrower shall not, without the
prior written consent of Prudential, settle or compromise any claim, or
permit a default or consent to the entry of any judgment in respect
thereof, unless such settlement, compromise or consent includes, as an
unconditional term thereof, the giving by the claimant to each of the
Lenders of an unconditional and irrevocable release from all liability in
respect of such claim.
(iv) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to the indemnification provisions
contained in this Section is made but is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then the
Borrower, on the one hand, and the Lenders, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements to which
the indemnified persons may be subject in accordance with the relative
benefits received by the Borrower, on the one hand, and the Lenders, on the
other hand, and also the relative fault of the Borrower, on the one hand,
and the Lenders, on the other hand, in connection with the statements, acts
or omissions which resulted in such losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and
disbursements and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation
shall be entitled to contribution from any person who is not also found
liable for such fraudulent misrepresentation.
(v) Neither termination of the Commitments nor repayment of the
Advances shall affect the indemnification provisions contained in this
Section which shall then remain operative and in full force and effect.
(c) If any payment of principal of any Advance is made by the Borrower
to or for the account of a Lender other than on the last day of the Interest
Period for such Advance, as a result of a payment or conversion pursuant to
Section 2.07(c), acceleration of the maturity of the Notes pursuant to Section
6.01 or for any other reason, the Borrower shall, upon demand by such Lender,
pay to such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance.
(d) If the Borrower fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of the Borrower by any Lender, in its sole discretion.
42
SECTION 7.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize Prudential to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any and all of the Obligations of
the Borrower now or hereafter existing under this Agreement and the Note or
Notes held by such Lender, irrespective of whether such Lender shall have made
any demand under this Agreement or such Note or Notes and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of set-
off) that such Lender may have.
SECTION 7.06. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and Prudential and thereafter shall
be binding upon and inure to the benefit of the Borrower, Prudential and each
Lender party thereto from time to time and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.
SECTION 7.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may assign
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments and the Advances owing to it and the
Note or Notes held by it.
(b) Prudential shall maintain at its address referred to in Section 7.02 a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing under the Facility to,
each Lender from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(c) The Borrower hereby agrees to cooperate with the Lenders in connection
with the assignment of the Commitments and Advances under Section 7.07(a).
Within five Business Days after its receipt of notice, the Borrower, at its own
expense, shall execute and deliver to the applicable Lender in exchange for the
surrendered Note or Notes a new Note to the order of such Lender's assignee in
an amount equal to the Commitment assumed by it and, if the assigning Lender has
retained a Commitment hereunder, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall
43
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of such
assignment.
(d) Each Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments and the Advances owing to it and the Note or
Notes held by it); provided, however, that (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by the Borrower therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation.
(e) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 7.07, 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; provided, however, that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information received by it from such Lender.
(f) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION 7.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
AND THE NOTES 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, EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE COMPANY
HEREBY SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK
LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO SOLE
AND ABSOLUTE ELECTION OF THE HOLDERS OF THE NOTES AND TO THE EXTENT PERMITTED BY
44
APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE
NOTES OR ANY OTHER LOAN DOCUMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE
COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM
NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURTS.
SECTION 7.09. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 7.10. CONFIDENTIALITY. Neither Prudential nor any Lender shall
disclose any Confidential Information to any Person without the consent of the
Borrower, other than (a) to such Lender's Affiliates and their officers,
directors, employees, agents and advisors and to actual or prospective assignees
and participants, and then only on a confidential basis, (b) as required by any
law, rule or regulation or judicial process and (c) as requested or required by
any state, federal or foreign authority or examiner regulating banks or banking.
SECTION 7.11. WAIVER OF JURY TRIAL. Each of the Borrower and the Lenders
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to any of the Loan Documents, the Advances or the actions of any Lender
in the negotiation, administration, performance or enforcement thereof.
[Signatures on Next Page]
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC., as Borrower
By: /s/ Thomas L. Easley
-----------------------------------
Name: Thomas L. Easley
Title: Vice President & CFO
PRUDENTIAL SECURITIES CREDIT
CORPORATION, as a Lender
By: /s/ Jeff K. French
-----------------------------------
Name:
Title:
S-1
EXHIBIT A
FORM OF PROMISSORY NOTE
$5,000,000 Dated: _________ __, 1998
FOR VALUE RECEIVED, the undersigned, BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation (the "BORROWER"), HEREBY PROMISES TO PAY
to the order of PRUDENTIAL SECURITIES CREDIT CORPORATION (the "LENDER") the
aggregate principal amount of FIVE MILLION UNITED STATES DOLLARS ($5,000,000)
pursuant to the Credit Agreement (as defined below) on the Maturity Date.
The Borrower promises to pay interest on the unpaid principal amount of
each Advance from the date of such Advance until such principal amount is paid
in full, at such interest rates, and payable at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Lender at its office specified in the Credit Agreement
in same day funds.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Senior Loan Agreement, dated as of [_________], 1998 (the
"CREDIT AGREEMENT"; capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Credit Agreement) by and between the
Borrower and the Lender. The Credit Agreement contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Note shall be construed in accordance with and governed by the laws of
the State of New York.
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC., as Borrower
By:__________________________________
Name:
Title:
EXHIBIT C
FORM OF SECURITY AGREEMENT AMENDMENTS
EXHIBIT D
FORM OF STOCK PLEDGE AGREEMENT AMENDMENTS
EXHIBIT E
FORM OF ASSIGNMENT AND OPTION AGREEMENT
SCHEDULE 3.01(c)
(Liabilities)
None
SCHEDULE 3.01(f)
(Permitted Debt)
$90,000 of IWC Services, Inc.'s 12% Senior Subordinated Notes due December 31,
2000 dated July 9, 1997 and May 8, 1997 and payable to Jeff Scott Cofsky in the
original aggregate face amount of $100,000.
Trade debt incurred by the Borrower or any Subsidiary in the ordinary course of
business.
SCHEDULE 4.01(b)
(Subsidiaries)
IWC Services, Inc.; Texas corporation; 1,000 shares authorized; 6,740,000 shares
(pre merger) outstanding; 100% of capital stock owned by Borrower.
Code 3, Inc.; Texas corporation; 100,000 shares authorized; 1,000 shares
outstanding; 100% of capital stock owned by Borrower.
Hell Fighters, Inc.; Texas corporation; 1,000,000 shares authorized; 80,000
shares outstanding; 100% of capital stock owned by IWC Services, Inc.
Boots & Coots Overseas, Ltd.; British Virgin Islands corporation; whose
oustanding capital stock is 100% owned by IWC Services, Inc.
International Well Control Services, Ltd.; Cayman Islands corporation; whose
oustanding capital stock is 100% owned by IWC Services, Inc.
ITS Supply Corporation; Delaware corporation; 1,000 shares authorized; 1,000
shares outstanding; 100% of capital stock owned by IWC Services, Inc.
Abasco, Inc.; Texas corporation; 1,000 shares authorized; 1,000 shares
outstanding; 100% of capital stock owned by IWC Services, Inc.
IWC Engineering, Inc.; Texas corporation; 100,000 shares authorized; 100 shares
outstanding; 100% of capital stock owned by IWC Services, Inc.
Boots & Coots de Venezuela, S.A.; Venezuelan corporation; whose oustanding
capital stock is 100% owned by Boots & Coots Overseas, Ltd.
International Tool & Supply de Venezuela S.A.; Venezuelan corporation; whose
oustanding capital stock is 100% owned by ITS Supply Corporation.
International Tool & Supply Peru; Peruvian corporation; whose oustanding capital
stock is 100% owned by ITS Supply Corporation.
International Tool and Supply UK; corporation organized under the laws of the
United Kingdom; whose oustanding capital stock is 100% owned by ITS Supply
Corporation.
SCHEDULE 5.02(a)
(Permitted Liens)
None
Senior Loan Agreement (Bridge Facility) - Boots & Coots International Well Control Inc. and Prudential Securities Credit Corp.
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