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EXHIBIT 10.7
CREDIT AGREEMENT
$29,000,000.00
UNSECURED ADVANCING LINE OF CREDIT
FROM
BANK ONE, TEXAS, N.A.
TO
EAGLE GEOPHYSICAL, INC.
June 5, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS ...............................................................1
ARTICLE II. THE LOAN...................................................................8
2.01 The Advancing Line .............................................8
2.02 Advances and Payments of Principal Under the Note...............8
2.03 Prepayment and Conversion.......................................8
2.04 Interest Rate and Payments of Interest..........................9
2.05 Increased Cost of Loans........................................11
2.06 Substitute Rate................................................12
2.07 Change of Law..................................................13
2.08 Advances to Satisfy Obligations of Borrower....................13
2.09 Commitment Fee.................................................13
2.10 Facility Fee...................................................14
2.11 Supplemental Fee...............................................14
ARTICLE III. CONDITIONS...............................................................14
3.01 Receipt of Note, Agreement, and Certificate of Compliance......14
3.02 Receipt of Guaranty Agreements.................................14
3.03 Receipt of Organizational Documents............................14
3.04 Receipt of Certified Copy of Corporate Proceedings and
Certificates of Incumbency.................................14
3.05 Receipt of Certificates of Authority and Certificates of
Good Standing..............................................15
3.06 UCC Search.....................................................15
3.07 Opinion of Counsel.............................................15
3.08 Fees...........................................................15
3.09 Financial Statements...........................................15
3.10 Request for Advance............................................15
3.11 Accuracy of Representations and Warranties and No Event
of Default.................................................15
3.12 Legal Matters Satisfactory to Counsel to Bank..................15
3.13 No Material Adverse Change.....................................15
3.14 Legal Fees.....................................................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES............................................16
4.01 Existence and Good Standing....................................16
4.02 Due Authorization..............................................16
4.03 Valid and Binding Obligations..................................16
4.04 Scope and Accuracy of Financial Statements.....................16
4.05 Liabilities, Litigation and Restrictions.......................17
4.06 Margin Stock...................................................17
4.07 Authorizations and Consents....................................17
4.08 Compliance with Laws, Rules, Regulations and Orders............17
4.09 Proper Filing of Tax Returns and Payment of Taxes Due..........17
4.10 ERISA..........................................................18
4.11 Investment Company Act Compliance..............................18
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4.12 Public Utility Holding Company Act Compliance..................18
4.13 Environmental Laws.............................................18
4.14 Subsidiaries...................................................19
4.15 Existing Indebtedness..........................................19
4.16 Material Commitments...........................................19
4.17 Insurance......................................................19
4.18 Material Misstatements and Omissions...........................19
ARTICLE V. AFFIRMATIVE COVENANTS......................................................20
5.01 Use of Funds...................................................20
5.02 Maintenance and Access to Records..............................20
5.03 Monthly Unaudited Financial Statements of Borrower.............20
5.04 Annual Audited Financial Statements of Borrower................20
5.05 Compliance Certificate.........................................20
5.06 Statement of Material Adverse Change in Condition..............20
5.07 Additional Information.........................................20
5.08 Compliance with Laws and Payment of Assessments and Charges....21
5.09 Maintenance of Existence and Good Standing.....................21
5.10 Further Assurances.............................................21
5.11 Initial Expenses of Bank.......................................21
5.12 Subsequent Expenses of Bank....................................21
5.13 Maintenance of Tangible Property...............................22
5.14 Maintenance of Insurance.......................................22
5.15 Inspection of Tangible Assets/Right of Audit...................22
5.16 Payment of Note and Performance of Obligations.................22
5.17 ERISA Reports..................................................22
5.18 Minimum Current Ratio..........................................23
5.19 Tangible Net Worth Requirement.................................23
5.20 Cash Flow to Debt Service Ratio................................23
5.21 Maximum Funded Senior Debt and Capital Leases to
Capitalization............................................23
5.22 Interest Coverage Ratio........................................23
5.23 Compliance with Environmental Laws.............................23
5.24 Hazardous Substances Indemnification...........................24
5.25 Changes in Management..........................................24
5.26 Payment of Taxes, Etc..........................................24
5.27 Notice of Litigation...........................................24
5.28 Notices Regarding Account Debtors..............................25
5.29 Notice of Change of Principal Offices..........................25
5.30 Payment of Accounts Payable....................................25
5.31 Ship Mortgage..................................................25
ARTICLE VI. NEGATIVE COVENANTS........................................................25
6.01 Mortgages or Pledges of Assets.................................25
6.02 Negative Pledges...............................................25
6.03 Nature of Business.............................................25
6.04 Sales of Assets................................................26
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6.05 Cancellation of Insurance......................................26
6.06 Margin Stock...................................................26
6.07 Changes in Business Structure..................................26
6.08 Transactions with Affiliates...................................26
ARTICLE VII. EVENTS OF DEFAULT........................................................26
7.01 Enumeration of Events of Default...............................26
7.02 Rights Upon Unmatured Event of Default.........................28
7.03 Rights Upon Default............................................28
ARTICLE VIII. MISCELLANEOUS...........................................................28
8.01 Security Interests in Deposits and Right of Offset or
Banker's Lien..............................................28
8.02 Survival of Representations, Warranties and Covenants..........28
8.03 Notices and Other Communications...............................28
8.04 Parties in Interest............................................29
8.05 Renewals and Extensions........................................29
8.06 No Waiver by Bank..............................................29
8.07 INDEMNIFICATION................................................30
8.08 GOVERNING LAW..................................................30
8.09 Incorporation of Exhibits......................................30
8.10 Survival Upon Unenforceability.................................30
8.11 Rights of Third Parties........................................30
8.12 Amendments or Modifications of this Agreement..................30
8.13 Agreement Construed as an Entirety.............................30
8.14 Number and Gender..............................................31
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS......................31
8.16 Controlling Provision Upon Conflict............................31
8.17 Time, Place and Method of Payments.............................31
8.18 Non-Application of Chapter 15 of Texas Credit Code.............31
8.19 Counterpart Execution..........................................31
8.20 Disclosure and Use of Confidential Information.................31
EXHIBITS
EXHIBIT A Note
EXHIBIT B Compliance Certificate
EXHIBIT C Form of Request for Advance
EXHIBIT D Matters to be covered by the opinion of counsel to Borrower
SCHEDULES
4.05 Litigation
4.14 Subsidiaries
4.15 Existing Indebtedness
4.16 Material Commitments
4.17 Certificates of Insurance
6.08 Agreements with Seitel, Inc.
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ADVANCING CREDIT AGREEMENT
THIS ADVANCING CREDIT AGREEMENT, is entered into as of the 5th day of
June 1998, by and among EAGLE GEOPHYSICAL, INC., a Delaware corporation (herein
referred to as the "Borrower"), and BANK ONE, TEXAS, N.A., a national banking
association (the "Bank").
W I T N E S S E T H
WHEREAS, Borrower desires to institute an advancing line of credit with
Bank for purposes of satisfying Borrower's working capital needs and for general
corporate purposes;
WHEREAS, Bank is willing to institute such an advancing line of credit
for Borrower in accordance with the terms and provisions hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and the mutual benefits to be derived herefrom, Bank and
Borrower agree as follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
"Advancing Commitment" means the obligation of Bank, subject to the
provisions of this Agreement and existing only through the last Business Day
prior to the Maturity Date, to advance to Borrower funds, not to exceed at any
one time outstanding the sum of Twenty-Nine Million Dollars ($29,000,000.00).
"Affiliate" means, as applied to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by", and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Advancing Credit Agreement, as the same may be
amended or supplemented from time to time.
"Bank" has the meaning set forth in the preamble hereof.
"Base Rate" means, at any time, the rate of interest per annum then most
recently established and published by the Bank as its Base Rate, which is eight
and one-half percent (8.50%) as of the date of this Agreement.
"Base Rate Loan" means any Loan for which interest thereon is to be
computed at the Floating Rate in accordance with this Agreement.
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"Borrower" has the meaning set forth in the preamble hereof.
"Business Day" shall mean: (a) for all purposes, a day other than a
Saturday, Sunday or legal holiday for commercial banks under the laws of the
State of Texas or the laws of the United States of America, and (b) in addition,
for purposes of any LIBOR Loan, a day that satisfies the requirements of clause
(a) and is a day on which commercial banks in London, England are open for
domestic or international business.
"Cash Flow" shall be defined for any fiscal quarter of Borrower as the
sum of net income plus depreciation and other non-cash charges less non-cash
income of Borrower and its Subsidiaries on a consolidated basis, during such
quarter.
"Closing" means the date on which this Agreement is executed and
delivered by Bank and Borrower.
"Compliance Certificate" means the certificate of the president or vice
president of Borrower required to be submitted to Bank from time to time
pursuant to this Agreement, which certificate shall be in the form attached
hereto as Exhibit "B."
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (a)
consolidated net income, plus consolidated interest expense, plus consolidated
tax expenses, plus depreciation and amortization, plus consolidated non-cash
charges deducted from consolidated net income, to (b) consolidated interest
expense, all calculated in accordance with GAAP.
"Current Assets" and "Current Liabilities" means at any time, all assets
or liabilities, respectively, that should in accordance with GAAP, be classified
as current assets or current liabilities, respectively, on a consolidated
balance sheet of Borrower and its Subsidiaries.
"Debt Service" shall be defined for any fiscal quarter of Borrower as the
sum of (i) principal amounts required to be paid by Borrower and its
Subsidiaries during such quarter on Indebtedness other than in connection with
this Loan, plus (ii) lease payments required to be paid by Borrower and its
Subsidiaries during such quarter in connection with capital leases, plus (iii)
the outstanding principal balance due at the beginning of such quarter on the
Loans hereunder, divided by sixteen.
"Environmental Laws" means (a) the following federal laws as they may be
cited, referenced and amended from time to time: the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
environmental statutes of any state in which property of Borrower is situated,
as they may be cited, referenced and amended from time to time; (c) any rules or
regulations promulgated under or adopted pursuant to the above federal and state
laws; and (d) any other federal, state or local statute or any requirement,
rule, regulation, code, ordinance or order adopted pursuant thereto, including,
without limitation, those
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relating to the generation, transportation, treatment, storage, recycling,
disposal, handling or release of Hazardous Substances.
"EFES" means Eagle Front End Services, Ltd.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with Borrower would be treated as a single employer
under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 7.01 of
this Agreement.
"Financial Statements" means the statements of the financial condition of
the indicated Person, as at the point in time and for the period indicated and
consisting of at least a consolidated balance sheet, income statement and
statement of cash flows, and, when the foregoing are audited, accompanied by the
certification of such Person's independent certified public accountants and
footnotes to any of the foregoing, all of which shall be prepared in accordance
with GAAP applied on a basis consistent with that of the preceding year.
"Floating Rate" means: (a) with respect to the principal amount
outstanding on Base Rate Loans from the date of this Agreement through July 31,
1998, the Base Rate in effect from time to time; and (b) with respect to the
principal amount outstanding on Base Rate Loans from August 1, 1998 until paid,
the Base Rate in effect from time to time, plus one-half of one percent (0.5%).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Guarantor" means each of the following parties: Eagle Geophysical
Onshore, Inc., Eagle Geophysical Offshore, Inc., Eagle Geophysical de Mexico,
Inc, Eagle Geophysical GOM, Inc., Eagle Front End Services, Ltd. and Eagle
Geophysical Management, Inc.
"Guaranty Agreement" means the duly authorized, executed and binding
written agreement of each Guarantor, in form an substance acceptable to Bank in
its discretion, whereby such Guarantor unconditionally guarantees the full
payment and performance of all Obligations of Borrower to Bank arising under
this Agreement and all of the other Loan Documents.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs),
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toxic substances or related materials, petroleum and petroleum products and
associated oil or natural gas exploration, production and development wastes or
any substances defined as "hazardous substances", "hazardous materials",
"hazardous wastes" or "toxic substances" under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Superfund Amendments
and Reauthorization Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other Environmental Laws now or
hereafter enacted or promulgated by any regulatory authority or governmental
body.
"High Yield Debt Offering" means that certain contemplated offering of up
to $100,000,000 of Senior Notes issued by Borrower on terms substantially as set
forth in the Summary of Indicative 144A Offering Terms dated May 5, 1998,
prepared by Prudential Securities Incorporated, and otherwise acceptable to Bank
in its discretion (it being understood that Bank has no objection to the amount
of such offering exceeding $100,000,000).
"Indebtedness" means, as to any Person, (a) all items of indebtedness or
liability (other than capital, surplus, deferred credits and reserves, as such)
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet as at the date as of which
Indebtedness is to be determined, (b) indebtedness secured by any mortgage,
pledge or lien existing on or encumbering property owned by the Person whose
Indebtedness is being determined, whether or not the indebtedness secured
thereby shall have been assumed (provided that if the indicated Person is not
liable for payment of such indebtedness, the amount thereof shall be deemed not
to exceed the book value of the encumbered property), and (c) all indebtedness
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted with recourse, agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such Person has agreed
to supply or advance funds (whether by way of loan, purchase of securities or
capital contribution, through a commitment to pay for property or services
regardless of the nondelivery of such property or the nonfurnishing of such
services or otherwise), or in respect of which such Person has otherwise become
directly or indirectly liable, contingently or otherwise, whether now existing
or hereafter arising.
"Initial Public Offering" means the initial public offering described in
the Form S-1 Registration Statement initially filed by Borrower on June 2, 1997.
"Interest Rate(s)" means the Floating Rate or the LIBOR Rate, as
applicable.
"Interest Period" means as to any LIBOR Loan the period commencing on and
including the date of such Loan (or on the effective date of the election
pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending
on and including the day preceding the same day (or if there is no such same
day, the day preceding the last day) in the 1st, 2nd, or 3rd calendar month
thereafter, as selected by Borrower in accordance with Section 2.04(B), and
thereafter such period commencing on and including the day immediately following
the last day of the then ending Interest Period for such Loan and ending on and
including the day preceding the day corresponding to the first day of such
Interest Period (or if there is no such corresponding day, the day preceding
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the last day), in the 1st, 2nd, or 3rd calendar month thereafter, as so selected
by Borrower; provided, however, that if any such Interest Period would otherwise
end on a day prior to a day that is not a Business Day it shall be extended so
as to end on the day prior to the next succeeding Business Day unless the same
would fall in a different calendar month, in which case such Interest Period
shall end on the day preceding the first Business Day preceding such next
succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other evidence
of Indebtedness or any other security (other than current trade and customer
accounts) of, or loan to, such Person.
"LIBOR" means, in respect to any Interest Period, the rate per annum
determined by the Bank to be the quotient of (a) the rate quoted, on an
immediately available funds basis, to the Bank, at approximately 10:00 a.m.
local time in Houston, Texas on the date one (1) Business Day prior to the first
day of such Interest Period, for the offering by leading banks in the London
interbank market of Dollars for deposit with the Bank for a period comparable to
such Interest Period and in an amount comparable to the amount of the Loan
determined by the Bank to be outstanding during such Interest Period and as to
which the LIBOR Rate is to be determined, divided by (b) 1.0, minus the Reserve
Percentage expressed as a decimal, for such Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest thereon
is to be computed on the basis of the LIBOR Rate.
"LIBOR Rate" means: (a) with respect to the principal amount outstanding
on LIBOR Loans from the date of this Agreement through July 31, 1998, a rate per
annum equal to the sum of LIBOR for the Interest Period for which interest is to
be determined at the LIBOR Rate, plus two percent (2.0%); and (b) with respect
to the principal amount outstanding on LIBOR Loans from August 1, 1998 until
paid, a rate per annum equal to the sum of LIBOR for the Interest Period for
which interest is to be determined at the LIBOR Rate, plus two and one-half
percent (2.5%).
"Limitation Period" means any period while any amount remains owing on
the Note and interest on such amount calculated at the Floating Rate, plus any
fees payable hereunder and deemed to be interest under applicable law, would
exceed the Maximum Rate.
"Loan" means, singly, any advance by Bank to Borrower pursuant to this
Agreement and "Loans" means, cumulatively, the aggregate sum of all money
advanced by Bank to Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement and all promissory notes, security
agreements, guaranties, and other instruments, documents, and agreements
executed and delivered pursuant to or in connection with this Agreement, as such
instruments, documents, and agreements may be amended, modified, renewed,
extended, or supplemented from time to time.
"Maturity Date" means October 5, 1998.
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"Maximum Rate" means the maximum non-usurious interest rate permissible
under applicable laws of the State of Texas or those of the United States of
America applicable to Bank.
"Multi-employer Plan" means a plan described in Section 4001(a)(3) of
ERISA which covers employees of Borrower or any ERISA Affiliate.
"Note" means that certain promissory note in the original face amount of
$29,000,000.00, dated of even date herewith, made by Borrower payable to the
order of Bank, in the form attached hereto as Exhibit "A," together with all
deferrals, renewals, extensions, amendments, modifications or rearrangements
thereof, which promissory note shall evidence the advances to Borrower by Bank
pursuant to Section 2.01 hereof.
"Obligations" means all obligations, indebtedness, and liabilities of
Borrower to Bank, now existing or hereafter arising, including, but not limited
to, the indebtedness evidenced by the Note, whether direct, indirect, related,
unrelated, fixed, contingent, specified, unspecified, joint, several, or joint
and several, and all interest and fees accruing thereon and all attorneys' fees
and other expenses incurred in the enforcement or collection thereof.
"Borrower" has the meaning set forth in the preamble hereof.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business that are not yet due and payable;
(B) Claims or liens for taxes, assessments, or similar charges, that are
due and remain unpaid, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long as
levy and execution thereon have been stayed and continue to be stayed,
and in Bank's sole judgment they do not, in the aggregate, materially
detract from the value of the property of Borrower or any Subsidiary, or
materially impair the use thereof in the operation of its business;
(C) Liens against equipment or fixtures of Borrower to secure the price
payable by Borrower for the purchase of, or improvements or accessions
to, such equipment or fixtures, respectively; and
(D) Liens in favor of Bank.
"Person" means an individual, company, corporation, partnership, limited
partnership, joint venture, trust, association, unincorporated organization or a
government or any agency or political subdivision thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from
time to time.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Request for Advance" means the written request by Borrower for an
advance by Bank pursuant to this Agreement, which Request for Advance shall be
in a form, and shall include the information and accompanying supporting
documentation, as prescribed in Exhibit "C" attached hereto.
"Required Number" means: in the case of notices hereunder (i) relative to
borrowings, prepayments, elections of the LIBOR Rate, selections of Interest
Periods for, or other transactions in respect of, LIBOR Loans: two (2) Business
Days; or (ii) relative to all transactions in respect of Base Rate Loans: one
(1) Business Day; it being understood, however, that in the case of notices
involving transactions in respect of more than one type of Loan (such as a
change in type of Loan in accordance with Section 2.04(B)), "Required Number"
means that number of days, as indicated above in respect of the Loans involved,
which would constitute the longest applicable period of time.
"Reserve Percentage" means for any Interest Period, the average (for such
Interest Period) maximum rate at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D of the Federal Reserve Board by member banks
of the Federal Reserve System as it applies to the Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Percentage shall reflect any other reserves
required to be maintained by member banks by reason of any regulatory change
against (i) any category of liabilities that includes deposits by reference to
which the interest rate for LIBOR Loans is to be determined as provided in this
Agreement or (ii) any category of extensions of credit or other assets that
include LIBOR Loans. As of the date of this Agreement the Reserve Percentage is
zero.
"Senior Debt" means all Indebtedness of Borrower and its Subsidiaries, on
a consolidated basis, including the Indebtedness of Borrower to Bank arising
hereunder, excluding any Indebtedness that has been subordinated to Borrower's
Indebtedness to Bank on terms and conditions acceptable to Bank, in its sole
discretion.
"Subsidiary" means (a) any corporation in which Borrower, directly or
indirectly through its Subsidiaries, owns more than fifty percent (50%) of the
stock of any class or classes having by the terms thereof the ordinary voting
power to elect a majority of the directors of such corporation; and (b) any
partnership, association, joint venture, or other entity in which Borrower,
directly or indirectly through its Subsidiaries, has more than a fifty percent
(50%) equity interest at the time.
"Tangible Net Worth" means the total assets of Borrower and its
Subsidiaries on a consolidated basis, exclusive of (a) those assets classified
as intangible, including, without limitation, goodwill, patents, trademarks,
trade names, copyrights, franchises and deferred charges, (b) treasury stock and
minority interests in any Person, (c) cash set apart and held in a sinking or
other analogous
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fund established for the purpose of redemption or other retirement of capital
stock, (d) to the extent not already deducted from total assets, allowances for
depreciation, depletion, obsolescence and/or amortization of properties,
uncollectible accounts, and contingent but probable liabilities as to which an
amount can be established, (e) deferred taxes and (f) all assets arising from
advances to officers, former officers or sales representatives of Borrower and
its Subsidiaries on a consolidated basis made outside of the ordinary course of
business; less total liabilities of Borrower and its Subsidiaries on a
consolidated basis; all of the above being determined in accordance with GAAP.
"Unmatured Event of Default" means any event or occurrence which solely
with the lapse of time or the giving of notice or both will ripen into an Event
of Default.
Undefined financial accounting terms used in this Agreement shall be
defined in accordance with GAAP.
ARTICLE II. THE LOAN
2.01 The Advancing Line. Upon the terms and conditions (including,
without limitation, the right of Bank to terminate the Advancing Commitment
hereunder upon an Event of Default or an Unmatured Event of Default) and relying
on the representations and warranties contained in this Agreement, Bank agrees,
for a period from and after the date hereof through the last Business Day prior
to the Maturity Date, to make advances for the account of Borrower from time to
time following receipt of a Request for Advance; provided, however, that the
aggregate principal amount of all such advances shall not exceed the amount of
the Advancing Commitment.
Through the last Business Day prior to the Maturity Date, Borrower may
use this advancing credit by borrowing up to the amount of the Advancing
Commitment in accordance with the terms and conditions of this Agreement, but
Borrower shall not be permitted to reborrow any portion of the Advancing
Commitment once it has been borrowed and prepaid. The borrowings made by
Borrower pursuant to the Advancing Commitment shall be made at the principal
office of Bank and shall be evidenced by the Note. The entire outstanding
principal amount of the Note is due on the Maturity Date.
2.02 Advances and Payments of Principal Under the Note. Each time an
advance is made against or payment is made on the Note, Bank is hereby
irrevocably authorized by Borrower to make appropriate entries of such in its
records in accordance with the usual and customary practices of accounting for
advances and payments on notes; provided, however, the failure of Bank to do so
shall not relieve Borrower of its correct liability hereunder or under the Note.
The aggregate unpaid amount of advances reflected by the notations by
Bank on its records or the ledger sheets affixed to the Note shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced to Borrower and outstanding under
this Agreement and interest on such amounts calculated in accordance with this
Agreement. Interest provided for in the Note and herein shall be calculated on
unpaid sums actually
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advanced and outstanding under the Note pursuant to the terms of this Agreement
and only for the period from the date or dates of such advances until repayment.
2.03 Prepayment and Conversion. Upon the Required Number of days notice
to the Bank, Borrower may: (a) without the payment of penalty or premium, prepay
the principal of the Loans, or (b) voluntarily convert the applicable Interest
Rate of any Loan prior to the termination of the applicable Interest Period in
whole or in part, from time to time; any partial payment or conversion to be
made in the sum of not less than $500,000 or any $100,000 increment in addition
thereto; provided that with respect to any such prepayment or conversion of any
Loan upon which interest is being calculated at the LIBOR Rate Borrower shall
reimburse the Bank on demand for any costs, including administrative costs,
incurred by the Bank as a result of such prepayment or conversion and any loss
incurred or to be incurred by the Bank in the redeployment of the funds released
by any such prepayment. Such loss shall be the difference, as reasonably
determined by Bank, between (i) Bank's gross return hereunder with respect to
that portion of the Loans which is prepaid, based on the applicable Interest
Rate for such portion of the Loans and (ii) any lesser amount realized by Bank
in deploying the funds received in repayment, or otherwise realized from that
portion of the Loans so prepaid, during the period from the date of the
prepayment until the end of the Interest Period for that portion of the Loans
prepaid; provided that Bank shall use its best efforts to redeploy such funds in
a commercially reasonable manner.
2.04 Interest Rate and Payments of Interest.
(A) Interest on Base Rate Loans shall be calculated on the basis of a
year of 365 or 366 days, as appropriate. Interest on LIBOR Loans shall be
calculated on the basis of a 360-day year, counting the actual number of
days elapsed. Interest on the outstanding principal balance of the Loans
shall accrue for each day at either the Floating Rate for such day or the
LIBOR Rate for the Interest Period which includes such day, all as
elected and specified (including specification as to length of Interest
Period, as permitted by the definition of that term, with respect to any
election of the LIBOR Rate) by Borrower in accordance with Section
2.04(B); provided that:
(i) In the absence of an election by Borrower of the LIBOR Rate,
or, having made such election but upon the Required Number of days
prior to the end of the then current Interest Period Borrower
fails or is not entitled under the terms of this Agreement to
elect to continue such Interest Rate and specify the applicable
Interest Period therefor, then upon the expiration of such then
current Interest Period, interest on the Loans shall accrue for
each day at the Floating Rate for such day, until Borrower,
pursuant to Section 2.04(B), elects a different Interest Rate and
specifies the Interest Period for the Loans.
(ii) Interest accruing on any LIBOR Loan during any Interest
Period shall be payable on the last Business Day of such then
current Interest Period; provided, however, that all accrued
interest on any LIBOR Loan converted
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or prepaid pursuant to Section 2.03 shall be paid immediately upon
such prepayment or conversion.
(B) By at least the Required Number of days prior to the advance of any
Loan hereunder, Borrower shall select the initial Interest Rate to be
charged on such Loan, and from time to time thereafter Borrower may
elect, on at least the Required Number of days' irrevocable prior written
(or telephoned, promptly confirmed by written) notice to the Bank, to
change the Interest Rate on any Loan to any other Interest Rate
(including, when applicable, the selection of the Interest Period);
provided that; (i) Borrower shall not select an Interest Period that
extends beyond the Maturity Date; (ii) except as otherwise provided in
Section 2.03 no such change from the LIBOR Rate to another Interest Rate
shall become effective on a day other than the day, which must be a
Business Day, next following the last day of the Interest Period last
effective for such LIBOR Loan; (iii) any elections made by Borrower
pursuant to this Section 2.04(B) shall be in the amount of $100,000, plus
any additional increment of $100,000; (iv) notwithstanding anything
herein to the contrary, Borrower may not make any election under this
Section 2.04(B) that would result in Loans outstanding at more than three
(3) different LIBOR Rates without the written agreement of the Bank to do
so; and (v) the first day of each Interest Period as to a LIBOR Loan
shall be a Business Day.
(C) Interest on Base Rate Loans shall be paid monthly in arrears on the
first Business Day of each calendar month commencing with any month
during which interest begins to accrue at the Floating Rate, as elected
by Borrower pursuant to Section 2.04(B), and on the date the principal of
such Loans shall be due (at stated maturity, on acceleration, or
otherwise).
(D) Interest on past-due principal shall accrue at the greater of the
applicable Floating Rate plus three percent (3.00%) or LIBOR plus five
percent (5.00%) until such principal is paid in full, and shall be
payable upon demand by the Bank.
(E) The Bank shall notify Borrower of the current Base Rate and of the
current LIBOR Rate from time to time upon request by Borrower.
(F) It is the intention of the parties hereto to conform strictly to
applicable usury laws as in effect from time to time. Accordingly, if any
transactions contemplated hereby would be usurious under applicable Law
(including the laws of the United States of America, or of any other
jurisdiction whose laws may be mandatorily applicable), then, in that
event, notwithstanding anything to the contrary in this Agreement, or any
other agreement entered into in connection with this Agreement, it is
agreed the aggregate of all consideration that constitutes interest under
applicable law that is contracted for, charged, or received under this
Agreement, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement shall under no circumstances exceed the
Maximum Rate, and any excess shall be credited to Borrower by Bank (or,
if such consideration shall have been paid in full,
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such excess refunded to Borrower by Bank). All sums paid, or agreed to be
paid, to the Bank for use, forbearance, and detention of the indebtedness
of Borrower by the Bank shall, to the extent permitted by applicable
laws, be amortized, pro rated, allocated, and spread throughout the full
term of such indebtedness until such indebtedness is paid in full so that
the actual rate of interest is uniform, but does not exceed the Maximum
Rate, throughout the full term thereof. If at any time the applicable
Interest Rate, which shall be deemed for purposes of this Section
2.04(F), only, to include any other fees, charges, or other forms of
consideration which constitute interest under applicable law that is
contracted for, charged, or received under this Agreement or any other
agreement entered into in connection with this Agreement, exceeds the
Maximum Rate, the rate of interest to accrue pursuant to this Agreement
shall be limited, notwithstanding anything to the contrary in this
Agreement, to the Maximum Rate, but any subsequent reductions in the
Interest Rate otherwise provided for herein shall not reduce the interest
to accrue pursuant to this Agreement below the Maximum Rate until the
total amount of interest accrued pursuant to this Agreement equals the
amount of interest that would have accrued if a varying rate per annum
equal to the otherwise applicable Interest Rate had at all times been in
effect. If the total amount of interest paid or accrued pursuant to this
Agreement under the foregoing provisions is less than the total amount of
interest that would have accrued if a varying rate per annum equal to the
otherwise applicable Interest Rate had at all times been in effect, then
Borrower agrees to pay upon final maturity of the Loans an amount equal
to the difference between (a) the lesser of (i) the amount of interest
that would have accrued if the Maximum Rate had at all times been in
effect or (ii) the amount of interest that would have accrued if a
varying rate per annum equal to the otherwise applicable Interest Rate
had at all times been in effect, and (b) the amount of interest accrued
in accordance with the other provisions of this Agreement.
2.05 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a result of any
regulatory change
(i) the basis of taxation of payments to Bank of the principal of,
or interest on, any LIBOR Loan or any other amounts due under this
Agreement in respect of any such LIBOR Loan (except for taxes
imposed on the overall net income or receipts of Bank, and
franchise or other taxes imposed generally on Bank), by the
jurisdiction (or any political subdivision therein) in which Bank
has its principal office is changed;
(ii) any reserve, special deposit, or similar requirement
(including without limitation any reserve requirement under
regulations of the Board of Governors of the Federal Reserve
System) against assets of, deposits with, or for the account of,
or credit extended by Bank, is imposed, increased, modified, or
deemed applicable; or
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(iii) any other condition affecting this Agreement or any LIBOR
Loan is imposed on Bank or (in the case of LIBOR Loans) the London
interbank market;
and the result of any of the foregoing is to increase the actual direct
cost to Bank of making or maintaining any such LIBOR Loan or to reduce
the amount of any sum received by Bank hereunder in respect thereof (and
such increase or reduction shall not have been compensated by a
corresponding increase in the interest rate applicable to the respective
Loans), by an amount deemed by Bank to be material (such increases in
cost and reductions in amounts receivable being herein called "Increased
Costs"), then Borrower shall pay to Bank, within thirty (30) days after
its demand, such additional amount or amounts as will compensate Bank for
those Increased Costs. The Bank will not demand to be compensated by
Borrower for such Increased Costs unless the Bank generally makes such
demands to its other LIBOR Loan customers who are similarly situated. A
certificate of Bank setting forth the basis for the determination of such
amount necessary to compensate the Bank as aforesaid, accompanied by
documentation showing reasonable support for such increased costs or
reduced sums received by Bank, shall be delivered to Borrower and shall
be conclusive, save for manifest error, as to such determination and such
amount.
(B) Notwithstanding the foregoing provisions of this Section 2.05, in the
event that by reason of any regulatory change the Bank either (i) incurs
Increased Costs based on, or measured by, the excess above a specified
level of the amount of a category of deposits or other liabilities of
Bank that includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank that includes LIBOR
Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if Bank so
elects by notice to Borrower, the obligation of Bank to make or convert
Loans of any other type into LIBOR Loans hereunder shall be suspended
until the earlier of the date such regulatory change ceases to be in
effect or the date Borrower and Bank agree upon an alternative method of
determining the interest rate payable by Borrower on LIBOR Loans, and all
LIBOR Loans of Bank then outstanding shall either be repaid or be
converted into a Base Rate Loan (if not otherwise prohibited under the
terms of this Agreement) at Borrower's option.
(C) Bank agrees that upon the occurrence of any regulatory change giving
rise to the operation of the first paragraph of this Section 2.05, it
will, if requested by Borrower and to the extent permitted by law or by
the relevant government authority, for a period of thirty (30) days
endeavor in good faith to avoid or minimize the increase in cost or
reduction in amount receivable resulting from such regulatory change;
provided, however, that such change can be made in such a manner that
Bank, in its sole determination, suffers no economic, legal, regulatory,
or other disadvantage. Any expense incurred by Bank in so doing shall be
paid by Borrower on delivery to Borrower of a certificate as to the
amount of such expense, which
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certificate shall be conclusive in the absence of manifest error. Nothing
in this paragraph shall affect or postpone the obligations of Borrower
set forth in any other paragraph of this Section 2.05.
2.06 Substitute Rate. Anything herein to the contrary notwithstanding,
if within two (2) Business Days prior to the first day of any Interest Period
for a LIBOR Loan the Bank is not, for any reason whatsoever, quoted rates for
the offering of Dollars for deposit with it in the London interbank market for a
period and amount relevant to the computation of the rate of interest on LIBOR
Loans for such Interest Period, the Bank shall give Borrower prompt notice
thereof and, if Borrower elects to obtain a Loan for the amount previously
requested as a LIBOR Loan, then on what would otherwise have been the first day
of such Interest Period such Loans shall be made as Base Rate Loans (if not
otherwise prohibited under the terms of this Agreement), in accordance with the
election procedures set forth in Section 2.04(B); provided, however, that prior
to the effective date of such election, interest shall be calculated at the
Floating Rate.
2.07 Change of Law. Notwithstanding any other provision herein, in the
event that any change in any applicable law, rule or regulation or in the
interpretation or administration thereof shall make it unlawful for the Bank to
(i) honor any commitment it may have hereunder to make any LIBOR Loan, then such
commitment shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR
Loans of the Bank then outstanding shall be repaid or, if Borrower so elects,
converted to Base Rate Loans (if not otherwise prohibited under the terms of
this Agreement) in accordance with the election procedures set forth in Section
2.04(B); provided, however, that prior to the effective date of such election,
interest shall be calculated at the Floating Rate. Any remaining commitment of
Bank hereunder to make LIBOR Loans (but not other Loans) shall terminate
forthwith. Upon the occurrence of any such change, the Bank shall promptly
notify Borrower thereof, and shall furnish to Borrower in writing evidence
thereof certified by the Bank.
Any repayment or conversion of any LIBOR Loan which is required under
this Section 2.07 or under 2.05(B) shall be effected by payment thereof,
together with accrued interest thereon, on demand, and concurrently there shall
occur the borrowing of the corresponding Base Rate Loan as provided herein.
If any repayment to Bank of any LIBOR Loan (including conversions
thereof) is made under this Section 2.07 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, Borrower shall
pay to Bank upon its request such amount or amounts as will compensate it for
the amount by which the rate of interest on such Loan immediately prior to such
repayment exceeds the stated rate of interest on relending or reinvesting the
funds received in connection with such prepayment, in each case for the period
from the date of such prepayment to the Business Day next succeeding the last
day of such then current Interest Period, all as determined by Bank in its good
faith discretion.
2.08 Advances to Satisfy Obligations of Borrower. Bank may, but shall
not be obligated to, make advances hereunder and apply same to the satisfaction
of any condition, warranty, representation or covenant of Borrower contained in
this Agreement and/or the Guaranty and the funds so advanced and applied shall
be part of the Loan proceeds advanced under this Agreement
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and evidenced by the Note. Bank shall endeavor to give written notice to
Borrower at least five (5) Business Days prior to making any such advance
pursuant to this Section, provided that Bank shall not be obligated to give any
such notice if, in good faith, it has determined that a delay in making any such
advance would have a material adverse effect on the business, operations or
financial condition of Borrower.
2.09 Commitment Fee. As consideration for the commitment of Bank to make
Loans to Borrower through the Maturity Date pursuant to this Agreement, Borrower
agrees to pay to Bank within three (3) Business Days of receipt of Bank's
statement as to the quarterly periods ending June 30 and September 30 (except
the first period shall be for a period of time from the Closing to September 30,
1998) during the period commencing on the date of this Agreement to and
including the Maturity Date, and at the Maturity Date, a fee equal to one half
of one percent (0.5%) per annum (computed on the basis of 365 or 366 days, as
the case may be) multiplied by an amount equal to the daily average excess, if
any, of: (a) the Advancing Commitment hereunder, over (b) the aggregate
principal amount outstanding on the Note throughout the period from the date of
this Agreement or previous calculation date provided above, whichever is later,
to the relevant calculation date or the Maturity Date, as the case may be.
2.10 Facility Fee. As consideration for the commitment of Bank to make
Loans to Borrower pursuant to this Agreement, Borrower shall pay to Bank a fee
("Facility Fee") equal to Twenty-Five Thousand Dollars ($25,000.00), $10,000.00
of which has been paid and the balance of which shall be paid at Closing.
2.11 Supplemental Fee. If Borrower has not consummated the High Yield
Debt Offering by September 4, 1998, then within thirty (30) days thereafter
Borrower shall pay to Bank an additional fee equal to the greater of: (a) One
Hundred Thousand Dollars ($100,000.00), or (b) one percent (1%) of all advances
made from Bank to Borrower under the terms of this Agreement..
ARTICLE III. CONDITIONS
The obligation of Bank to make advances of the Loans referred to in
Article II of this Agreement is subject to the prior or contemporaneous
satisfaction of the following conditions precedent stated in this Article III.
3.01 Receipt of Note, Agreement, and Certificate of Compliance. Bank
shall have received the Note, multiple counterparts of this Agreement, as
requested by Bank, and the Certificate of Compliance, all duly executed by an
authorized officer of Borrower.
3.02 Receipt of Guaranty Agreements. Bank shall have received the
Guaranty Agreement of each Guarantor, each duly executed by an authorized
officer of such Guarantor.
3.03 Receipt of Organizational Documents. Bank shall have received from
Borrower, from each Guarantor other than EFES, and from the general partner of
EFES the Articles of Incorporation and bylaws of such Person, certified as being
true and correct by the secretary or an assistant secretary of such Person, and
shall have received from EFES its Certificate of Limited
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Partnership and its Agreement of Limited Partnership, certified as being true
and correct by the secretary or an assistant secretary of the general partner of
EFES.
3.04 Receipt of Certified Copy of Corporate Proceedings and Certificates
of Incumbency. Bank shall have received from Borrower, from each Guarantor
other than EFES, and from the general partner of EFES on behalf of EFES, copies
of all resolutions of its board of directors authorizing, with respect to
Borrower, the transactions set forth in this Agreement, and the execution of
this Agreement, the Note, and the Security Instruments, and with respect to each
Guarantor, the transaction set forth in its Guaranty Agreement and its execution
of such Guaranty Agreement, such copy or copies to be certified by the secretary
or an assistant secretary as being true and correct and in full force and effect
as of the date hereof. In addition, Bank shall have received from Borrower, from
each Guarantor other than EFES, and from the general partner of EFES, a
certificate of incumbency signed by the secretary or an assistant secretary of
such Person setting forth (a) the names of the officers executing those of the
Loan Documents to which it is a party, (b) the office(s) to which such Persons
have been elected and in which they presently serve and (c) an original specimen
signature of each such Person.
3.05 Receipt of Certificates of Authority and Certificates of Good
Standing. Bank shall have received certificates, as of the most recent dates
practicable, of the Secretary of State of the jurisdiction in which Borrower,
each Guarantor, and the general partner of EFES is formed attesting to the
existence of such Person, and of each state (or of a comparable governmental
authority in any applicable foreign jurisdiction) in which such Person is
qualified to do business as a foreign corporation attesting to such
qualification, and from the department of revenue or taxation of each of the
foregoing states or governmental authorities, as to the good standing of such
Person.
3.06 UCC Search. The results of a Uniform Commercial Code/security
interest search showing all financing statements and other documents or
instruments on file against Borrower in the Offices of the Secretaries of State
of the States of Texas and Delaware, such searches to be as of a date no more
than ten (10) days prior to the date of the Closing.
3.07 Opinion of Counsel. Bank shall have received an opinion of counsel
to Borrower in the form attached hereto as Exhibit "D".
3.08 Fees. Bank shall have contemporaneously received the fees required
by Section 2.10.
3.09 Financial Statements. Bank shall have received the Financial
Statements of Borrower as of March 31, 1998, showing financial information
consistent with that previously provided to Bank.
3.10 Request for Advance. Bank shall have received from Borrower a
Request for Advance.
3.11 Accuracy of Representations and Warranties and No Event of Default.
The representations and warranties contained in Article IV of this Agreement
shall be true and correct
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in all material respects on the date of the making of such Loans or advances
with the same effect as though such representations and warranties had been made
on such date; and no Event of Default shall have occurred and be continuing or
will have occurred at the completion of the making of such Loans or advances.
3.12 Legal Matters Satisfactory to Counsel to Bank. All legal matters
incident to the consummation of the transactions hereby contemplated shall be
satisfactory to counsel for Bank.
3.13 No Material Adverse Change. No material adverse change shall have
occurred since the date of this Agreement in the condition, financial or
otherwise, of Borrower.
3.14 Legal Fees. All legal fees and disbursements owed to Bank's special
counsel who provided representation to the Bank in connection with this
Agreement or any amendment hereto shall have been paid.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make the Loan
hereunder, Borrower represents and warrants to Bank (which representations and
warranties will survive the delivery of the Note) that:
4.01 Existence and Good Standing. Borrower and each of its Subsidiaries
is a corporation, duly organized, legally existing and in good standing under
the laws of its jurisdiction of incorporation and is duly qualified and in good
standing as a foreign corporation in all jurisdictions wherein the property
owned or the business transacted by it makes such qualification necessary, other
than those jurisdictions wherein the failure to so qualify does not have a
material adverse effect on Borrower.
4.02 Due Authorization. The execution and delivery by Borrower of this
Agreement and the borrowings hereunder; the execution and delivery by Borrower
of the Note and the Security Instruments; and the repayment by Borrower of
Indebtedness evidenced by the Note and interest and fees provided in the Note
and this Agreement (a) are within the corporate power of Borrower; (b) have been
duly authorized by all necessary corporate action; and (c) do not and will not
(i) require the consent of any regulatory authority, governmental body, or any
other Person, (ii) violate any provision of law, the certificate of
incorporation, the articles of incorporation, or the bylaws of Borrower, (iii)
cause a default to occur under the terms and provisions of any indenture,
instrument or other agreement to which Borrower is a party or by which its
property may be presently bound or encumbered, or (iv) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest, charge
or other encumbrance in, upon or of any of the properties or assets of Borrower
under any such indenture, instrument or other agreement, other than under any of
the Security Instruments.
4.03 Valid and Binding Obligations. This Agreement, the Note, and the
Security Instruments are the legal, valid and binding obligations of and
enforceable against Borrower in
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accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other laws of general application affecting creditors' rights and
judicial decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to Bank hereunder are and will be
complete and correct in all material respects; are and will be prepared in
accordance with GAAP and practices consistently applied; and do and will fairly
reflect the financial condition and the results of the operations of Borrower
and its Subsidiaries in all material respects as of the dates and for the period
stated therein (subject only to normal year-end audit adjustments with respect
to such unaudited interim statements); and no material adverse change has since
occurred in the condition, financial or otherwise, of Borrower or its
Subsidiaries (taken as a whole).
4.05 Liabilities, Litigation and Restrictions. Except as disclosed in
the Financial Statements, neither Borrower nor any of its Subsidiaries has any
liabilities, direct or contingent, which may materially and adversely affect its
business or assets. Except as described on Schedule 4.05, there is no litigation
or other action of any nature pending before any court, governmental
instrumentality, regulatory authority or arbitral body or, to the knowledge of
Borrower, threatened against or affecting Borrower, or any of its Subsidiaries,
which might reasonably be expected to result in any material, adverse change in
the business or assets of Borrower or its Subsidiaries (taken as a whole). No
unusual or unduly burdensome restriction, restraint or hazard exists by
contract, law, governmental regulation or otherwise relative to the business or
material properties of Borrower or any of its Subsidiaries which might
reasonably be expected to result in any material, adverse change in the business
or assets of Borrower or its Subsidiaries (taken as a whole) other than such as
relate generally to Persons engaged in the business activities conducted by
Borrower or any applicable Subsidiary.
4.06 Margin Stock. None of the proceeds of the Loans will be used for
the purpose of buying or carrying margin stock.
4.07 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any governmental or
public authority or any third party is required to authorize, or is otherwise
required in connection with the valid execution and delivery by Borrower of this
Agreement, the Note, and the Security Instruments or any instrument contemplated
hereby, the repayment by Borrower of advances against the Note and interest and
fees provided in the Note and this Agreement, or the performance by Borrower of
its obligations under any of the foregoing.
4.08 Compliance with Laws, Rules, Regulations and Orders. To the best of
the knowledge and belief of Borrower, neither the business nor any of the
activities of Borrower or any of its Subsidiaries, as presently conducted,
violates any law or any rule, regulation or directive of any applicable
judicial, administrative or other governmental instrumentality (including, but
not by way of limitation, any law or any rule, regulation or directive of any
judicial, administrative or other governmental instrumentality relating to
zoning, to any Environmental Law, or to the stabilization of wages or prices the
result of which violation would have a material adverse effect on Borrower
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or its Subsidiaries (taken as a whole), and Borrower and each of its
Subsidiaries possess all licenses, approvals, registrations, permits and other
authorizations necessary to enable it to carry on its respective business in all
material respects as now conducted, and all such licenses, approvals,
registrations, permits and other authorizations are in full force and effect;
and Borrower has no reason to believe that it will be unable to obtain the
renewal of any such licenses, approvals, registrations, permits and other
authorizations.
4.09 Proper Filing of Tax Returns and Payment of Taxes Due. Borrower and
each of its Subsidiaries have duly and properly filed all United States Income
Tax returns and all other tax returns which are required to be filed, and has
paid all taxes due pursuant to said returns or pursuant to any assessment
received, except such taxes, if any, as are being contested in good faith and as
to which adequate provisions and disclosures have been made; and the respective
charges and reserves on the books of Borrower and each of its Subsidiaries with
respect to any taxes or other governmental charges are adequate.
4.10 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any plan; no notice
of intent to terminate a plan has been filed, nor has any plan been terminated;
no circumstances exist which constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administrate a plan, nor has the PBGC instituted any such proceedings;
neither Borrower nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multi-employer plan; Borrower and
each ERISA Affiliate have met their minimum funding requirements under ERISA
with respect to all of their plans and the present value of all vested benefits
under each plan exceeds the fair market value of all plan assets allocable to
such benefits, as determined on the most recent valuation date of the plan and
in accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of Borrower or any ERISA Affiliate to the
PBGC or the plan under Title IV of ERISA; and neither Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
4.11 Investment Company Act Compliance. Borrower is not, nor is it
directly or indirectly controlled by or acting on behalf of any person or entity
which is, an investment company or an "affiliated person" of an investment
company within the meaning of the Investment Company Act of 1940.
4.12 Public Utility Holding Company Act Compliance. Borrower is not a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.13 Environmental Laws. To the best of the knowledge and belief of
Borrower:
(a) no property of Borrower or any of its Subsidiaries is currently on,
or has ever been on, any federal or state list of superfund sites as
listed on the Environmental Protection
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Agency National Priority List or any comparable state registries or list
in any state of the United States (collectively "Superfund Sites");
(b) no Hazardous Substances have in the past been generated,
transported, and or disposed of, by Borrower or any of its Subsidiaries
at any Superfund Site;
(c) except in accordance with a valid permit, license, certificate
or approval of the relevant regulatory authority or governmental body,
there has been no emission, spill, release, disposal or discharge of any
Hazardous Substance into or upon (i) the air, (ii) soils or any
improvements located thereon, (iii) surface water or groundwater, or (iv)
the sewer, septic system or waste treatment, storage or disposal system
servicing any property of Borrower or any of its Subsidiaries; and
(d) no complaint, order, directive, claim, citation, notice of
environmental report, notice of investigation or other notice by any
regulatory authority or governmental body or any other Person with
respect to (i) air emissions, (ii) spills, releases or discharges to
soils or any improvements located thereon, surface water, groundwater or
the sewer, septic system or waste treatment, storage or disposal systems
servicing any property of Borrower or any of its Subsidiaries, (iii)
solid or liquid waste disposal, (iv) the use, generation, storage,
transportation or disposal of any Hazardous Substance, or (v) other
environmental, health or safety matters affecting any property of
Borrower or any of its Subsidiaries, any improvements located thereon, or
the business thereon conducted, has been received by Borrower or any of
its Subsidiaries, nor has Borrower been given oral or written notice
thereof;
provided, however, that the representations and warranties set forth in
subparagraphs (c) and (d) above shall apply only to events and conditions which
either resulted in (i) a continuing lien or encumbrance on the property of
Borrower or (ii) otherwise materially affect Borrower's use or operation of its
property or Borrower's ability to repay the Indebtedness evidenced by the Note.
4.14 Subsidiaries. Borrower has no Subsidiaries other than those
listed on Schedule 4.14 hereto, and the jurisdiction of incorporation and
principal place of business of each of Borrower's Subsidiaries is set forth on
Schedule 4.14.
4.15 Existing Indebtedness. All Indebtedness of Borrower and any
Subsidiary existing as of the Closing, other than accounts payable incurred in
the ordinary course of business that are not more than 30 days overdue, is
described in Schedule 4.15; and neither Borrower nor any Subsidiary is in
default with respect to any of such Indebtedness, except as described on
Schedule 4.15.
4.16 Material Commitments. Except as described in Schedule 4.16
hereto, (A) neither Borrower nor any Subsidiary has any material leases,
contracts or commitments of any kind (including, without limitation, employment
agreements; collective bargaining agreements; powers of attorney; distribution
arrangements; patent license agreements; contracts for future purchase or
delivery of goods or rendering of services; bonuses, pension and retirement
plans; or accrued
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vacation pay, insurance and welfare agreements) requiring aggregate expenditure
by Borrower in excess of $500,000 per year; (B) to the best of Borrower's
knowledge, all parties to all such material leases, contracts, and other
commitments to which Borrower or any Subsidiary is a party have materially
complied with the provisions of such leases, contracts, and other commitments;
and (C) to the best of Borrower's knowledge, no party is in material default
under any thereof and no event has occurred that but for the giving of notice or
the passage of time, or both, would constitute a material default.
4.17 Insurance. Borrower maintains insurance with respect to the
properties and business of Borrower providing coverage for such liabilities,
casualties, risks and contingencies and in such amounts as it believes is
customary in the industry. As of the date hereof, the insurance coverage
reflected on the Certificate(s) of Insurance attached hereto as Schedule 4.17 is
in full force and effect, and, except as disclosed on Schedule 4.17, all
premiums due thereon have been paid.
4.18 Material Misstatements and Omissions. No express representation or
warranty by or with respect to Borrower or any Subsidiary contained herein or in
any certificate or other document required by this Agreement and furnished by
Borrower or any Subsidiary contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower covenants, so long as any Indebtedness of Borrower to Bank
remains unpaid under this Agreement or Bank remains obligated to make advances
hereunder, to:
5.01 Use of Funds. Use the proceeds advanced under the Loan to finance
Borrower's working capital needs and for other general corporate purposes, and
furnish Bank such evidence as it may reasonably require with respect to such
use.
5.02 Maintenance and Access to Records. Keep adequate records in
accordance with good accounting practices, of all of Borrower's transactions so
that at any time, and from time to time, its true and complete financial
condition may be readily determined and, at Bank's reasonable request, make all
financial records available for Bank's inspection and permit Bank to make and
take away copies thereof.
5.03 Monthly Unaudited Financial Statements of Borrower. Deliver to
Bank, on or before the sixtieth (60th) day after the end of each calendar month,
unaudited consolidated and consolidating Financial Statements of Borrower and
its Subsidiaries as at the end of such month and from the beginning of each
fiscal year to the end of each such month, which Financial Statements shall be
certified by the president or chief financial officer of Borrower as being true
and correct, subject to changes resulting from year-end audit adjustments.
5.04 Annual Audited Financial Statements of Borrower. Deliver to Bank,
on or before the one hundred and twentieth (120th) day after the close of each
fiscal year of Borrower: (a) the annual audited consolidated Financial
Statements of Borrower and its Subsidiaries, and
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(b) unaudited consolidating Financial Statements of Borrower and its
Subsidiaries, certified by the president or chief financial officer of Borrower
as being true and correct.
5.05 Compliance Certificate. Deliver to Bank a Compliance Certificate:
(a) at the time of Borrower's execution of this Agreement, and (b) on the first
day of each month thereafter prior to the Maturity Date.
5.06 Statement of Material Adverse Change in Condition. Deliver to Bank,
promptly upon any officer of Borrower having knowledge of any material adverse
change in the condition, financial or otherwise, of Borrower or its Subsidiaries
(or any event or circumstance that would result in any such material adverse
change in condition including, but not limited to, litigation and changes in
business), a statement of the president or vice president of Borrower, setting
forth the change in condition or event or circumstance likely to result in any
such change and the steps being taken by Borrower or the applicable Subsidiary
with respect to such change in condition or event or circumstance.
5.07 Additional Information. Furnish to Bank all information, if any,
filed with the SEC by Borrower and all information routinely provided by
Borrower to its shareholders, generally. Furnish to the Bank, promptly upon the
Bank's reasonable request, such additional financial or other information
concerning the assets, liabilities, operations, and transactions of Borrower.
5.08 Compliance with Laws and Payment of Assessments and Charges. Comply
with all applicable statutes and government regulations, including, without
limitation, ERISA, and pay all taxes, assessments, governmental charges, claims
for labor, supplies, rent, and other obligations which, if unpaid, might become
a lien against its property, except any of the foregoing being contested in good
faith and as to which satisfactory accruals have been provided, unless failure
to comply or pay would not have a material adverse effect on the business,
operations or financial condition of Borrower.
5.09 Maintenance of Existence and Good Standing. Maintain Borrower's and
its Subsidiaries' corporate existence and good standing in the jurisdiction of
its incorporation, and in all jurisdictions wherein the property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
other than those jurisdictions wherein the failure to so qualify will not have a
material adverse effect on Borrower, or on any of Borrower's Subsidiaries
considered on a consolidated basis with Borrower.
5.10 Further Assurances. Promptly cure any defects in the execution and
delivery of this Agreement, the Note, the Security Instruments, or any other
instrument referred to herein or executed in connection with the Note, and upon
notice, immediately execute and deliver to Bank, all such other and further
instruments as may be reasonably required or desired by Bank from time to time
in compliance with the covenants and agreements made in this Agreement.
5.11 Initial Expenses of Bank. Pay all fees and expenses of ▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P., special legal counsel for Bank, incurred in connection with the
negotiation and preparation
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of this Agreement, the Note, the Security Instruments, or any other instrument
referred to herein or executed in connection with the Note, the satisfaction of
the conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.12 Subsequent Expenses of Bank. Upon request, promptly reimburse Bank
for all reasonable amounts expended, advanced or incurred by Bank to collect the
Note or to enforce the rights of Bank under this Agreement, the Note, the
Security Instruments, or any other instrument referred to herein or executed in
connection with the Note, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to Borrower by Bank and which amounts
will include, but not be limited to, (a) all court costs, (b) attorneys' fees,
(c) fees of auditors and accountants, (d) investigation expenses, (e) internal
fees of Bank's in-house legal counsel, (f) fees and expenses incurred in
connection with Bank's participation as a member of the creditors' committee in
a case commenced under Title 11 of the United States Code or other similar law
of the United States, the State of Texas or any other jurisdiction, (g) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
ss.ss.362 Title 11 of the United States Code, and (h) fees and expenses incurred
in connection with any action pursuant to ss.ss.1129 Title 11 of the United
States Code, incurred by Bank in connection with the collection of any sums due
under this Agreement, together with interest at the Floating Rate per annum,
calculated on a basis of a year of three hundred sixty-five (365) or three
hundred sixty-six (366) days, on each such amount from the date of notification
to Borrower that the same was expended, advanced or incurred by Bank until the
date it is repaid to Bank, with the obligations under this Section 5.13,
surviving the non-assumption of this Agreement in a case commenced under Title
11 of the United States Code or other similar law of the United States, the
State of Texas or any other jurisdiction and being binding upon Borrower or a
trustee, receiver or liquidator of any such party appointed in any such case.
5.13 Maintenance of Tangible Property. Maintain all of Borrower's and
its Subsidiaries' tangible property that is material to the conduct of
Borrower's or any of its Subsidiaries' businesses in good repair and condition
and make all necessary replacements thereof and operate such property in a good
and workmanlike manner in accordance with standard industry practices.
5.14 Maintenance of Insurance. Continue to maintain, or cause to be
maintained, insurance with respect to the properties and business of Borrower
and its Subsidiaries against such liabilities, casualties, risks and
contingencies and in such amounts as is customary in the industry, in an amount
and form, and underwritten by an insurer or insurers, as are reasonably
acceptable to Bank, and furnish to Bank, at the execution of this Agreement and
annually thereafter, certificates evidencing such insurance.
5.15 Inspection of Tangible Assets/Right of Audit. Permit (or cause to
be permitted) any authorized representative of Bank, to visit and inspect (at
the risk of Bank and/or such representative) any tangible asset of Borrower and
its Subsidiaries, and/or to audit the books and records of Borrower or any of
its Subsidiaries, during normal business hours. Bank shall give Borrower five
(5) Business Days prior written notice of any such inspection or audit, and no
such inspection or audit shall occur more often than once per calendar quarter;
provided, however, that if Bank has a good faith belief that a condition exists
that constitutes an Event Default or an Unmatured Event of Default, which may
reasonably be expected to have a material adverse effect
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on the business, operations, or financial condition of Borrower, the Bank shall
be entitled to conduct any such visit and inspection, and/or any such audit,
notwithstanding that a prior visit and inspection, or audit, respectively, was
conducted in the same calendar quarter, and without the necessity of giving five
(5) Business Days prior written notice.
5.16 Payment of Note and Performance of Obligations. Pay the Note
according to the reading, tenor and effect thereof, and do and perform every act
and discharge all of the obligations provided to be performed and discharged
hereunder.
5.17 ERISA Reports. Promptly after the filing or receiving thereof,
copies of all reports, including annual reports, and notices which Borrower or
any of its Subsidiaries files with or receives from the PBGC or the U.S.
Department of Labor under ERISA; and promptly after Borrower knows or has reason
to know that any Reportable Event or Prohibited Transaction has occurred with
respect to any plan or that the PBGC, Borrower, or any of Borrower's
Subsidiaries has instituted or will institute proceedings under Title IV of
ERISA to terminate any plan, Borrower will deliver to Bank a certificate of the
chief financial officer of Borrower setting forth details as to such Reportable
Event or Prohibited Transaction or plan termination and the action Borrower or
its applicable Subsidiary proposes to take with respect thereto.
5.18 Minimum Current Ratio. Maintain a ratio of Current Assets to
Current Liabilities, excluding current maturities of long-term debt, of not less
than 1.15 to 1.0.
5.19 Tangible Net Worth Requirement. Maintain a total Tangible Net Worth
of not less than the greater of: (a) $45,000,000.00, or (b) ninety-five percent
(95%) of the equity raised by Borrower as the result of the Initial Public
Offering; increasing by seventy percent (70%) of net income (excluding losses)
of Borrower and its Subsidiaries on a consolidated basis subsequent to September
30, 1997.
5.20 Cash Flow to Debt Service Ratio. Maintain a ratio of Cash Flow to
Debt Service for each fiscal quarter of not less than 1.25 to 1.0.
5.21 Maximum Funded Senior Debt and Capital Leases to Capitalization.
Maintain a ratio between: (a) the sum of the outstanding balance at any time,
and from time to time, of Senior Debt plus the remaining obligatory payments on
all capital leases of Borrower and its Subsidiaries on a consolidated basis, and
(b) the sum of the outstanding balance at any time, and from time to time, of
Senior Debt, plus the remaining obligatory payments under capital leases of
Borrower and its Subsidiaries on a consolidated basis, plus the Tangible Net
Worth, of not greater than the following: .45 to 1.00 at June 30, 1998; and .70
to 1.0 at closing of the High Yield Debt Offering and at September 30, 1998;
provided, however, that Bank shall have the right to adjust the ratios set forth
in this Section if Borrower fails to consummate the High Yield Debt Offering by
September 4, 1998, or if Borrower raises additional equity, in which event the
adjusted ratios shall be determined by Bank, in its discretion, based on its
then-prevailing credit policies and parameters, as applied to similarly situated
Borrowers.
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5.22 Interest Coverage Ratio. Maintain a Consolidated Fixed Charge
Coverage Ratio for the preceding four full fiscal quarters for which quarterly
Financial Statements are available, calculated on a pro forma basis as if such
Indebtedness had been incurred and the proceeds applied at the beginning of such
four fiscal quarters, of not less than 2.7 to 1.0.
5.23 Compliance with Environmental Laws. Comply in all material respects
with any and all requirements of law, including, without limitation,
Environmental Laws, (a) related to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or affected by
any property of Borrower or its Subsidiaries, or (b) required for the
performance or conduct of its operations, including, without limitation, all
permits, licenses, registrations, approvals and authorizations, and, in this
regard, comply fully and in a timely manner with, and cause all employees, crew
members, agents, contractors, subcontractors and future lessees (pursuant to
appropriate lease provisions) of Borrower and its Subsidiaries while such
Persons are acting within the scope of their relationship with Borrower or its
Subsidiaries, to so comply with, all requirements of law, including, without
limitation, Environmental Laws, and other requirements with respect to the
property of Borrower and its Subsidiaries and the operation thereof necessary or
appropriate to enable Borrower to fulfill its obligations under all requirements
of law, including, without limitation, Environmental Laws, applicable to the
use, generation, handling, storage, treatment, transport and disposal of any
Hazardous Substances now or hereafter located or present on or under any such
property.
5.24 Hazardous Substances Indemnification. Indemnify and hold Bank
harmless from and against any and all claims, losses, damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings and orders,
judgments, remedial actions, requirements and enforcement actions of any kind,
and all costs and expenses incurred in connection therewith (including, without
limitation, attorneys' fees and expenses), arising directly or indirectly, in
whole or in part, out of (a) the presence of any Hazardous Substances on, under
or from the property of Borrower or its Subsidiaries, whether prior to or during
the term hereof, or (b) any activity carried on or undertaken on or off such
property, whether prior to or during the term hereof, and whether by Borrower or
its Subsidiaries or any predecessor in title or any employees, agents,
contractors or subcontractors of Borrower or its Subsidiaries or any predecessor
in title, or any third Persons at any time occupying or present on such
property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous Substances
at any time located or present on or under such property; with the foregoing
indemnity further applying to any residual contamination on or under the
property of Borrower or its Subsidiaries, or any property of any other Person,
or affecting any natural resources, and to any contamination of any property or
natural resources arising in connection with the generation, use, handling,
storage, transportation or disposal of any Hazardous Substances, irrespective of
whether any of such activities were or will be undertaken in accordance with
applicable requirements of law, including, without limitation, Environmental
Laws, and surviving satisfaction of all Indebtedness of Borrower to Bank and the
termination of this Agreement, provided, further, that the claims and other
actions of any kind against Bank which give rise to such indemnity are not
barred by the applicable statute of limitations at the time such claims or
actions are instituted and such indemnity shall not extend to any act or
omission by Bank or any Affiliate of Bank or any of Bank's employees or agents
with respect to the relevant property subsequent to Bank becoming the owner of,
taking possession of to the exclusion
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of Borrower or assuming operations of any property previously owned by Borrower
and with respect to which property such claim, loss, damage, liability, fine,
penalty, charge, proceeding, order, judgment, action or requirement arises
subsequent to the acquisition of title thereto, taking possession thereof or
assumption of operations thereon by Bank or any Affiliate of Bank or any of
Bank's employees or agents. Notwithstanding anything herein to the contrary, the
provisions of this Section 5.23 shall survive any termination of this Agreement
and shall survive the payment and performance in full of all Obligations owed by
Borrower to Bank.
5.25 Changes in Management. Notify Bank of any change in the senior
management of Borrower, as such management exists as of the date hereof.
5.26 Payment of Taxes, Etc. Borrower and its Subsidiaries will each pay
or cause to be paid when due, all taxes, assessments, and charges or levies
imposed upon it or on any of its property or which it is required to withhold
and pay, except where contested in good faith by appropriate proceedings with
adequate reserves therefor having been set aside on its books, provided,
however, that Borrower and its Subsidiaries shall each pay or cause to be paid
all such taxes, assessments, charges, or levies forthwith whenever foreclosure
on any lien that may have attached (or security therefor) appears imminent.
5.27 Notice of Litigation. Borrower and its Subsidiaries will each give
notice to the Bank within ten (10) Business Days of the occurrence of: (A) any
litigation or proceeding in which it is a party if an adverse decision therein
might reasonably be expected to require it to pay more than $250,000.00 or
deliver (or lose title to) assets the value of which exceeds such sum (whether
or not the claim is considered to be covered by insurance); and (B) the
institution of any other suit or proceeding involving Borrower that would
reasonably be expected to materially and adversely affect its operations,
financial condition, property, or business prospects.
5.28 Notices Regarding Account Debtors. Upon the receipt by Borrower of
any notice of the death of an Account Debtor or a partner thereof, or of the
dissolution, termination of existence, insolvency, business failure, appointment
of a receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, an Account
Debtor, Borrower will immediately give the Bank written advice thereof.
5.29 Notice of Change of Principal Offices. Borrower will notify the
Bank at least ten (10) Business Days in advance of any change in the location of
the principal office of Borrower or any of its Subsidiaries.
5.30 Payment of Accounts Payable. Pay its accounts payable not later
than thirty (30) days after their due date, except such as are being contested
in good faith and as to which adequate provision or accrual has been made,
provided that up to an aggregate amount of $500,000 of accounts payable not
being so contested may be overdue by more than such number of days.
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5.31 Ship Mortgage. If Borrower has not consummated the High Yield Debt
Offering by September 4, 1998, then promptly thereafter, and in no event later
than September 18, 1998, Borrower shall grant to Bank, or shall cause an
Affiliate of Borrower to grant to Bank, a duly executed and enforceable first
preferred ship mortgage covering the Panamanian flag vessel AUSTRAL HORIZON,
Official Number 15397-86-C, securing all the Obligations of Borrower to Bank
arising under this Agreement, in form and substance satisfactory to Bank, in its
discretion.
ARTICLE VI. NEGATIVE COVENANTS
Without the prior written consent of Bank and so long as any part of the
principal or interest on the Note shall remain unpaid or Bank remains obligated
to make advances hereunder, Borrower and its Subsidiaries will not:
6.01 Mortgages or Pledges of Assets. Create, incur, assume or permit to
exist, any mortgage, pledge, security interest, lien or encumbrance on any of
its properties or assets (now owned or hereafter acquired), except that the
foregoing restrictions shall not apply to any matters that would constitute or
result in Permitted Encumbrances.
6.02 Negative Pledges. Enter into a covenant with any third party in
which Borrower or any such Subsidiary agrees not to create, incur, assume or
permit to exist, any mortgage, pledge, security interest, lien or encumbrance on
any of its properties or assets (now owned or hereafter acquired).
6.03 Nature of Business. Permit any material change to be made in the
character of its business as conducted as of the date hereof, or permit any
Subsidiary to permit any material change to be made in the character of such
Subsidiary's business as conducted as of the date hereof.
6.04 Sales of Assets. Sell, lease, assign, transfer or otherwise dispose
of, in one or any series of related transactions, all or any part of its assets,
if such transfer is material to Borrower's operations, nor enter into any
arrangement, directly or indirectly, with any Person to sell and rent or lease
back such assets or any part thereof which are intended to be used for
substantially the same purpose or purposes as the assets sold or transferred.
6.05 Cancellation of Insurance. Allow any insurance policy required to
be carried hereunder to be terminated or lapse or expire without provision for
adequate renewal thereof.
6.06 Margin Stock. Neither Borrower nor any Subsidiary will directly or
indirectly apply any part of the proceeds of the Loans to the purchasing or
carrying of any "margin stock" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, or any regulations, interpretations
or rulings thereunder.
6.07 Changes in Business Structure. Consolidate or merge with, or
purchase (for cash or securities) all or substantially all of the assets or all
or any part of the capital stock of any corporation, firm, association or
enterprise, or allow any such entity to be merged into Borrower or any of its
Subsidiaries, nor shall Borrower or any of its Subsidiaries dissolve or
liquidate.
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6.08 Transactions with Affiliates. Enter into any transaction between or
among Borrower and/or any Subsidiaries with any Affiliate on terms that are less
favorable than could be obtained in an arms-length transaction with a Person
that is not an Affiliate, provided, however, than Borrower may perform its
obligations under the existing agreements with Seitel, Inc. listed on Schedule
6.08 hereto.
ARTICLE VII. EVENTS OF DEFAULT
7.01 Enumeration of Events of Default . Any of the following events shall
be considered an Event of Default as that term is used herein:
(a) Default shall be made by Borrower in the payment of any
installment of principal on the Note,
(b) Default shall be made by Borrower in the payment of any
installment of interest on the Note, or any fees or other monetary
obligation payable hereunder, and such default shall remain unremedied in
excess of three (3) Business Days after notice being given by Bank,
(c) Default shall be made by Borrower in the due observance or
performance of any affirmative covenant required in this Agreement, the
Note, or any Security Instrument, and such default shall remain
unremedied for in excess of thirty (30) days after the earlier of: (i)
such default becoming known to Borrower, or (ii) notice being given by
Bank.
(d) Default shall be made by Borrower in the due observance or
performance of any negative covenant required in this Agreement, the
Note, or any Security Instruments. (e) Any representation or warranty
herein made by Borrower proves to have been untrue in any material
respect, or any representation, statement (including Financial
Statements), certificate or data furnished or made by Borrower to Bank in
connection herewith proves to have been untrue in any material respect as
of the date the facts therein set forth were stated or certified;
(f) Default shall be made by Borrower (as principal or guarantor
or other surety) in payment or performance of any bond, debenture, note
or other evidence of Indebtedness for borrowed money, or any other credit
agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing
in excess of $1,000,000.00 in the aggregate; and such default shall
remain unremedied for in excess of the period of grace, if any, with
respect thereto, with the effect of accelerating the maturity of any such
Indebtedness;
(g) Borrower applies for or consents to the appointment of a
receiver, trustee or liquidator of it or all or a substantial part of its
assets, or (ii) files a voluntary petition commencing a case under Title
11 of the United States Code, seeking liquidation, reorganization or
rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief or other similar law of the United States, the State of Texas or
any other jurisdiction, or
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(iii) makes a general assignment for the benefit of creditors, or (iv) is
unable, or admits in writing its inability to pay its debts generally as
they become due, or (v) files an answer admitting the material
allegations of a petition filed against it in any case commenced under
Title 11 of the United States Code or any reorganization, insolvency,
conservatorship or similar proceeding under any bankruptcy, insolvency,
debtor's relief or other similar law of the United States, the State of
Texas or any other jurisdiction;
(h) An order, judgment or decree shall be entered against Borrower
by any court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting relief
under Title 11 of the United States Code or under any bankruptcy,
insolvency, debtor's relief or other similar law of the United States,
the State of Texas or any other jurisdiction, approving a petition
seeking reorganization or an arrangement of its debts or appointing a
receiver, trustee, conservator, custodian or liquidator of it or all or
any substantial part of its assets, and the failure to have such order,
judgment or decree dismissed within ten (10) days of its entry;
(i) Borrower has concealed, removed, or permitted to be concealed
or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them; or has made or suffered a transfer
of any of its property which are or would be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or has made any
transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or has
suffered or permitted, while insolvent, any creditor to obtain a lien
upon any of its property through legal proceedings or distraint which is
not vacated within thirty (30) days from the date thereof;
(j) An "Event of Default," as defined in either the Credit
Agreement dated October 21, 1997, among Borrower, certain of its
Subsidiaries and Bank or the Foreign Affiliate Loan Agreement, as defined
therein, has occurred and is continuing.
7.02 Rights Upon Unmatured Event of Default. At any time that there
exists an Unmatured Event of Default, any obligation of the Bank hereunder to
make advances to or for the benefit of Borrower shall be suspended unless and
until the Bank shall reinstate the same in writing, the Unmatured Event of
Default shall have been waived by the Bank or the relevant Unmatured Event of
Default shall have been remedied prior to ripening into an Event of Default.
7.03 Rights Upon Default. Upon the happening of an Event of Default
specified in Subsections 7.01 (g) or (h), the entire aggregate principal amount
of all Indebtedness then outstanding hereunder and the interest accrued thereon
shall automatically become immediately due and payable, and upon the happening
and continuation of any other Event of Default, Bank may declare the entire
aggregate principal amount of all Indebtedness then outstanding hereunder and
the interest accrued thereon immediately due and payable. In either case, the
entire principal and interest shall thereupon become immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate maturity or notice of acceleration of maturity) and without
presentment, demand, protest, notice of protest or other notice of default or
dishonor of any kind, except as provided to the contrary elsewhere herein, all
of which are hereby expressly waived by Borrower.
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Upon the happening and continuation of any Event of Default, all
obligations (if any) of Bank hereunder shall immediately cease and terminate
unless and until Bank shall reinstate the same in writing.
ARTICLE VIII. MISCELLANEOUS
8.01 Security Interests in Deposits and Right of Offset or Banker's Lien.
Borrower hereby transfers, assigns and pledges to Bank and/or grants to Bank a
security interest (as security for the payment and/or performance of the
obligations of Borrower under this Agreement and the Note, with such interest of
Bank to be retransferred, reassigned and/or released by Bank at the expense of
Borrower upon payment in full and/or complete performance by Borrower of all
such obligations) and the right, exercisable at such time as any obligation
hereunder shall mature, whether by acceleration of maturity or otherwise of
offset or banker's lien against all funds or other property of Borrower now or
hereafter or from time to time on deposit with or in the possession of Bank,
including, without limitation, all certificates of deposit and other depository
accounts.
8.02 Survival of Representations, Warranties and Covenants. All
representations and warranties of Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Note, or any renewal or extension of this Agreement or the
Note, or Bank remains obligated to make advances hereunder.
8.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, telex, telegram or
hand):
(a) If to Bank:
BANK ONE, TEXAS, N.A.
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Energy Lending
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Notices and/or reports sent to Bank pursuant to Sections 5.03, 5.04,
and 5.05 shall also be sent to:
BANK ONE, TEXAS, N.A.
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Monitoring Unit
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) If to Borrower:
EAGLE GEOPHYSICAL, INC.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by proper written notice hereunder to the other, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
8.04 Parties in Interest. All covenants and agreements herein contained
by or on behalf of Borrower shall be binding upon Borrower and its successors
and assigns and inure to the benefit of Bank and its successors and assigns.
8.05 Renewals and Extensions. All provisions of this Agreement relating
to the Note shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Note.
8.06 No Waiver by Bank. No course of dealing on the part of Bank, its
officers or employees, nor any failure or delay by Bank with respect to
exercising any of its rights, powers or privileges under this Agreement, the
Note, the Security Instruments or any other instrument referred to herein or
executed in connection with the Note shall operate as a waiver thereof. The
rights and remedies of Bank under this Agreement, the Note, the Security
Instruments or any other instrument referred to herein or executed in connection
with the Note shall be cumulative and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy. In the event that Borrower is unable to satisfy any covenant, warranty
or condition herein, no advance of loan proceeds by Bank shall have the effect
of precluding Bank from thereafter declaring any such continuing inability to be
an Event of Default as hereinabove provided.
8.07 INDEMNIFICATION. BORROWER HEREBY RELEASES AND AGREES TO INDEMNIFY
AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND ATTORNEYS
(COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL CLAIMS,
DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND UNACCRUED,
INCLUDING ANY OF THE FOREGOING ALLEGED TO HAVE RESULTED FROM NEGLIGENCE OF ANY
OF THE BANK PARTIES, UNLESS ATTRIBUTABLE TO BANK PARTIES' OWN GROSS NEGLIGENCE
OR WILFUL MISCONDUCT, THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST ANY OF BANK
PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION OR
PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR ARISING OUT OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
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8.08 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
8.09 Incorporation of Exhibits. The Exhibits and Schedules attached to
this Agreement are incorporated herein for all purposes and shall be considered
a part of this Agreement.
8.10 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in this Agreement, the Note, the Security Instruments or in
any other instrument referred to herein or executed in connection with the Note
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof or of any other instrument referred to herein or executed
in connection herewith.
8.11 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of Bank and Borrower and no other Person shall
have standing to require satisfaction of such provisions in accordance with
their terms or be entitled to assume that Bank will refuse to make advances in
the absence of strict compliance with any or all thereof and any or all of such
provisions may be freely waived in whole or in part by Bank at any time if in
its sole discretion it deems it advisable to do so.
8.12 Amendments or Modifications of this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
8.13 Agreement Construed as an Entirety. This Agreement, for convenience
only, has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties and other legal relations of the parties
hereto shall be determined from this Agreement as an entirety and without regard
to the aforesaid division into Articles and Sections and without regard to
headings prefixed to said Articles or Sections.
8.14 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative.
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT, TOGETHER
WITH THE NOTE AND THE SECURITY INSTRUMENTS, CONSTRUED TOGETHER WITH THE
ADVANCING CREDIT AGREEMENT AND ALL INSTRUMENTS EXECUTED PURSUANT THERETO,
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO,
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WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.16 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of the Note, the Security
Instruments or any other instrument referred to herein or executed in connection
with the Note, the provisions of this Agreement shall control.
8.17 Time, Place and Method of Payments. All payments required pursuant
to this Agreement or the Note shall be made in immediately available funds;
shall be deemed received by Bank on the next Business Day following receipt if
such receipt is after 3:00 p.m., on any Business Day, and shall be made at the
principal banking quarters of Bank.
8.18 Non-Application of Chapter 15 of Texas Credit Code. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Security Instruments or to the transactions
contemplated hereby.
8.19 Counterpart Execution. This Agreement may be executed as one
instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
8.20 Disclosure and Use of Confidential Information. Bank agrees to keep
confidential all information disclosed to it by Borrower in connection with this
Agreement or the Loans or otherwise made available to Bank pursuant to the terms
hereof, with the exception of information that is either publicly available or
obtained by Bank from third parties not known by the Bank to be subject to any
confidentiality agreement with Borrower (collectively, excluding such
exceptions, the "Confidential Information") and Bank shall not, without
Borrower's prior written consent, disclose to any third party, firm, corporation
or entity (other than regulatory agencies having jurisdiction over Bank) such
Confidential Information, except: (a) as required by law and (b) to third-party
consultants of Bank, including, but not limited to, attorneys and accountants,
on a "need to know" basis in connection with the negotiation, execution, or
administration of this Agreement or any of the Loan Documents, or the
enforcement of any Borrower's Obligations or any of Bank's rights thereunder,
provided that such third-party consultants' possession and/or use of such
Confidential Information shall be subject to the provisions of this Section.
Bank shall use such Confidential Information only for the purposes of its
evaluation, administration, and enforcement of the Agreement, the Loan
Documents, and the Loans.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
BORROWER:
EAGLE GEOPHYSICAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President and Chief
Financial Officer
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
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