1
EXHIBIT 10.08
================================================================================
CREDIT AGREEMENT
DATED AS OF MARCH 25, 1998
BETWEEN
▇▇▇▇▇▇ OIL CORPORATION
AND
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
================================================================================
-1-
2
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDITS............................................1
Section 1.1. Revolving Credit.......................................1
Section 1.2. Revolving Credit Loans.................................2
Section 1.3. Letters of Credit......................................2
Section 1.4. Manner and Disbursement of Revolving Credit Loans......3
SECTION 2. INTEREST, FEES, TERM AND TERMINATION...................4
Section 2.1. Interest Rate Options..................................4
Section 2.2. Minimum and Maximum Amounts...........................5
Section 2.3. Manner of Rate Selection...............................5
Section 2.4. Change of Law..........................................6
Section 2.5. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR.....................................6
Section 2.6. Taxes and Increased Costs..............................6
Section 2.7. Funding Indemnity......................................8
Section 2.8. Lending Branch.........................................8
Section 2.9. Bank's Duty to Mitigate................................8
Section 2.10. Discretion of Bank as to Manner of Funding.............9
SECTION 3. FEES, APPLICATION, PREPAYMENTS, COMPUTATIONS, AND
NOTATIONS..............................................9
Section 3.1. Facility Fee...........................................9
Section 3.2. Unused Line Fee........................................9
Section 3.3. Audit Fees.............................................9
Section 3.4. Letter of Credit Fees..................................9
Section 3.5. Computation of Interest and Fees......................10
Section 3.6. Change in Capital Adequacy Requirements...............10
Section 3.7. Term and Termination..................................10
Section 3.8. Place and Application of Payments and Collections.....11
Section 3.9. Voluntary Prepayments.................................13
Section 3.9. Mandatory Prepayment..................................13
Section 3.10. Computation of Obligations Outstanding................13
Section 3.11. Notations.............................................14
-i-
3
SECTION 4. COLLATERAL............................................14
Section 4.1. Collateral............................................14
Section 4.2. Collateral Proceeds...................................14
Section 4.3. Further Assurances....................................15
Section 4.4. Release of Kaneb MLP Units............................15
SECTION 5. DEFINITIONS; INTERPRETATION...........................15
Section 5.1. Definitions...........................................15
Section 5.2. Interpretation........................................27
SECTION 6. REPRESENTATIONS AND WARRANTIES........................27
Section 6.1. Organization and Qualification........................27
Section 6.2. Subsidiaries..........................................27
Section 6.3. Corporate Authority and Validity of Obligations.......28
Section 6.4. Use of Proceeds; Margin Stock.........................28
Section 6.5. Financial Reports.....................................28
Section 6.6. No Material Adverse Change............................29
Section 6.7. Full Disclosure.......................................29
Section 6.8. Good Title............................................29
Section 6.9. Litigation and Other Controversies....................29
Section 6.10. Taxes.................................................29
Section 6.11. Approvals.............................................29
Section 6.12. Affiliate Transactions................................30
Section 6.13. Investment Company; Public Utility Holding Company....30
Section 6.14. ERISA.................................................30
Section 6.15. Compliance with Laws..................................30
Section 6.16. Other Agreements......................................31
Section 6.17. No Default............................................31
Section 6.18. Purchase Agreement....................................31
Section 6.19. Solvency..............................................31
SECTION 7. CONDITIONS PRECEDENT..................................31
Section 7.1. All Advances..........................................31
Section 7.2. Initial Advance.......................................32
SECTION 8. COVENANTS.............................................34
Section 8.1. Maintenance of Business...............................34
Section 8.2. Maintenance of Properties.............................34
-ii-
4
Section 8.3. Taxes and Assessments.................................35
Section 8.4. Insurance.............................................35
Section 8.5. Financial Reports.....................................35
Section 8.6. Inspection; Appraisals................................37
Section 8.7. Tangible Net Worth....................................38
Section 8.8. Leverage Ratio........................................38
Section 8.9. Debt Coverage Ratio...................................38
Section 8.10. Capital Expenditures..................................38
Section 8.11. Indebtedness for Borrowed Money.......................38
Section 8.12. Liens.................................................39
Section 8.13. Investments, Acquisitions, Loans, Advances and
Guaranties........................................39
Section 8.14. Operating Leases......................................41
Section 8.15. Mergers, Consolidations and Sales.....................41
Section 8.16. Maintenance of Subsidiaries...........................41
Section 8.17. Dividends and Certain Other Restricted Payments.......41
Section 8.18. ERISA.................................................41
Section 8.19. Compliance with Laws..................................42
Section 8.20. Burdensome Contracts With Affiliates..................42
Section 8.21. No Changes in Fiscal Year.............................42
Section 8.22. Formation of Subsidiaries.............................42
Section 8.23. Change in the Nature of Business......................42
SECTION 9. EVENTS OF DEFAULT AND REMEDIES........................43
Section 9.1. Events of Default.....................................43
Section 9.2. Non-Bankruptcy Defaults...............................45
Section 9.3. Bankruptcy Defaults...................................46
Section 9.4. Collateral for Undrawn Letters of Credit..............46
SECTION 10. MISCELLANEOUS.........................................46
Section 10.1. Non-Business Days.....................................46
Section 10.2. No Waiver, Cumulative Remedies........................46
Section 10.3. Amendments, Etc.......................................47
Section 10.4. Costs and Expenses....................................47
Section 10.5. Documentary Taxes.....................................47
Section 10.6. Survival of Representations...........................48
Section 10.7. Notices...............................................48
Section 10.8. Participations........................................49
Section 10.9. Construction..........................................49
Section 10.10. Headings..............................................49
-iii-
5
Section 10.11. Severability of Provisions............................49
Section 10.12. Counterparts..........................................49
Section 10.13. Excess Interest.......................................49
Section 10.14. Binding Nature, Governing Law, Etc....................50
Section 10.15. Submission to Jurisdiction; Waiver of Jury Trial.....50
Signature....................................................................51
Exhibit A -- Revolving Credit Note
Exhibit B -- Borrowing Base Certificate
Exhibit C -- Compliance Certificate
Schedule 6.2 -- Subsidiaries
-iv-
6
CREDIT AGREEMENT
▇▇▇▇▇▇ Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
The undersigned, ▇▇▇▇▇▇ Oil Corporation, a Delaware corporation (the
"Company"), applies to you (the "Bank") for your commitment, subject to the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to extend credit to the Company, all as more
fully hereinafter set forth.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit. Subject to the terms and conditions
hereof, the Bank agrees to extend a revolving credit (the "Revolving Credit") to
the Company which may be availed of by the Company from time to time during the
period from and including the date hereof to but not including the Termination
Date, at which time the commitment of the Bank to extend credit under the
Revolving Credit shall expire. The Revolving Credit may be utilized by the
Company in the form of Loans and Letters of Credit, all as more fully
hereinafter set forth, provided that the aggregate principal amount of Loans and
Letters of Credit outstanding at any one time shall not exceed the lesser of (i)
$20,000,000 (such amount as the same may be reduced pursuant hereto being
hereinafter referred to as the "Revolving Credit Commitment") and (ii) the
Borrowing Base as then determined and computed. During the period from and
including the date hereof to but not including the Termination Date, the Company
may use the Revolving Credit Commitment by borrowing, repaying and reborrowing
Loans in whole or in part and/or by having the Bank issue Letters of Credit,
having such Letters of Credit expire or otherwise terminate without having been
drawn upon or, if drawn upon, reimbursing the Bank for each such drawing, and
having the Bank issue new Letters of Credit, all in accordance with the terms
and conditions of this Agreement. Notwithstanding any other provision of this
Agreement to the contrary, (i) the Bank is imposing the Present Excise Tax
Reserve effective immediately against the amount of the Revolving Credit which
the Company may otherwise request hereunder and (ii) the Bank shall have the
right from time to time to establish additional reserves against the amount of
Revolving Credit which the Company may otherwise request hereunder in such
amounts and with respect to such matters as the Bank shall deem necessary or
appropriate in its reasonable judgment. The amount of such reserves (including
the Present Excise Tax Reserve) shall be subtracted from the Borrowing Base when
calculating the amount of availability under the Revolving Credit Commitment.
Additionally, the Bank may from time to time reduce the
7
percentages applicable to Eligible Accounts and Eligible Inventory as they
relate to the Borrowing Base if the Bank determines in its reasonable judgment
that there has been a material adverse change in circumstances relating to any
or all of such Collateral from those circumstances in existence on the date of
this Agreement or in the condition (financial or otherwise) of the Company. The
Bank agrees to give the Company thirty (30) Business Days' prior notice of the
establishment of any such reserve (other than the Present Excise Tax Reserve) or
the reduction of any such percentage.
Section 1.2. Revolving Credit Loans. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the Company in the
form of loans (individually a "Loan" and collectively the "Loans"). All Loans
shall be made against and evidenced by a single promissory note of the Company
in the form (with appropriate insertions) attached hereto as Exhibit A (the
"Revolving Credit Note") payable to the order of the Bank in the principal
amount of its Revolving Credit Commitment. The Revolving Credit Note shall be
dated the date of issuance thereof, be expressed to bear interest as set forth
in Section 2 hereof, and be expressed to mature on the Termination Date. Without
regard to the principal amount of the Revolving Credit Note stated on its face,
the actual principal amount at any time outstanding and owing by the Company on
account of the Revolving Credit Note shall be the sum of all Loans made
hereunder less all payments of principal actually received by the Bank.
Section 1.3. Letters of Credit. (a) General Terms. Subject to the terms
and conditions hereof, the Revolving Credit may be availed of by the Company in
the form of standby and commercial letters of credit issued by the Bank for the
account of the Company (individually a "Letter of Credit" and collectively the
"Letters of Credit"), provided that the aggregate amount of Letters of Credit
issued and outstanding hereunder shall not at any one time exceed $10,000,000
(such amount as the same may be reduced pursuant hereto being hereinafter
referred to as the "L/C Commitment"). For purposes of this Agreement, a Letter
of Credit shall be deemed outstanding as of any time in an amount equal to the
maximum amount which could be drawn thereunder under any circumstances and over
any period of time plus any unreimbursed drawings then outstanding with respect
thereto. If and to the extent any Letter of Credit expires or otherwise
terminates without having been drawn upon, the availability under the Revolving
Credit Commitment shall to such extent be reinstated.
(b) Term. Each Letter of Credit issued hereunder shall expire not later
than the earlier of (i) twelve (12) months from the date of issuance (or be
cancelable not later than twelve (12) months from the date of issuance and each
renewal) or (ii) the Termination Date or (iii) to the extent fully secured at
all times on and after the date of issuance by cash collateral maintained with
and under the sole custody and control of the Bank pursuant to agreements in
form, scope and substance reasonably satisfactory to the Bank, ninety (90) days
past the Termination Date.
-2-
8
(c) General Characteristics. Each Letter of Credit issued hereunder shall
be payable in U.S. dollars, conform to the general requirements of the Bank for
the issuance of standby or commercial letters of credit, as the case may be, as
to form and substance, and be a letter of credit which the Bank may lawfully
issue.
(d) Applications. At the time the Company requests each Letter of Credit to
be issued (or prior to the first issuance of a Letter of Credit in the case of a
continuing application), the Company shall execute and deliver to the Bank an
application for such Letter of Credit in the form then customarily prescribed by
the Bank (individually an "Application" and collectively the "Applications").
The current form of the Bank's Applications are attached hereto as Schedule 1.3
(Standby) and Schedule 1.3 (Commercial) hereto. Subject to the other provisions
of this subsection, the obligation of the Company to reimburse the Bank for
drawings under a Letter of Credit shall be governed by the Application for such
Letter of Credit. Anything contained in the Applications to the contrary
notwithstanding, (i) in the event the Bank is not reimbursed by the Company for
the amount the Bank pays on any draft drawn under a Letter of Credit issued
hereunder by 1:30 p.m. (Chicago time) on the date when such drawing is paid, the
obligation of the Company to reimburse the Bank for the amount of such draft
paid shall bear interest (which the Company hereby promises to pay on demand)
from and after the date the draft is paid until payment in full thereof at the
rate per annum determined by adding 2% to the Domestic Rate as from time to time
in effect, (ii) the Company shall pay fees in connection with each Letter of
Credit as set forth in Section 2 hereof, (iii) except as otherwise provided in
Sections 3 and 4 hereof, prior to the occurrence of an Event of Default the Bank
will not call for additional collateral security for the obligations of the
Company under the Applications other than the collateral security contemplated
by this Agreement and the Collateral Documents and collateral security
consisting of rights in goods (or documents of title evidencing the same)
financed under such Applications, and (iv) except as otherwise provided in
Sections 3 and 4 hereof, prior to the occurrence of an Event of Default the Bank
will not call for the funding of a Letter of Credit by the Company prior to
being presented with a draft drawn thereunder (or, in the event the draft is a
time draft, prior to its due date).
Section 1.4. Manner and Disbursement of Revolving Credit Loans. (a) The
Company shall give written or telephonic notice to the Bank (which notice shall
be irrevocable once given) by no later than 1:00 p.m. (Chicago time) on the date
the Company requests the Bank to make a Revolving Credit Loan hereunder. Each
such notice shall specify the date of the Revolving Credit Loan requested (which
must be a Business Day) and the amount of such Revolving Credit Loan. The
Company agrees that the Bank may rely upon any written or telephonic notice
given by any person the Bank reasonably believes is an Authorized Representative
without the necessity of independent investigation.
-3-
9
(b) The Company hereby irrevocably authorizes the Bank to make Revolving
Credit Loans from time to time hereunder for payment of any Obligation then due
and payable (whether such Obligation is for interest then due on a Revolving
Credit Loan, reimbursement under an Application or otherwise), and any such
Revolving Credit Loan may be made without regard to the provisions of Section 7
hereof. The Company acknowledges and agrees, however, that the Bank shall not be
under any obligation to make a Revolving Credit Loan under this Section 1.4(b),
and the Bank shall incur no liability to the Company or any other Person for
refusing to make a Revolving Credit Loan under this Section 1.4(b).
(c) Subject to the provisions of Section 7 hereof, the proceeds of each
Revolving Credit Loan made under Section 1.4(a) hereof shall be made available
to the Company at the principal office of the Bank in Chicago, Illinois, in
immediately available funds, in the case of the initial Revolving Credit Loan
made hereunder, in accordance with the terms of the written disbursement
instructions of the Company, and, in the case of each subsequent Revolving
Credit Loan, by deposit to the Company's general account with the Bank known as
Account Number ▇▇▇-▇▇▇-▇. The proceeds of each Revolving Credit Loan made under
Section 1.4(b) hereof shall be disbursed by the Bank by way of direct payment of
the relevant Obligation.
SECTION 2. INTEREST, FEES, TERM AND TERMINATION.
Section 2.1. Interest Rate Options. (a) Generally. Subject to all of
the terms and conditions of this Section 2, portions of the principal
indebtedness evidenced by the Revolving Credit Note (all of the indebtedness
evidenced by the Revolving Credit Note bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Domestic Rate (the
"Domestic Rate Portion") or with reference to an Adjusted LIBOR ("LIBOR
Portions") and Portions may be converted from time to time from one basis to the
other. All of the indebtedness evidenced by the Revolving Credit Note which is
not part of a LIBOR Portion shall constitute a single Domestic Rate Portion. All
of the indebtedness evidenced by the Revolving Credit Note which bears interest
with reference to a particular Adjusted LIBOR for a particular Interest Period
shall constitute a single LIBOR Portion. There shall not be more than ten (10)
LIBOR Portions applicable to the Revolving Credit Note outstanding at any one
time. Anything contained herein to the contrary notwithstanding, the obligation
of the Bank to create, continue or effect by conversion any LIBOR Portion shall
be conditioned upon the fact that at the time no Default or Event of Default
shall have occurred and be continuing. The Company hereby promises to pay
interest on each Portion at the rates and times specified in this Section 2.
(b) Domestic Rate Portion. The Domestic Rate Portion shall bear interest at
the Domestic Rate as in effect from time to time, provided that if the Domestic
Rate Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such
-4-
10
Portion shall bear interest, whether before or after judgment, until payment in
full thereof at the rate per annum determined by adding 2% to the interest rate
which would otherwise be applicable thereto from time to time. Interest on the
Domestic Rate Portion shall be payable monthly on the first Business Day of each
month in each year (commencing April 1, 1998) and at maturity of the Revolving
Credit Note and interest after maturity (whether by lapse of time, acceleration
or otherwise) shall be due and payable upon demand. Any change in the interest
rate on the Domestic Rate Portion resulting from a change in the Domestic Rate
shall be effective on the date of the relevant change in the Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding
1-1/2% to the Adjusted LIBOR for such Interest Period, provided that if any
LIBOR Portion is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full thereof through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding 2% to the interest
rate which would otherwise be applicable thereto (provided that if any Interest
Period is longer than one month, then interest on the LIBOR Portion having such
Interest Period shall be due and payable on the date occurring each month after
the date such Interest Period began and on the last day of such Interest
Period), and effective at the end of such Interest Period such LIBOR Portion
shall automatically be converted into and added to the Domestic Rate Portion and
shall thereafter bear interest at the interest rate applicable to the Domestic
Rate Portion after default. Interest on each LIBOR Portion shall be due and
payable on the last day of each Interest Period applicable thereto and interest
after maturity (whether by lapse of time, acceleration or otherwise) shall be
due and payable upon demand. The Company shall notify the Bank on or before
11:00 a.m. (Chicago time) on the third Business Day preceding the end of an
Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to
continue as a LIBOR Portion, in which event the Company shall notify the Bank of
the new Interest Period selected therefor, and in the event the Company shall
fail to so notify the Bank, such LIBOR Portion shall automatically be converted
into and added to the Domestic Rate Portion as of and on the last day of such
Interest Period.
Section 2.2. Minimum and Maximum Amounts. Each LIBOR Portion shall be
in a minimum amount of $500,000 or such greater amount which is an integral
multiple of $50,000.
Section 2.3. Manner of Rate Selection. The Company shall notify the
Bank by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the Domestic Rate Portion be converted into a LIBOR Portion. If any
request is made to convert a LIBOR Portion into another type of Portion
available hereunder, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such
-5-
11
requests may be written or oral and the Bank is hereby authorized to honor
telephonic requests for creations, continuances and conversions received by it
from any person the Bank reasonably believes to be an Authorized Representative
without the need of independent investigation, the Company hereby indemnifying
the Bank from any liability or loss ensuing from so acting.
Section 2.4. Change of Law. Notwithstanding any other provisions of
this Agreement or the Revolving Credit Note, if at any time the Bank shall
determine in good faith that any change in applicable laws, treaties or
regulations or in the interpretation thereof makes it unlawful for the Bank to
create or continue to maintain any LIBOR Portion, it shall promptly so notify
the Company and the obligation of the Bank to create, continue or maintain any
such LIBOR Portion under this Agreement shall terminate until it is no longer
unlawful for the Bank to create, continue or maintain such LIBOR Portion. The
Company, on demand, shall, if the continued maintenance of any such LIBOR
Portion is unlawful, thereupon prepay the outstanding principal amount of the
affected LIBOR Portion, together with all interest accrued thereon and all other
amounts payable to the Bank with respect thereto under this Agreement; provided,
however, that the Company may elect to convert the principal amount of the
affected Portion into another type of Portion available hereunder, subject to
the terms and conditions of this Agreement.
Section 2.5. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or the
Revolving Credit Note, if prior to the commencement of any Interest Period, the
Bank shall determine in good faith that deposits in the amount of any LIBOR
Portion scheduled to be outstanding during such Interest Period are not readily
available to the Bank in the relevant market or, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining Adjusted LIBOR, then the Bank shall promptly give notice thereof to
the Company and the obligations of the Bank to create such new LIBOR Portion,
continue such existing LIBOR Portion for a new Interest Period or effect such
new LIBOR Portion by conversion of the Domestic Rate Portion, as the case may
be, in such amount and for such Interest Period shall terminate until deposits
in such amount and for the Interest Period selected by the Company shall again
be readily available in the relevant market and adequate and reasonable means
exist for ascertaining Adjusted LIBOR.
Section 2.6. Taxes and Increased Costs. With respect to any LIBOR
Portion, if the Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or its
-6-
12
lending branch or the LIBOR Portions contemplated by this Agreement (whether or
not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in
or for the account of, or loans by, or any other acquisition of funds
or disbursements by, the Bank which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject the Bank, any LIBOR Portion or the Revolving
Credit Note to the extent it evidences such a Portion to any tax
(including, without limitation, any United States interest equalization
tax or similar tax however named applicable to the acquisition or
holding of debt obligations and any interest or penalties with respect
thereto), duty, charge, stamp tax, fee, deduction or withholding in
respect of this Agreement, any LIBOR Portion or the Revolving Credit
Note to the extent it evidences such a Portion, except such taxes as
may be measured by the overall net income or gross receipts of the Bank
or its lending branches and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which the Bank's
principal executive office or its lending branch is located;
(iii) change the basis of taxation of payments of principal
and interest due from the Company to the Bank hereunder or under the
Revolving Credit Note to the extent it evidences any LIBOR Portion
(other than by a change in taxation of the overall net income or gross
receipts of the Bank); or
(iv) impose on the Bank any penalty with respect to the
foregoing or any other condition regarding this Agreement, its
disbursement, any LIBOR Portion or the Revolving Credit Note to the
extent it evidences any LIBOR Portion;
and the Bank shall determine in good faith that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to the Bank of creating or maintaining any LIBOR Portion hereunder or to
reduce the amount of principal or interest received or receivable by the Bank,
then the Company shall pay on demand to the Bank from time to time as specified
by the Bank such additional amounts as the Bank shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or reduced
amount. If the Bank makes such a claim for compensation, it shall provide to the
Company a certificate setting forth the computation of the increased cost or
reduced amount as a result of any event mentioned herein in reasonable detail
and such certificate shall be conclusive if reasonably determine.
-7-
13
Section 2.7. Funding Indemnity. In the event the Bank shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting
of such deposits or other funds or amounts paid or prepaid to the Bank) as a
result of:
(i) any payment of a LIBOR Portion on a date other than the
last day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by
any provisions of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then upon the demand of the Bank, the Company shall pay to the Bank such amount
as will reimburse the Bank for such loss, cost or expense. If the Bank requests
such a reimbursement, it shall provide to the Company a certificate setting
forth the computation of the loss, cost or expense giving rise to the request
for reimbursement in reasonable detail and such certificate shall be conclusive
if reasonably determined.
Section 2.8. Lending Branch. The Bank may, at its option (subject only
to Section 2.9 hereof), elect to make, fund or maintain Portions of the Loans
hereunder at such of its branches or offices as the Bank may from time to time
elect.
Section 2.9. Bank's Duty to Mitigate. The Bank agrees that, as promptly
as practicable after it becomes aware of the occurrence of an event or the
existence of a condition that would cause it to be affected under Section 2.4,
2.5 or 2.6 hereof, the Bank will, to the extent not inconsistent with the Bank's
internal policies and customary business practices, use reasonable efforts to
make, fund or maintain the LIBOR Portions through another lending branch or
office of the Bank if as a result thereof the unlawfulness which would otherwise
require payment of such Loans pursuant to Section 2.4 hereof would cease to
exist or the circumstances which under Section 2.5 hereof would otherwise
terminate such Bank's obligation to make LIBOR Portions would cease to exist or
the increased costs or other compensation which would otherwise be required to
be paid in respect of LIBOR Portions pursuant to Sections 2.6 hereof would be
materially reduced, and if, as determined by the Bank, in its sole discretion,
the making, funding or maintaining of such Portions through such other lending
branch or office would not otherwise adversely affect such Portions or the Bank.
The Company hereby agrees to pay all reasonable expenses incurred by the Bank in
utilizing another lending branch or office of the Bank pursuant to this Section
2.9.
-8-
14
Section 2.10. Discretion of Bank as to Manner of Funding. Subject to
Section 2.9 hereof, but notwithstanding any other provision of this Agreement to
the contrary, the Bank shall be entitled to fund and maintain its funding of all
or any part of the Revolving Credit Note in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder (including, without limitation, determinations under Sections 2.5, 2.6
and 2.7 hereof) shall be made as if the Bank had actually funded and maintained
each LIBOR Portion during each Interest Period applicable thereto through the
purchase of deposits in the relevant market in the amount of such LIBOR Portion,
having a maturity corresponding to such Interest Period, and bearing an interest
rate equal to the LIBOR for such Interest Period
SECTION 3. FEES, APPLICATION, PREPAYMENTS, COMPUTATIONS, AND NOTATIONS.
Section 3.1. Facility Fee. The Company shall pay to the Bank on the
date hereof a non-refundable facility fee in the amount of $25,000.
Section 3.2. Unused Line Fee. For the period from and including the
date hereof to but not including the Termination Date, the Company shall pay to
the Bank a fee at the rate of 1/4 of 1% per annum on the average daily unused
portion of the Revolving Credit Commitment. Such fee shall be payable monthly in
arrears on the last day of each calendar month (commencing April 30, 1998) and
on the Termination Date.
Section 3.3. Audit Fees. The Company shall pay to the Bank charges for
audits of the Collateral performed by the Bank or its agents or representatives
in such amounts as the Bank may from time to time request (the Bank
acknowledging and agreeing that such charges shall be computed in the same
manner as it at the time customarily uses for the assessment of charges for
similar collateral audits); provided, however, that in the absence of any
Default or Event of Default, the Company shall not be required to pay the Bank
for more than two (2) such audits per calendar year and shall not be required to
pay more than $10,000 in charges for such audits in any one calendar year.
Section 3.4. Letter of Credit Fees. On the date of issuance of each
Letter of Credit, and as a condition thereto, and quarterly thereafter, the
Company shall pay to the Bank a letter of credit fee computed at the rate of 1%
per annum on the maximum amount of the related Letter of Credit which is
scheduled to be outstanding during the immediately succeeding three (3) months.
In addition to the letter of credit fee called for above, the Company further
agrees to pay to the Bank such processing and transaction fees and charges as
the Bank from time to time customarily imposes in connection with any amendment,
cancellation, negotiation and/or payment of letters of credit and drafts drawn
thereunder.
-9-
15
Section 3.5. Computation of Interest and Fees. All interest on the
Loans and on the reimbursement obligations with respect to all Applications and
all fees due hereunder shall be calculated on the basis of a year of 360 days
for the actual number of days elapsed. Any change in the interest rate
applicable to the Obligations resulting from a change in the Domestic Rate shall
be effective on the date of the relevant change in the Domestic Rate.
Section 3.6. Change in Capital Adequacy Requirements. If the Bank shall
determine that the adoption after the date hereof of any applicable law, rule or
regulation regarding capital adequacy, or any change in any existing law, rule
or regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank (or any of
its branches) with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital as a consequence of its obligations hereunder to extend
credit constituting a LIBOR Portion to a level below that which the Bank could
have achieved but for such adoption, change or compliance (taking into
consideration the Bank's policies with respect to liquidity and capital
adequacy) by an amount deemed by the Bank to be material, then from time to
time, within fifteen (15) days after demand by the Bank, the Company shall pay
to the Bank such additional amount or amounts reasonably determined by the Bank
as will compensate the Bank for such reduction.
Section 3.7. Term and Termination. (a) Term. The term of the Revolving
Credit Commitment shall be one day less than one calendar year from the date
hereof through but excluding March 24, 1999. The Company may advise the Bank in
writing of the Company's desire to extend the Termination Date for an additional
period of one day less than one calendar year, provided (i) such request is made
not later than 60 days prior to such Termination Date, (ii) not more than one
such request for the extension of the Termination Date may be made in any one
calendar year and (iii) in no event shall the Termination Date be extended
beyond May 1, 2000. In the event that the Bank is agreeable to such extension,
it shall so notify the Company in writing (it being understood that the Bank may
accept or decline such a request in its sole discretion and on such terms as it
may elect) and the Company and the Bank shall enter into such documents as the
Bank may deem necessary or appropriate to reflect such extension, and all
reasonable costs and expenses incurred by Bank in connection therewith
(including reasonable attorneys' fees) shall be paid by the Company. The Bank
shall be deemed to have refused to grant the requested extension in the event it
shall fail to so notify the Company of the Bank's agreement to such an extension
within 30 days after receipt of such request.
(b) Termination. The Company shall have the right at any time and from time
to time, upon twenty (20) Business Days' prior notice to the Bank, to terminate
without premium or penalty and in whole or in part (but if in part, then in an
amount not less than $100,000) the
-10-
16
Revolving Credit Commitment, provided that the Revolving Credit Commitment may
not be reduced (except if being terminated in whole) to an amount less than the
aggregate principal amount of the Letters of Credit then outstanding. Any
termination of the Revolving Credit Commitment shall not reduce the L/C
Commitment unless and until the L/C Commitment would exceed the Revolving Credit
Commitment as so reduced, in which event the L/C Commitment shall be equal to
the Revolving Credit Commitment as so reduced. Not later than the effective date
of such termination, there shall be made such payments to the Bank as may be
necessary to reduce the aggregate outstanding principal amount of Loans and
Letters of Credit to the amount to which the Revolving Credit Commitment has
been reduced, together with any amount due under Section 2.7 hereof and in the
case of any such termination in whole, such termination shall only be effective
upon (i) the payment in full of all outstanding Obligations (including, without
limitation, the outstanding principal balance of the Revolving Credit Note),
together with all accrued and unpaid interest thereon, (ii) the payment of any
accrued and unpaid unused line fees to the date of termination and (iii) the
expiration or termination of all Letters of Credit and, to the extent any such
Letter of Credit has not expired in accordance with its terms or otherwise been
terminated to the satisfaction of the Bank, accompanied by collateral security
in form and in such amounts as shall be satisfactory to the Bank.
Section 3.8. Place and Application of Payments and Collections. (a) All
payments of principal, interest, fees and all other Obligations payable
hereunder and under the other Loan Documents shall be made to the Bank at its
office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (or at such other place as
the Bank may specify). All such payments shall be made in lawful money of the
United States of America, in immediately available funds at the place of
payment, without set-off or counterclaim and without reduction for, and free
from, any and all present or future taxes, levies, imposts, duties, fees,
charges, deductions, withholdings, restrictions or conditions of any nature
imposed by any government or any political subdivision or taxing authority
thereof (but excluding any taxes imposed on or measured by the net income or
gross receipts of the Bank). Payments received by the Bank after 1:30 p.m.
(Chicago time) shall be deemed received as of the opening of business on the
next Business Day. Unless the Company otherwise directs, principal payments on
the Revolving Credit Note shall be applied first to the Domestic Rate Portion of
the Revolving Credit Note until payment in full thereof, with any balance
applied to the LIBOR Portions of the Revolving Credit Note in the order in which
their Interest Periods expire. Notwithstanding the foregoing, if and so long as
no Default or Event of Default has occurred and is continuing, if and to the
extent Section 3.8(b) hereof would result in payment on any LIBOR Portion prior
to the end of its Interest Period, the Company may direct that such payment be
held in a cash collateral account maintained by the Company with the Bank
pursuant to agreements in form, scope and substance reasonably satisfactory to
the Bank (the "Cash Collateral Account") and not applied to any LIBOR Portion
until the earlier of (i) the last day of the Interest Period then applicable to
such LIBOR Portion or (ii) the occurrence of any Default or Event of Default.
The Company hereby grants to the Bank a lien on the Cash
-11-
17
Collateral Account and all earnings thereon as collateral security for the
Obligations, it being understood and agreed that at such time as any Default or
Event of Default shall occur, the balance of the Cash Collateral Account and
earnings thereon may be applied by the Bank to the Obligations as provided in
this Agreement. All payments on the Revolving Credit Note (whether voluntary or
required) shall be accompanied by any amount due the Bank under Section 2.7
hereof, but no acceptance of such a payment without requiring payment of amounts
due under Section 2.7 shall preclude a later demand by the Bank for any amount
due it under Section 2.7 in respect of such payment. Any amount paid or prepaid
on the Revolving Credit Note may, subject to all of the terms and conditions
hereof, be borrowed, repaid and borrowed again.
(b) All payments made by the Company and all proceeds of Collateral shall,
upon receipt by the Bank, be applied by the Bank to the Obligations then due and
payable, with any balance of such proceeds not applied to the Obligations to be
held by the Bank as collateral security for the Obligations. Prior to the
occurrence of a Default or Event of Default, except as otherwise specifically
provided for herein, all payments made by the Company and all proceeds of
Collateral shall be applied by the Bank against the outstanding Obligations as
follows:
(i) first, to any outstanding fees, charges and expenses then
due the Bank;
(ii) second, to outstanding interest charges then due in
respect of the Obligations;
(iii) third, to the outstanding principal balance of the
Revolving Credit Loans and reimbursement obligations in respect of
drafts drawn under Letters of Credit; and
(iv) finally, to be applied to, or held as collateral security
for, any remaining unpaid or unsatisfied Obligations.
Except as otherwise specifically provided for herein, the Company hereby
irrevocably waives the right to direct the application of payments and
collections at any time received by the Bank from or on behalf of the Company,
and the Company hereby irrevocably agrees that the Bank shall have the
continuing exclusive right to apply and reapply any and all such payments and
collections received at any time by the Bank against the Obligations in such
manner as the Bank may deem advisable.
(c) The Company hereby irrevocably authorizes the Bank to charge any of the
Company's deposit accounts maintained with the Bank for the amounts from time to
time necessary to pay any then due Obligations; provided that the Company
acknowledges and agrees that the Bank shall be under no obligation to do so and
the Bank shall incur no liability to the Company or any other Person for the
Bank's failure to do so.
-12-
18
Section 3.9. Voluntary Prepayments.
(a) Domestic Rate Portion. The Company shall have the privilege of
voluntarily prepaying without premium or penalty and in whole or in part (but if
in part, then in an amount not less than $10,000) the Domestic Rate Portion of
the Revolving Credit Note at any time upon notice to the Bank prior to 11:00
a.m. (Chicago time) on the date fixed for prepayment.
(b) LIBOR Portions. The Company may voluntarily prepay any LIBOR Portion of
the Revolving Credit Note only on the last date of the then applicable Interest
Period, in whole or in part (but if in part, then in an amount not less than
$50,000 or such greater amount which is an integral multiple of $50,000), upon 3
Business Days' prior notice to the Bank (which notice shall be irrevocable once
given, must be received by the Bank no later than 11:00 a.m. (Chicago time) on
the third Business Day preceding the date of such prepayment, and shall specify
the principal amount to be repaid); provided, however, that the outstanding
principal amount of any LIBOR Portion of the Note prepaid in part shall not be
less than $500,000 or such greater amount which is an integral multiple of
$50,000 after giving effect to such prepayment. Any such prepayment shall be
effected by payment of the principal amount to be prepaid and accrued interest
thereon to the end of the applicable Interest Period.
Section 3.9. Mandatory Prepayment. The Company covenants and agrees
that if at any time the sum of the then unpaid principal balance of the Loans
plus the then outstanding amount of Letters of Credit shall be in excess of the
Borrowing Base as then determined and computed, the Company shall immediately
and without notice or demand pay over the amount of the excess to the Bank as
and for a mandatory prepayment on such Obligations, with each such prepayment
first to be applied to the Revolving Credit Loans until payment in full thereof
with any remaining balance to be held by the Bank as collateral security for the
Obligations owing under the Applications. The mandatory prepayment required by
this Section is in addition to such mandatory prepayments of the Obligations as
are made from time to time pursuant to Section 3.8(b) hereof.
Section 3.10. Computation of Obligations Outstanding. For the purpose
of calculating the aggregate principal balance of Obligations outstanding
hereunder, Obligations shall be deemed to be paid on the date payments or
collections, as the case may be, are applied by the Bank to such Obligations;
provided, however, for purposes of calculating interest payable by the Company
on the Loans and on any other interest-bearing Obligations under this Agreement,
any payment (other than a payment by means of wire transfer, which shall be
applied as of the date of receipt) or collection, as the case may be, shall be
deemed to be applied to the Loans or other interest-bearing Obligations two (2)
Business Days after receipt of such payment or collection by the Bank.
Notwithstanding the foregoing, if any item presented for collection by the Bank
is not
-13-
19
honored, the Bank may reverse any provisional credit which has been given for
the item and make appropriate adjustments to the amount of interest and
principal otherwise due hereunder.
Section 3.11. Notations. Each Loan made against the Revolving Credit
Note, the status of all amounts evidenced by the Revolving Credit Note as
constituting part of the Domestic Rate Portion or a LIBOR Portion, and, in the
case of any LIBOR Portion, the rates of interest and Interest Periods applicable
to such Portion shall be recorded by the Bank on its books and records or, at
its option in any instance, endorsed on a schedule to the Revolving Credit Note
and the unpaid principal balance and status, rates and Interest Periods so
recorded or endorsed by the Bank shall be prima facie evidence in any court or
other proceeding brought to enforce the Revolving Credit Note of the principal
amount remaining unpaid thereon, the status of the Revolving Credit Loan or
Loans evidenced thereby and the interest rates and Interest Periods applicable
thereto; provided that the failure of the Bank to record any of the foregoing
shall not limit or otherwise affect the obligation of the Company to repay the
principal amount of the Revolving Credit Note together with accrued interest
thereon. Prior to any negotiation of the Revolving Credit Note, the Bank shall
record on a schedule thereto the status of all amounts evidenced thereby as
constituting part of the Domestic Rate Portion or a LIBOR Portion and, in the
case of any LIBOR Portion, the rates of interest and the Interest Periods
applicable thereto.
SECTION 4. COLLATERAL.
Section 4.1. Collateral. The payment and performance of the Obligations
shall at all times be secured by, among other things, (a) all of the Company's
accounts, chattel paper, documents, instruments, general intangibles, inventory,
equipment, investment property and certain other assets and property of the
Company, in each case whether now owned or held or hereafter acquired or
arising, in each case as described in and pursuant to that certain Security
Agreement dated of even date herewith, as the same may be amended, modified or
supplemented from time to time (the "Security Agreement") and (b) all of the
Company's Kaneb MLP Units and certain other related assets and property of the
Company, in each case whether now owned or held or hereinafter acquired or
arising, in each case as described in and pursuant to that certain Assignment of
Partnership Interests dated of even date herewith, as the same may be amended,
modified or supplemented from time to time (the "Collateral Assignment of MLP
Units").
Section 4.2. Collateral Proceeds. The Company agrees to make such
arrangements as shall be necessary or appropriate to assure (through the use of
a lockbox under the sole control of the Bank) that all proceeds of the
Collateral (other than ordinary distributions made prior to any Event of Default
on the Company's Kaneb MLP Units) are deposited (in the same form as received)
in a remittance account maintained with and under the control of the Bank, such
account to constitute a special restricted account. Any proceeds of Collateral
received by the Company shall be held by the Company in trust for the Bank in
the same form in which received,
-14-
20
shall not be commingled with any assets of the Company, and (other than ordinary
distributions made prior to any Event of Default on the Company's Kaneb MLP
Units) shall be delivered immediately to the Bank (together with any necessary
endorsements thereto) for deposit into such account. The Company acknowledges
that the Bank has (and is hereby granted to the extent it does not already have)
a Lien on such account and all funds contained therein to secure the
Obligations. No amounts deposited in such account shall be released to the
Company, but shall instead be applied to, or otherwise held as collateral
security for, the outstanding Obligations as set forth in Section 3 hereof, it
being understood and agreed that the Company notwithstanding such application
shall have the right to obtain additional Revolving Credit under this Agreement
subject to the terms and conditions hereof.
Section 4.3. Further Assurances. The Company covenants and agrees that
it shall comply with all terms and conditions of each of the Collateral
Documents and that it shall, at any time and from time to time as requested by
the Bank, execute and deliver such further instruments and do such other acts as
the Bank may deem necessary or desirable to provide for or protect or perfect
the Lien of the Bank in the Collateral.
Section 4.4. Release of Kaneb MLP Units. Notwithstanding anything
herein or in the Collateral Documents to the contrary, within two (2) Business
Days of the Company's request, the Bank will release its Lien on any Kaneb MLP
Units held by the Bank as Collateral if at the time of such release and
immediately after giving effect thereto, (i) no Default or Event of Default
would occur or be continuing and (ii) the principal amount outstanding on the
Revolving Credit Note would not exceed the Borrowing Base as then determined and
computed.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall
have the following meanings:
"Adjusted LIBOR" means a rate per annum determined by the Bank in
accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
-15-
21
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this definition,
LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit of or credit for prorations, exemptions or offsets
under Regulation D. "LIBOR" means, for each Interest Period, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the LIBOR
Index Rate cannot be determined, the arithmetic average of the rates of interest
per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) at which
deposits in U.S. Dollars in immediately available funds are offered to the Bank
at 11:00 a.m. (London, England time) two (2) Business Days before the beginning
of such Interest Period by three (3) or more major banks in the interbank
eurodollar market selected by the Bank for a period equal to such Interest
Period and in an amount equal or comparable to the applicable LIBOR Portion
scheduled to be outstanding from the Bank during such Interest Period. "LIBOR
Index Rate" means, for any Interest Period, the rate per annum (rounded upwards,
if necessary, to the next higher one hundred-thousandth of a percentage point)
for deposits in U.S. Dollars for a period equal to such Interest Period, which
appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the
day two (2) Business Days before the commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of LIBOR
made by the Bank shall be conclusive and binding absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise; provided, however, that, in any
event for purposes of this definition, any Person that owns, directly or
indirectly, 20% or more of the securities having the ordinary voting power for
the election of directors or governing body of a corporation or 20% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Application" is defined in Section 1.3 hereof.
-16-
22
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof, or on any
update of any such list provided by the Company to the Bank, or any further or
different officer of the Company so named by any Authorized Representative of
the Company in a written notice to the Bank.
"Bank" is defined in the introductory paragraph hereof.
"Bonding Requirement" means the maintenance by the Company of
performance bonds issued by good and responsible surety companies covering (in
form and substance satisfactory to the Bank) at least $6,000,000 in aggregate
amount of the Company's obligations with respect to the collection and
remittance of Federal and state fuel and excise taxes in respect of inventory of
the Company and which surety companies agree (in form and substance satisfactory
to the Bank) that their claims against the Company on such bonds are subject to
the Bank's perfected security interests in the Collateral.
"Borrowing Base" means, as of any time it is to be determined, the sum
of:
(a) 85% (or such lesser percentage as the Bank may determine
from time to time pursuant to Section 1.1 hereof) of the remainder of
the then outstanding unpaid amount of Eligible Accounts less any and
all returns, rebates, discounts (which may, at the Bank's option, be
calculated on the shortest terms), credits, allowances, finance charges
and/or taxes of any nature at any time issued, owing, available to or
claimed by account debtors, granted, outstanding or payable in
connection with such Eligible Accounts at such time; plus
(b) the lesser of (i) $6,500,000 and (ii) 70% through June 30,
1998 and 60% at all times thereafter (or such lesser percentage as the
Bank may determine from time to time pursuant to Section 1.1 hereof) of
the value (computed at the lower of market or cost using the
first-in/first-out method of inventory valuation applied by the Company
in accordance with GAAP) of Eligible Inventory; plus
(c) 60% of the Market Value of Eligible Kaneb MLP Units
(provided that such 60% advance rate shall be reduced to 50% if and so
long as use of the prospectus contained in the Shelf Registration
identified and defined in the Registration Rights Agreement has been
suspended for more than thirty (30) days);
provided that the Borrowing Base shall be computed only as against and on so
much of such Collateral as is included on the certificates to be furnished from
time to time by the Company pursuant to this Agreement and, if required by the
Bank pursuant to any of the terms hereof or
-17-
23
any Collateral Document, as verified by such other evidence required to be
furnished to the Bank pursuant hereto or pursuant to any such Collateral
Document.
"Business Day" means any day other than a Saturday or Sunday on which
the Bank is not authorized or required to close in Chicago, Illinois.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease as determined
in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral" means all properties, rights, interests and privileges
from time to time subject to the Liens granted to the Bank by the Collateral
Documents.
"Collateral Assignment of MLP Units" is defined in Section 4.1 hereof.
"Collateral Documents" means the Security Agreement, Collateral
Assignment of MLP Units, and all other mortgages, deeds of trust, security
agreements, assignments, financing statements and other documents as shall from
time to time secure the Obligations.
"Company" is defined in the introductory paragraph hereof.
"Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Bank from time to time as its prime commercial rate,
as in effect on such day; and (ii) the sum of (x) the rate determined by the
Bank to be the average (rounded upwards, if necessary, to the next higher 1/100
of 1%) of the rates per annum quoted to the Bank at approximately 10:00 a.m.
(Chicago time) (or as soon thereafter as is practicable) on such day (or, if
such day is not a Business Day, on the immediately preceding Business Day) by
two or more Federal funds brokers selected by the Bank for the sale to the Bank
at face value of Federal funds in an amount
-18-
24
equal or comparable to the principal amount owed to the Bank for which such rate
is being determined, plus (y) 3/8 of 1% (0.375%).
"EBITDA" means, with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (i) Interest Expense for such period, plus (ii) federal, state and
local income taxes for such period, plus (iii) all amounts properly charged for
depreciation of fixed assets and amortization of intangible assets during such
period on the books of the Company and its Subsidiaries.
"Eligible Accounts" means all accounts receivable of the Company which
the Bank, in its reasonable judgment, deems to be Eligible Accounts; provided
that in no event shall an account receivable be deemed an Eligible Account
unless all representations and warranties set forth in the Collateral Documents
with respect to such account receivable are true and correct and such account
receivable:
(a) arises out of the sale by the Company of finished goods
inventory delivered to and accepted by, or out of the rendition by the
Company of services fully performed by the Company and accepted by, the
account debtor on such account receivable and such account receivable
otherwise represents a final sale;
(b) the account debtor on such account receivable is located
within the United States of America;
(c) is the valid, binding and legally enforceable obligation
of the account debtor obligated thereon and such account debtor is not
(i) a Subsidiary or an Affiliate of the Company, (ii) a shareholder,
director, officer or employee of the Company or any Subsidiary, (iii)
the United States of America, or any state or political subdivision
thereof, or any department, agency or instrumentality of any of the
foregoing, unless the Company has complied with the Assignment of
Claims Act or any similar state or local statute, as the case may be,
to the satisfaction of the Bank, (iv) a debtor under any proceeding
under the United States Bankruptcy Code, as amended, or any other
comparable bankruptcy or insolvency law, or (v) an assignor for the
benefit of creditors;
(d) is not evidenced by an instrument or chattel paper unless
the same has been endorsed and delivered to the Bank;
(e) is an asset of the Company to which it has good and
marketable title, is freely assignable, and is subject to a perfected,
first priority Lien in favor of the Bank free and clear of any other
Liens;
-19-
25
(f) is not owing from an account debtor who is also a creditor
or supplier of the Company, is not subject to any offset (provided that
accounts receivable owing from such account debtor will not be rendered
ineligible by virtue of the foregoing provisions of this clause (f) to
the extent the aggregate unpaid amount of otherwise Eligible Accounts
owing from such account debtor exceeds the aggregate amount owed to
such account debtor by the Company and its Subsidiaries), counterclaim
or other defense with respect thereto and, with respect to said account
receivable or the contract or purchase order out of which the same
arose, no surety bond was required or given in connection therewith;
(g) is not unpaid more than thirty (30) days after the
original invoice date (which must be not more than five (5) days
subsequent to the shipment date or the date services were fully
performed by the Company);
(h) is not owed by an account debtor who is obligated on
accounts receivable owed to the Company more than 50 % of the aggregate
unpaid balance of which have been past due for longer than the relevant
period specified in subsection (g) above unless the Bank has approved
the continued eligibility thereof;
(i) would not cause the total accounts receivable owing from
any one account debtor and its Affiliates to exceed 15% of all Eligible
Accounts;
(j) would not cause the total accounts receivable owing from
any one account debtor and its Affiliates to exceed any credit limit
established for purposes of determining eligibility hereunder by the
Bank in its reasonable judgment for such account debtor and for which
the Bank has given the Company at least thirty (30) Business Day's
prior notice of the establishment of any such credit limit; and
(k) does not arise from a sale to an account debtor on a
▇▇▇▇-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis.
"Eligible Inventory" means all finished goods inventory of the Company
(other than packaging, crating and supplies inventory) which the Bank, in its
reasonable judgment, deems to be Eligible Inventory; provided that in no event
shall inventory be deemed Eligible Inventory unless all representations and
warranties set forth in the Collateral Documents with respect to such inventory
are true and correct and such inventory:
-20-
26
(a) is an asset of the Company to which it has good and
marketable title, is freely assignable, and is subject to a perfected,
first priority Lien in favor of the Bank free and clear of any other
Liens;
(b) is located at the storage facilities at the terminals
identified on Schedule 5.1 hereto or such other locations as are
approved in writing by the Bank and, in the case of facilities not
owned by the Company, which are at all times subject to agreements (in
form and substance satisfactory to the Bank) from the owners of such
facilities allowing the Bank access to such inventory;
(c) is not so identified to a contract to sell that it
constitutes an account; and
(d) is not obsolete or slow moving, and is of good and
merchantable quality free from any defects which might adversely affect
the market value thereof.
"Eligible Kaneb MLP Units" shall mean each Kaneb MLP Unit listed on the
New York Stock Exchange if and so long as:
(a) such Kaneb MLP Unit is owned by the Company;
(b) such Kaneb MLP Unit is subject to a nonavoidable, valid
and perfected, first and only Lien in favor of the Bank under the
relevant Collateral Documents;
(c) each certificate evidencing such Kaneb MLP Unit has been
delivered and pledged to, and is in the possession and control of, the
Bank, along with an undated stock power or powers (or equivalent)
executed by the Company with the name of the transferee on such power
left blank and such power otherwise in compliance with the relevant
Collateral Document and also along with a properly completed and
executed Federal Reserve Form U-1;
(d) all of the Kaneb MLP Units evidenced by the certificate
evidencing such Kaneb MLP Unit have been pledged under the relevant
Collateral Document to the Bank;
(e) such Kaneb MLP Unit is Freely Tradeable;
(f) bankruptcy or similar insolvency proceedings have not been
instituted by or against Kaneb Partnership or Kaneb Company;
(g) all representations and warranties by the Company
contained in the Collateral Documents with respect to such Kaneb MLP
Unit are true and correct; and
(h) the Bank shall have received such assurances of the
foregoing (such as opinions of counsel) as it shall reasonably request.
-21-
27
Any Kaneb MLP Unit which at any time fails to satisfy any of the above criteria
shall forthwith cease to be an Eligible Kaneb MLP Unit.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Freely Tradeable" shall mean when used with reference to any Kaneb MLP
Units as of any time the same is to be determined, such Kaneb MLP Units to the
extent the same can then be publicly sold in whole or in part at any time in
each case and without restriction and without registration under Federal
securities laws, subject to the following exceptions:
(a) Kaneb MLP Units shall be deemed "Freely Tradeable" if and
so long as (i) an effective registration statement covering resales of
such Kaneb MLP Units and complying with the relevant requirements of
Federal securities laws covering such Units has been declared effective
by the Securities and Exchange Commission, (ii) the Bank shall have
received on or before the date of determination a favorable opinion of
counsel to the Company confirming such a registration statement is
effective and such other matters as the Bank shall reasonably require
and (iii) Kaneb Partnership has executed and delivered the Registration
Rights Agreement and is in compliance in all material respects with the
Registration Rights Agreement; and
(b) prior to July 1, 1998, Kaneb MLP Units shall be deemed
"Freely Tradeable" if and so long as (i) Kaneb Company has irrevocably
committed to repurchase such Kaneb MLP Units at their then current
Market Value upon demand by the Company or any pledgee thereof (such as
the Bank) made at any time before the conditions set forth in clause
(a) above are satisfied and (ii) Kaneb Partnership is in compliance in
all material respects with the Registration Rights Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's most recent financial statements furnished
to the Bank pursuant to Section 6.5 hereof.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business which are not more than sixty (60) days past due), (iii) all
indebtedness
-22-
28
secured by any Lien upon Property of such Person, whether or not such Person has
assumed or become liable for the payment of such indebtedness, (iv) all
Capitalized Lease Obligations of such Person, and (v) all obligations of such
Person on or with respect to letters of credit, bankers' acceptances and other
extensions of credit whether or not representing obligations for borrowed money.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Subsidiaries for such period determined in accordance with GAAP.
"Interest Period" means, with respect to (a) any LIBOR Portion, the
period commencing on, as the case may be, the creation, continuation or
conversion date with respect to such LIBOR Portion and ending one (1), two (2)
or three (3) months thereafter as selected by the Company in its notice as
provided herein; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless in the case of an Interest Period
for a LIBOR Portion the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the Termination
Date;
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day of
such Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part of
a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
-▇▇-
▇▇
"▇▇▇▇▇ ▇▇▇ ▇▇▇▇" shall mean any equity interest in Kaneb Partnership,
commonly referred to as a Preference Unit.
"Kaneb Partnership" means Kaneb Pipe Line Partners, L.P., a Delaware
limited partnership.
"Kaneb Company" means Kaneb Pipe Line Company, a Delaware corporation.
"Letter of Credit" is defined in Section 1.3 hereof.
"LIBOR Portions" is defined in Section 2.1(a).
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loans" is defined in Section 1.2 hereof.
"Loan Documents" means this Agreement, the Revolving Credit Note, the
Applications, and the Collateral Documents.
"Market Value" means as of any time the same is to be determined and
with reference to any Kaneb MLP Unit, (i) if the security shall at the time be
listed on the New York Stock Exchange, the reported closing sales price per unit
for such security on such Exchange as of the most recent preceding Business Day
or (ii) if such security is not at the time so listed, zero.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Oil Marketing, Ltd., an Illinois limited
partnership.
"▇▇▇▇▇▇ Acquisition" means the Company's acquisition of ▇▇▇▇▇▇'▇ fuel
marketing business and related assets pursuant to the Purchase Agreement.
"Material Adverse Effect" means any material adverse effect on or
change in the financial condition, Properties, business or operations of the
Company and its Subsidiaries taken as a whole.
"Net Income" means, with reference to any period, the net income (or
net loss) of the Company and its Subsidiaries for such period as computed on a
consolidated basis in accordance with GAAP.
-24-
30
"Net Worth" means, as of any time the same is to be determined, the
total shareholders' equity (including capital stock, additional paid-in-capital
and retained earnings after deducting treasury stock, but excluding minority
interests in Subsidiaries) which would appear on the balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP minus the write-up of assets above cost; provided, however, for
purposes of any such determination, the Company's Kaneb MLP Units shall be
included as an asset at their then prevailing market value.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all reimbursement obligations owing under the
Applications, all fees and charges payable hereunder, and all other payment
obligations of the Company arising under or in relation to any Loan Document, in
each case whether now existing or hereafter arising, due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (i) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group or (ii) is maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Present Excise Tax Reserve" means a continuing reserve in the amount
of $4,000,000 unless and until the Bonding Requirement is met to the Bank's
satisfaction.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Purchase Agreement" means that certain Purchase and Sale Agreement
dated as of January 28, 1998 between the Company and ▇▇▇▇▇▇.
"Registration Rights Agreement" an agreement by Kaneb Partnership in
the form of Exhibit D hereto to file a registration statement with the
Securities and Exchange Commission.
-25-
31
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Security Agreement" is defined in Section 4.1 hereof.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Net Worth" means, as of any time the same is to be
determined, Net Worth minus all assets which would be classified as intangible
assets under GAAP, including, without limitation, goodwill, patents, trademarks,
trade names, copyrights, franchises and deferred charges (including, without
limitation, unamortized debt discount and expense, organization costs and
deferred research and development expense) and similar assets.
"Termination Date" means March 24, 1999, or such later date to which
the Revolving Credit Commitment is automatically extended pursuant to Section
3.7 hereof, or such earlier date on which the Revolving Credit Commitment is
terminated in whole pursuant to Section 3.7, 9.2 or 9.3 hereof.
"Total Liabilities" means, as of any time the same is to be determined,
the aggregate of all indebtedness, obligations, liabilities, reserves and any
other items which would be listed as a liability on a balance sheet of the
Company and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying shares
as required by law) or
-26-
32
other equity interests are owned by the Company and/or one or more Wholly-Owned
Subsidiaries within the meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein", and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Bank as follows:
Section 6.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has all necessary corporate power to own its Property
and conduct its business as now conducted, and is duly licensed or qualified and
in good standing in each jurisdiction in which the nature of the business
conducted by it or the nature of the Property owned or leased by it requires
such licensing or qualifying and in which the failure to be so licensed or
qualified might reasonably be expected to have a Material Adverse Effect.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has all necessary corporate (or
analogous) power to own its Property and conduct its business as now conducted,
and is duly licensed or qualified and in good standing in each jurisdiction in
which the nature of the business conducted by it or the nature of the Property
owned or leased by it requires such licensing or qualifying. Schedule 6.2 hereto
identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Company and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized capital stock and other equity interests and the number of shares
of each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 6.2 as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and
-27-
33
clear of all Liens. There are no outstanding commitments or other obligations of
any Subsidiary to issue, and no options, warrants or other rights of any Person
to acquire, any shares of any class of capital stock or other equity interests
of any Subsidiary.
Section 6.3. Corporate Authority and Validity of Obligations. The
Company has full right and authority to enter into this Agreement and the other
Loan Documents, to make the borrowings herein provided for, to issue its Notes
in evidence thereof, to grant to the Bank the Liens described in the Collateral
Documents, and to perform all of its obligations hereunder and under the other
Loan Documents. The Loan Documents delivered by the Company have been duly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Company of any of the matters and things herein or therein provided for,
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Company or any provision of the
charter, articles of incorporation or by-laws of the Company or any covenant,
indenture or agreement of or affecting the Company or any of its Properties, or
result in the creation or imposition of any Lien on any Property of the Company
(other than Liens created pursuant to the Collateral Documents).
Section 6.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans and other extensions of credit made available hereunder
solely for its general working capital purposes and for such other legal and
proper purposes as are consistent with all applicable laws and the terms of this
Agreement. Neither the Company nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or any other extension of
credit made hereunder will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
Section 6.5. Financial Reports. The unaudited balance sheet of the
Company as at February 28, 1998 heretofore furnished to the Bank, fairly
presents the consolidated financial condition of the Company and its
Subsidiaries as at said date in conformity with generally accepted accounting
principles applied on a consistent basis. Neither the Company nor any Subsidiary
has contingent liabilities which are material to it other than as indicated on
such financial statements or, with respect to future periods, on the financial
statements furnished pursuant to Section 8.5 hereof.
-28-
34
Section 6.6. No Material Adverse Change. Since February 28, 1998, there
has been no change in the condition (financial or otherwise) or business
prospects of the Company or any Subsidiary except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse.
Section 6.7. Full Disclosure. The statements and information furnished
to the Bank in connection with the negotiation of this Agreement and the other
Loan Documents and the commitment by the Bank to provide all or part of the
financing contemplated hereby do not contain any untrue statements of a material
fact or omit a material fact necessary to make the material statements contained
herein or therein not misleading, the Bank acknowledging that as to any
projections furnished to the Bank, the Company only represents that the same
were prepared on the basis of information and estimates the Company believed to
be reasonable.
Section 6.8. Good Title. The Company and its Subsidiaries each have
good and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Bank (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as are
permitted by Section 8.14 hereof.
Section 6.9. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the Company threatened, against the Company or any Subsidiary which if adversely
determined would (a) impair the validity or enforceability of, or impair the
ability of the Company to perform its obligations under, this Agreement or any
of the other Loan Documents or (b) result in any Material Adverse Effect.
Section 6.10. Taxes. All tax returns required to be filed by the
Company or any Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective Properties, income or franchises,
which are shown to be due and payable in such returns, have been paid, unless
and to the extent that the same are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and adequate reserves are provided therefor. The Company does not know of any
proposed additional tax assessment against it or its Subsidiaries for which
adequate provision in accordance with GAAP has not been made on its accounts.
Adequate provisions in accordance with GAAP for taxes on the books of the
Company and each Subsidiary have been made for all open years, and for its
current fiscal period.
Section 6.11. Approvals. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor
-29-
35
any approval or consent of the stockholders of the Company or any other Person,
is or will be necessary to the valid execution, delivery or performance by the
Company of this Agreement or any other Loan Document.
Section 6.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other.
Section 6.13. Investment Company; Public Utility Holding Company.
Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.14. ERISA. The Company and each other member of its
Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with ERISA and the
Code to the extent applicable to it with respect to a Plan and has not incurred
any liability to the PBGC other than a liability to the PBGC for premiums under
Section 4007 of ERISA, except to the extent that the failure to so comply or the
incurrences of any such liability would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has any
contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA, except to the extent such liabilities would not
reasonably be expected to have a Material Adverse Effect.
Section 6.15. Compliance with Laws. The Company and its Subsidiaries
each are in compliance with the requirements of all federal, state and local
laws, rules and regulations applicable to or pertaining to their Properties or
business operations (including, without limitation, the Occupational Safety and
Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances), non-compliance with which could have
a Material Adverse Effect. Neither the Company nor any Subsidiary has received
notice to the effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local environmental, health and
safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could have a Material Adverse Effect.
-30-
36
Section 6.16. Other Agreements. Neither the Company nor any Subsidiary
is in default under the terms of any covenant, indenture or agreement of or
affecting the Company, any Subsidiary or any of their Properties, which default,
if uncured, would have a Material Adverse Effect.
Section 6.17. No Default. No Default or Event of Default has occurred
and is continuing.
Section 6.18. Purchase Agreement. The Company has heretofore delivered
to the Bank a true and correct copy of the Purchase Agreement and all exhibits
thereto and the same has not been amended or modified in any respect. The
Company has all necessary corporate right, power and authority to consummate the
transactions contemplated by the Purchase Agreement and to perform and observe
all of its obligations thereunder. Neither the Company nor (to the Company's
knowledge) ▇▇▇▇▇▇ is in default in any of its respective obligations under the
Purchase Agreement.
Section 6.19. Solvency. The Company is able to pay its debts as they
become due and has sufficient capital to carry on its business and all
businesses in which it is about to engage, and the amount that will be required
to pay the Company's probable liabilities on its existing debts as they become
absolute and mature in less than the sum of the present fair saleable value of
its assets.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Bank to make any Loan or to issue any Letter of
Credit under this Agreement is subject to the following conditions precedent:
Section 7.1. All Advances. As of the time of the making of each
extension of credit (including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in
Section 6 hereof and in the other Loan Documents shall be true and
correct as of such time, except to the extent the same expressly relate
to an earlier date;
(b) the Company shall be in full compliance with all of the
terms and conditions of this Agreement and of the other Loan Documents,
and no Default or Event of Default shall have occurred and be
continuing or would occur as a result of making any such extension of
credit;
-31-
37
(c) in the case of any request for an extension of credit
under the Revolving Credit, after giving effect to such extension of
credit the aggregate principal amount of all Loans and Letters of
Credit outstanding under this Agreement shall not exceed the lesser of
(i) the Revolving Credit Commitment and (ii) the Borrowing Base;
(d) in the case of the issuance of any Letter of Credit, the
Bank shall have received a properly completed Application therefor
together with the fees called for hereby; and
(e) such extension of credit shall not violate any order,
judgment or decree of any court or other authority or any provision of
law or regulation applicable to the Bank (including, without
limitation, Regulation U of the Board of Governors of the Federal
Reserve System) as then in effect.
The Company's request for any Loan or Letter of Credit shall constitute its
warranty as to the facts set forth in subsections (a) through (e), both
inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial
extension of credit hereunder, the following conditions precedent shall also
have been satisfied:
(a) the Bank shall have received the following (each to be
properly executed and completed) and the same shall have been approved
as to form and substance by the Bank:
(i) the Revolving Credit Note;
(ii) the Collateral Documents, including the lockbox
agreement required pursuant to Section 4.2 hereof (including,
without limitation, all certificates evidencing the Company's
Kaneb MLP Units being pledged under the Collateral Assignment
of MLP Units, together with executed blank stock powers
therefor, and all financing statements requested by the Bank
in connection with the Collateral Documents);
(iii) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Agreement
and the other Loan Documents to the extent the Bank or its
counsel may reasonably request;
(iv) an incumbency certificate containing the name,
title and genuine signatures of each of the Company's
Authorized Representatives;
-32-
38
(v) evidence of insurance required by Section 8.4
hereof;
(vi) a written consent from ▇▇▇▇▇▇ to the collateral
assignment of the Company's rights under the Purchase
Agreement and related documents as security for the
Obligations;
(vii) an agreement from Kaneb Company to redeem the
Company's Kaneb MLP Units of the type contemplated by clause
(b) of the definition of the term "Freely Tradeable";
(viii) a payoff letter from Bank of America Illinois
setting forth the amount of indebtedness and obligations owed
it by ▇▇▇▇▇▇ and containing its agreement to release its Liens
upon receipt of such payoff amount; and
(ix) except to the extent waived in writing by the
Bank, agreements providing the Bank access to inventory of the
Company located in storage facilities not owned by the
Company.
(b) the Bank shall have received the initial fees called for
hereby;
(c) the Bank shall have received such valuations and
certifications as it may require in order to satisfy itself as to the
value of the Collateral, the financial condition of the Company and its
Subsidiaries, and the lack of material contingent liabilities of the
Company and its Subsidiaries;
(d) legal matters incident to the execution and delivery of
the Purchase Agreement, this Agreement and the other Loan Documents and
to the transactions contemplated hereby and thereby shall be
satisfactory to the Bank and its counsel; and the Bank shall have
received the favorable written opinion of counsel for the Company in
form and substance satisfactory to the Bank and its counsel;
(e) the Bank shall have received a Borrowing Base certificate
in the form attached hereto as Exhibit C showing the computation of the
Borrowing Base in reasonable detail as of the close of business not
earlier than March 23, 1998 and showing, among other things, excess
availability of at least $500,000 after deeming as borrowed hereunder
an amount equal to all but $100,000 of the Company's accounts payable
over sixty (60) days past due;
(f) the Bank shall have received a copy of the Purchase
Agreement, which agreement shall be in form and substance satisfactory
to the Bank and its counsel;
-33-
39
(g) all conditions precedent to the ▇▇▇▇▇▇ Acquisition shall
have been satisfied except for the Bank's funding of the purchase price
for the ▇▇▇▇▇▇ Acquisition and the Bank shall have received assurances
satisfactory to it of the foregoing;
(h) the Company shall have common stock and paid-in equity
capital of at least $8,000,000 immediately prior to consummation of the
▇▇▇▇▇▇ Acquisition as a result of equity contributions to the Company
from Kaneb Company in the form of at least $2,500,000 in cash and the
remainder in Kaneb MLP Units which are Freely Tradeable;
(i) the Bank shall have received a good standing certificate
for the Company (dated as of the date no earlier than thirty (30) days
prior to the date hereof) from the office of the secretary of state of
the state of its incorporation and each state in which it is qualified
to do business as a foreign corporation;
(j) the Liens granted to the Bank under the Collateral
Documents shall have been perfected in a manner satisfactory to the
Bank and its counsel;
(k) the Bank shall have received evidence satisfactory to it
that $2,000,000 of the Bonding Requirement is satisfied; and
(l) the Bank shall have received such other agreements,
instruments, documents, certificates and opinions as the Bank may
reasonably request.
SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in
use by the Company hereunder, except to the extent compliance in any case or
cases is waived in writing by the Bank:
Section 8.1. Maintenance of Business. The Company shall, and shall
cause each Subsidiary to, preserve and maintain its existence. The Company
shall, and shall cause each Subsidiary to, preserve and keep in force and effect
all licenses, permits and franchises necessary to the proper conduct of its
business.
Section 8.2. Maintenance of Properties. The Company shall maintain,
preserve and keep its property, plant and equipment in good repair, working
order and condition (ordinary wear and tear excepted) and shall from time to
time make all needful and proper repairs, renewals, replacements, additions and
betterments thereto so that at all times the efficiency thereof shall be fully
preserved and maintained, and shall cause each Subsidiary to do so in respect of
property, plant and equipment owned or used by it.
-34-
40
Section 8.3. Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor. The Company
shall duly pay and discharge, and shall cause each Subsidiary to duly perform,
obligations with respect to the remittance of Federal and state fuel and excise
taxes in respect of inventory of the Company, in each case before the same
become delinquent and before penalties accrue thereon, unless and to the extent
that such obligations are being contested in good faith and by appropriate
proceedings which prevent enforcement of the matter under contest and adequate
reserves are provided therefor and neither the amount in dispute nor the
allegedly late remittances on such taxes aggregate more than $50,000.
Section 8.4. Insurance. The Company shall insure and keep insured, and
shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually insured by Persons similarly situated and conducting similar businesses.
The Company shall in any event maintain insurance on the Collateral to the
extent required by the Collateral Documents. The Company shall upon written
request furnish to the Bank a certificate setting forth in summary form the
nature and extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The Company shall, and shall cause each
Subsidiary to, maintain a standard system of accounting in accordance with GAAP
and shall furnish to the Bank and its duly authorized representatives such
information respecting the business and financial condition of the Company and
its Subsidiaries as the Bank may reasonably request in writing; and without any
request, shall furnish to the Bank:
(a) as soon as available, and in any event no later than the
last Business Day of each calendar week, a Borrowing Base certificate
in the form attached hereto as Exhibit B showing the computation of the
Borrowing Base in reasonable detail as of the close of business on the
last day of the immediately preceding week, together with such other
information as is therein required, prepared by the Company and
certified to by the President or chief financial officer of the
Company;
-35-
41
(b) as soon as available, and in any event within twenty (20)
days after the close of each monthly accounting period of the Company,
a copy of the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the last day of such monthly
accounting period and the consolidated and the consolidating statements
of income, retained earnings and cash flows of the Company and its
Subsidiaries for the month and for the fiscal year-to-date period then
ended, each in reasonable detail showing in comparative form the
figures for the corresponding date and period in the previous fiscal
year as well as showing in comparative form the year-to-date
comparisons to the Company's current business plan, prepared by the
Company in accordance with GAAP and certified to by the President or
chief financial officer of the Company;
(c) within the period provided in subsection (b) above, an
accounts receivable and accounts payable aging together with an
inventory report, each in reasonable detail prepared by the Company and
certified to by the President or chief financial officer of the
Company;
(d) as soon as available, and in any event within ninety-five
(95) days after the last day of each annual accounting period of the
Company, a copy of the consolidated and consolidating balance sheet of
the Company and its Subsidiaries as of the close of such period and the
consolidated and consolidating statements of income, retained earnings
and cash flows of the Company and its Subsidiaries for the period then
ended, and accompanying notes thereto, each in reasonable detail
showing in comparative form the figures for the previous fiscal year,
accompanied by an unqualified opinion thereon of Price Waterhouse or
another firm of independent public accountants of recognized national
standing, selected by the Company and satisfactory to the Bank, to the
effect that the financial statements have been prepared in accordance
with GAAP and present fairly in accordance with GAAP the consolidated
financial condition of the Company and its Subsidiaries as of the close
of such fiscal year and the results of their operations and cash flows
for the fiscal year then ended and that an examination of such accounts
in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
such examination included such tests of the accounting records and such
other auditing procedures as were considered necessary in the
circumstances;
(e) within the period provided in subsection (d) above, the
written statement of the accountants who certified the audit report
thereby required that in the course of their audit they have obtained
no knowledge of any Default or Event of Default, or, if such
accountants have obtained knowledge of any such Default or Event of
Default, they shall disclose in such statement the nature and period of
the existence thereof;
-36-
42
(f) promptly after receipt thereof, any additional written
reports, management letters or other detailed information contained in
writing concerning significant aspects of the Company's or any
Subsidiary's operations and financial affairs given to it by its
independent public accountants;
(g) as soon as available and in any event within ninety days
after the date hereof, a balance sheet for the Company as of the close
of, and immediately after giving effect to, the ▇▇▇▇▇▇ Acquisition,
prepared in reasonable accordance with GAAP by the Company and
certified to by its chief financial officer;
(h) as soon as available, and in any event within thirty (30)
days prior to the end of each fiscal year of the Company, a copy of the
Company's consolidated and consolidating business plan for the
following fiscal year, such business plan to show the Company's
projected consolidated and consolidating revenues, expenses, and
balance sheet on month-by-month basis in reasonable detail, prepared by
the Company and in form reasonably satisfactory to the Bank; and
(i) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Company, written notice of
any threatened or pending litigation or governmental proceeding or
labor controversy against the Company or any Subsidiary which, if
adversely determined, would adversely effect the financial condition,
Properties, business or operations of the Company or any Subsidiary or
of the occurrence of any Default or Event of Default hereunder.
Each of the financial statements furnished to the Bank pursuant to subsections
(b) and (d) of this Section 8.5 shall be accompanied by a written certificate in
the form attached hereto as Exhibit C signed by the President or chief financial
officer of the Company to the effect that to the best of such officer's
knowledge and belief no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default
has occurred during such period, setting forth a description of such Default or
Event of Default and specifying the action, if any, taken by the Company to
remedy the same. Such certificate shall also set forth the calculations
supporting such statements in respect of Sections 8.7, 8.8 and 8.9 of this
Agreement.
Section 8.6. Inspection; Appraisals. The Company shall, and shall cause
each Subsidiary to, permit the Bank and its duly authorized representatives and
agents to visit and inspect any of the Properties, corporate books and financial
records of the Company and each Subsidiary, to examine and make copies of the
books of accounts and other financial records of the Company and each
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
each Subsidiary with, and to be advised as to the same by, its officers,
employees
-37-
43
and independent public accountants (and by this provision the Company authorizes
such accountants to discuss with the Bank the finances and affairs of the
Company and of each Subsidiary) at such reasonable times and reasonable
intervals as the Bank may designate.
Section 8.7. Tangible Net Worth. The Company shall, at all times during
each of the periods specified below, maintain Tangible Net Worth at not less
than $4,500,000.
Section 8.8. Leverage Ratio. The Company shall, at all times, maintain
a ratio of (a) Indebtedness for Borrowed Money of the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP to (b) the sum of
(i) such Indebtedness for Borrowed Money plus (ii) Net Worth of not more than
0.65 to 1.0.
Section 8.9. Debt Coverage Ratio. The Company shall, as of the last day
of each fiscal year of the Company, maintain the ratio of EBITDA for the four
fiscal quarters of the Company then ended to Interest Expense for the same four
fiscal quarters then ended of not less than 1.25 to 1.0.
Section 8.10. Capital Expenditures. The Company shall not, nor shall it
permit any Subsidiary to, expend or become obligated for capital expenditures
(as determined in accordance with GAAP) in an aggregate amount for the Company
and its Subsidiaries taken together, in excess of $250,000 during any fiscal
year of the Company.
Section 8.11. Indebtedness for Borrowed Money. The Company shall not,
nor shall it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
(a) the Obligations of the Company owing to the Bank and other
indebtedness and obligations of the Company or any Subsidiary from time
to time owing to the Bank;
(b) purchase money indebtedness and Capitalized Lease
Obligations secured by Liens permitted by Section 8.12 (e) hereof in an
aggregate amount not to exceed $200,000 at any one time outstanding;
(c) unsecured indebtedness of the Company owing to Kaneb
Company aggregating not more than $2,000,000 at any one time
outstanding; and
(d) unsecured indebtedness not otherwise permitted by this
Section aggregating not more than $200,000 outstanding at any one time.
-38-
44
Section 8.12. Liens. The Company shall not, nor shall it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that the
foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts
or leases to which the Company or any Subsidiary is a party or other
cash deposits required to be made in the ordinary course of business,
provided in each case that the obligation is not for borrowed money and
that the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or which are
being contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Company and
its Subsidiaries secured by a pledge of assets permitted under this
subsection, including interest and penalties thereon, if any, shall not
be in excess of $200,000 at any one time outstanding;
(d) the Liens granted in favor of the Bank by the Loan
Documents; and
(e) Liens on property of the Company or any of its
Subsidiaries created solely for the purpose of securing indebtedness
permitted by Section 8.11(b) hereof, representing or incurred to
finance, refinance or refund the purchase price of Property, provided
that no such Lien shall extend to or cover other Property of the
Company or such Subsidiary other than the respective Property so
acquired, and the principal amount of indebtedness secured by any such
Lien shall at no time exceed the original purchase price of such
Property.
Section 8.13. Investments, Acquisitions, Loans, Advances and
Guaranties. The Company shall not, nor shall it permit any Subsidiary to,
directly or indirectly, make, retain or have outstanding any investments
(whether through purchase of stock or obligations or otherwise) in, or loans or
advances (other than for travel advances and other similar cash advances made to
employees in the ordinary course of business) to, any other Person, or acquire
-39-
45
all or any substantial part of the assets or business of any other Person or
division thereof, or be or become liable as endorser, guarantor, surety or
otherwise for any debt, obligation or undertaking of any other Person, or
otherwise agree to provide funds for payment of the obligations of another, or
supply funds thereto or invest therein or otherwise assure a creditor of another
against loss, or apply for or become liable to the issuer of a letter of credit
which supports an obligation of another, or subordinate any claim or demand it
may have to the claim or demand of any other Person; provided, however, that the
foregoing shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one
year of the date of issuance thereof;
(b) investments in commercial paper rated at least P-1 by
▇▇▇▇▇'▇ Investors Services, Inc. and at least A-1 by Standard & Poor's
Corporation maturing within 270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial bank having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
(e) liabilities in respect of performance bonds obtained by
the Company in the ordinary course of its business to cover its
obligations with respect to the collection and remittance of Federal
and state fuel and excise taxes in respect of inventory of the Company;
and
(f) investments, loans, advances and guarantees not otherwise
permitted by this Section aggregating not more than $250,000 at any one
time outstanding.
In determining the amount of investments, acquisitions, loans, advances and
guarantees permitted under this Section 8.13, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.
-40-
46
Section 8.14. Operating Leases. The Company shall not, nor shall it
permit any Subsidiary to, acquire the use or possession of any Property under a
lease or similar arrangement, whether or not the Company or any Subsidiary has
the express or implied right to acquire title to or purchase such Property, at
any time if, after giving effect thereto, the aggregate amount of fixed rentals
and other consideration payable by the Company and its Subsidiaries under all
such leases and similar arrangements would exceed $3,000,000 during any fiscal
year of the Company. Capital Leases shall not be included in computing
compliance with this Section to the extent the Company's and its Subsidiaries'
liability in respect of the same is permitted by Section 8.11(b) hereof.
Ordinary through-put charges owed to terminal operators for handling of the
Company's inventory shall not be included in compliance with this Section.
Section 8.15. Mergers, Consolidations and Sales. The Company shall not,
nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of all or any
substantial part of its Property, including any disposition of Property as part
of a sale and leaseback transaction, or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided, however,
that this Section shall not apply to nor operate to prevent the Company or any
Subsidiary from selling its inventory in the ordinary course of its business.
Any sale, transfer, lease or other disposition of more than five percent (5%) of
the Company's total assets shall be deemed "substantial" for purposes of this
Section.
Section 8.16. Maintenance of Subsidiaries. The Company shall not
assign, sell or transfer, or permit any Subsidiary to issue, assign, sell or
transfer, any shares of capital stock of a Subsidiary; provided that the
foregoing shall not operate to prevent the issuance, sale and transfer to any
person of any shares of capital stock of a Subsidiary solely for the purpose of
qualifying, and to the extent legally necessary to qualify, such person as a
director of such Subsidiary.
Section 8.17. Dividends and Certain Other Restricted Payments. The
Company shall not during any fiscal year (a) declare or pay any dividends on or
make any other distributions in respect of any class or series of its capital
stock (other than dividends payable solely in its capital stock) or (b) directly
or indirectly purchase, redeem or otherwise acquire or retire any of its capital
stock (such non-excepted declarations or payments of dividends, purchases,
redemptions, retirements, and distributions in respect of capital stock being
herein collectively called "Restricted Payments"), if, at the time of such
Restricted Payment or after giving effect thereto, any Default or Event of
Default would occur or be continuing.
Section 8.18. ERISA. The Company shall, and shall cause each Subsidiary
that is a member of the Controlled Group to, promptly pay and discharge all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of the
Company's Properties. The Company shall, and shall
-41-
47
cause each Subsidiary that is a member of the Controlled Group to, promptly
notify the Bank of (i) the occurrence of any reportable event (as defined in
ERISA Section 4043(c)) with respect to a Plan for which the PBGC has not waived
the 30-day notice requirement, (ii) receipt of any notice from the PBGC of its
intention to seek termination of any Plan or appointment of a trustee therefor,
(iii) its intention to terminate any Plan in a distress termination pursuant to
Section 4041(c) of ERISA, and (iv) the occurrence of any event with respect to
any Plan which would result in the incurrence by the Company of any liability,
fine or penalty, or increase in the contingent liability of the Company or any
Subsidiary with respect to any post-retirement Welfare Plan benefit except where
such liability would not reasonably be expected to have a Material Adverse
Effect.
Section 8.19. Compliance with Laws. The Company shall, and shall cause
each Subsidiary to, comply in all respects with the requirements of all federal,
state and local laws, rules, regulations, ordinances and orders applicable to or
pertaining to their Properties or business operations, non-compliance with which
could have a material adverse effect on the financial condition, Properties,
business or operations of the Company or any Subsidiary or could result in a
Lien upon any of their Property.
Section 8.20. Burdensome Contracts With Affiliates. The Company shall
not, nor shall it permit any Subsidiary to, enter into any contract, agreement
or business arrangement with any of its Affiliates (other than with Wholly-Owned
Subsidiaries) on terms and conditions which are less favorable to the Company or
such Subsidiary than would be usual and customary in similar contracts,
agreements or business arrangements between Persons not affiliated with each
other.
Section 8.21. No Changes in Fiscal Year. Neither the Company nor any
Subsidiary shall change its fiscal year from its present basis without the prior
written consent of the Bank.
Section 8.22. Formation of Subsidiaries. Except for existing
Subsidiaries designated on Schedule 6.2 hereto, the Company shall not, nor shall
it permit any Subsidiary to, form or acquire any Subsidiary without the prior
written consent of the Bank.
Section 8.23. Change in the Nature of Business. The Company shall not,
and shall not permit any Subsidiary to, engage in any business or activity if as
a result the general nature of the business of the Company or any Subsidiary
would be changed in any material respect from the general nature of the business
engaged in by the Company or such Subsidiary on the date of this Agreement.
-42-
48
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default in the payment when due of all or any part of any
Obligation payable by the Company hereunder or under any other Loan
Document (whether at the stated maturity thereof or at any other time
provided for in this Agreement), or default shall occur in the payment
when due of any other indebtedness or obligation (whether direct,
contingent or otherwise) of the Company owing to the Bank; or
(b) default in the observance or performance of any covenant
set forth in Sections 8.11, 8.12, 8.13, 8.15 or 8.17 hereof or of any
provision of any Loan Document requiring the maintenance of insurance
on the Collateral subject thereto or dealing with the use or remittance
of proceeds of Collateral; or
(c) default in the observance or performance of any covenant
set forth in Sections 8.5, 8.7, 8.8, 8.9 or 8.10 hereof within ten (10)
days after the earlier of (i) the date on which such failure shall
first become known to any officer of the Company or (ii) written notice
thereof is given to the Company by the Bank; or
(d) default in the observance or performance of any other
provision hereof or of any other Loan Document which is not remedied
within thirty (30) days after the earlier of (i) the date on which such
failure shall first become known to any officer of the Company or (ii)
written notice thereof is given to the Company by the Bank; or
(e) any representation or warranty made by the Company herein
or in any other Loan Document, or in any statement or certificate
furnished by it pursuant hereto or thereto, or in connection with any
extension of credit made hereunder, proves untrue in any material
respect as of the date of the issuance or making thereof; or
(f) any event occurs or condition exists (other than those
described in subsections (a) through (e) above) which is specified as
an event of default under any of the other Loan Documents, or any of
the Loan Documents shall for any reason not be or shall cease to be in
full force and effect, or any of the Loan Documents is declared to be
null and void, or any of the Collateral Documents shall for any reason
fail to create a valid and perfected first priority Lien in favor of
the Bank in any Collateral purported to be covered thereby except as
expressly permitted by the terms thereof; or
-43-
49
(g) default shall occur under any Indebtedness for Borrowed
Money aggregating in excess of $100,000 issued, assumed or guaranteed
by the Company or any Subsidiary, or under any indenture, agreement or
other instrument under which the same may be issued, and such default
shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such Indebtedness for Borrowed
Money (whether or not such maturity is in fact accelerated), or any
such Indebtedness for Borrowed Money shall not be paid when due
(whether by lapse of time, acceleration or otherwise); or
(h) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,500,000 shall be entered or filed
against the Company or any Subsidiary or against any of their Property
and which remains unvacated, unbonded, unstayed or unsatisfied for a
period of thirty (30) days; or
(i) more than $100,000 has been expended in the aggregate on a
cumulative basis after the date hereof by surety companies under
performance bonds covering defaults by the Company in its collection
and remittance of Federal and state fuel and excise taxes in respect of
inventory of the Company; or
(j) the Company or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess
$1,000,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans having aggregate Unfunded Vested Liabilities in excess of
$1,000,000 (collectively, a "Material Plan") shall be filed under Title
IV of ERISA by the Company or any other member of its Controlled Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan
against the Company or any member of its Controlled Group to enforce
Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have
been dismissed within thirty (30) days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or
(k) dissolution or termination of existence of the Company or
any Subsidiary; or
(l) there shall occur any material adverse change in the
condition (financial or otherwise) or business prospects of the Company
or any Subsidiary and the Bank shall have provided to Company at least
ten (10) Business Days' written notice of such occurrence and its
existence as a default hereunder; or
-44-
50
(m) 80% of the issued and outstanding shares of capital stock
of the Company having the power to vote for the election of directors
of the Company ceases at any time and for any reason (including death
or incapacity) to be owned, legally and beneficially, by Kaneb Company;
or
(n) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part
of its Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the United States Bankruptcy Code,
as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in
good faith any appointment or proceeding described in Section 9.1(o)
hereof;
(o) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any Subsidiary
or any substantial part of any of their Property, or a proceeding
described in Section 9.1(n)(v) shall be instituted against the Company
or any Subsidiary, and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of thirty
(30) days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default
described in subsection (a) through (m), both inclusive, of Section 9.1 has
occurred and is continuing, the Bank may, by notice to the Company, take one or
more of the following actions:
(a) terminate the obligation of the Bank to extend any further
credit hereunder on the date (which may be the date thereof) stated in
such notice;
(b) declare the principal of and the accrued interest on the
Revolving Credit Note to be forthwith due and payable and thereupon the
Revolving Credit Note, including both principal and interest and all
fees, charges and other Obligations payable hereunder and under the
other Loan Documents, shall be and become immediately due and payable
without further demand, presentment, protest or notice of any kind; and
-45-
51
(c) enforce any and all rights and remedies available to it
under the Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described
in subsection (n) or (o) of Section 9.1 has occurred and is continuing, then the
Revolving Credit Note, including both principal and interest, and all fees,
charges and other Obligations payable hereunder and under the other Loan
Documents, shall immediately become due and payable without presentment, demand,
protest or notice of any kind, and the obligation of the Bank to extend further
credit pursuant to any of the terms hereof shall immediately terminate. In
addition, the Bank may exercise any and all remedies available to it under the
Loan Documents or applicable law.
Section 9.4. Collateral for Undrawn Letters of Credit. When any Event
of Default, other than an Event of Default described in subsections (n) or (o)
of Section 9.1, has occurred and is continuing, the Company shall, upon demand
of the Bank, and when any Event of Default described in subsections (n) or (o)
of Section 9.1 has occurred the Company shall, without notice or demand from the
Bank, immediately pay to the Bank the full amount of each Letter of Credit then
outstanding, the Company agreeing to immediately make such payment and
acknowledging and agreeing that the Bank would not have an adequate remedy at
law for failure of the Company to honor any such demand and that the Bank shall
have the right to require the Company to specifically perform such undertaking
whether or not any draws have been made under any such Letters of Credit.
SECTION 10. MISCELLANEOUS.
Section 10.1. Non-Business Days. If any payment hereunder becomes due
and payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such payment
shall be due and payable. In the case of any payment of principal falling due on
a day which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 10.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of the Bank in the exercise of any power or right shall operate as a
waiver thereof or as an acquiescence in any default, nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The rights and remedies
hereunder of the Bank are cumulative to, and not exclusive of, any rights or
remedies which it would otherwise have.
-46-
52
Section 10.3. Amendments, Etc. No amendment, modification, termination
or waiver of any provision of this Agreement or of any other Loan Document, nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank. No notice
to or demand on the Company in any case shall entitle the Company to any other
or further notice or demand in similar or other circumstances.
Section 10.4. Costs and Expenses. The Company agrees to pay on demand
the reasonable costs and expenses of the Bank in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Loan Documents and the other instruments and documents to be delivered
thereunder, and in connection with the recording and filing of any of the
foregoing as well as in connection with lien searches from time to time obtained
by the Bank in its administration of the credit facilities provided for herein,
and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder and any waivers or amendments hereto or
thereto, including the reasonable fees and expenses of Messrs. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇, counsel for the Bank, with respect to all of the foregoing (whether or
not the transactions contemplated hereby are consummated). The Company further
agrees to pay to the Bank or any other holder of the Obligations all reasonable
costs and expenses (including court costs and reasonable attorneys' fees), if
any, incurred or paid by the Bank or any other holder of the Obligations in
connection with any Default or Event of Default or in connection with the
enforcement of this Agreement or any other Loan Document or any other instrument
or document delivered thereunder. The Company further agrees to indemnify the
Bank, and any security trustee, and their respective directors, officers and
employees, against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor, whether or not the indemnified person is a
party thereto) which any of them may pay or incur arising out of or relating to
any Loan Document or any of the transactions contemplated thereby or the direct
or indirect application or proposed application of the proceeds of any extension
of credit made available hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The
Company, upon demand by the Bank at any time, shall reimburse the Bank for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing except if the same is directly due to the gross
negligence or willful misconduct of the party to be indemnified. The obligations
of the Company under this Section 10.4 shall survive the termination of this
Agreement.
Section 10.5. Documentary Taxes. The Company agrees to pay on demand
any documentary, stamp or similar taxes payable in respect of this Agreement or
any other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
-47-
53
Section 10.6. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 10.7. Notices. Except as otherwise specified herein, all
notices hereunder shall be in writing (including cable, telecopy or telex) and
shall be given to the relevant party at its address, telecopier number or telex
number set forth below, or such other address, telecopier number or telex number
as such party may hereafter specify by notice to the other given by United
States certified or registered mail, by telecopy or by other telecommunication
device capable of creating a written record of such notice and its receipt.
Notices hereunder shall be addressed:
to the Company at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
to the Bank at:
▇▇▇▇▇▇ Trust and Savings Bank
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Commercial Finance Group
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telex: 254157
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 10.7 and a confirmation of such telecopy has been
received by the sender, (ii) if given by telex, when such telex is transmitted
to the telex number specified in this Section 10.7 and the answerback is
received by sender, (iii) if given by mail, five (5) days after such
communication is deposited in the mail, certified or registered with return
receipt requested, addressed as aforesaid, or (iv) if
-48-
54
given by any other means, when delivered at the addresses specified in this
Section 10.7; provided that any notice given pursuant to Section 1 hereof shall
be effective only upon receipt.
Section 10.8. Participations. The Bank may grant participations in its
extensions of credit hereunder to any other bank or other lending institution (a
"Participant"), provided that (i) no Participant shall thereby acquire any
direct rights under this Agreement or the other Loan Documents and (ii) no sale
of such a participation in extensions of credit hereunder shall in any manner
relieve the Bank of its obligations hereunder.
Section 10.9. Construction. The provisions of this Agreement relating
to Subsidiaries shall only apply during such times as the Company has one or
more Subsidiaries. Nothing contained herein shall be deemed or construed to
permit any act or omission which is prohibited by the terms of any of the other
Loan Documents, the covenants and agreements contained herein being in addition
to and not in substitution for the covenants and agreements contained in the
other Loan Documents.
Section 10.10. Headings. Section headings used in this Agreement are
for convenience of reference only and are not a part of this Agreement for any
other purpose.
Section 10.11. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 10.12. Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 10.13. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount in excess of the
maximum amount of interest permitted by applicable law to be charged for the use
or detention, or the forbearance in the collection, of all or any portion of the
Loans or other Obligations ("Excess Interest"). If any Excess Interest is
provided for, or is adjudicated to be provided for, herein or in any other Loan
Document, then in such event (a) the provisions of this Section 10.13 shall
govern and control; (b) neither the Company nor any guarantor or endorser shall
be obligated to pay any Excess Interest; (c) any Excess Interest that the Bank
may have received under any Loan Document shall, at the option of the Bank, be
(i) applied as a credit against the then outstanding principal amount of Loans
hereunder, accrued and unpaid interest thereon (not to exceed the maximum amount
permitted by applicable law) and any other Obligations, or all of the foregoing;
(ii) refunded to the Company,
-49-
55
or (iii) any combination of the foregoing; (d) the interest rate payable
hereunder or under any other Loan Document shall be automatically subject to
reduction to the maximum lawful contract rate allowed under applicable usury
laws, and this Agreement and the other Loan Documents shall be deemed to have
been, and shall be, reformed and modified to reflect such reduction in the
relevant interest rate; and (e) neither the Company nor any guarantor or
endorser shall have any action against the Bank for any damages whatsoever
arising out of the payment or collection of any Excess Interest.
Section 10.14. Binding Nature, Governing Law, Etc. This Agreement shall
be binding upon the Company and the Bank and their respective successors and
assigns, and shall inure to the benefit of the Bank and the benefit of its
successors and assigns, including any subsequent holder of the Obligations. The
Company may not assign its rights hereunder without the written consent of the
Bank. This Agreement, together with the other Loan Documents, constitutes the
entire understanding of the parties with respect to the subject matter hereof
and any prior agreements, whether written or oral, with respect thereto are
superseded hereby. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 10.15. Submission to Jurisdiction; Waiver of Jury Trial. The
Company hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE COMPANY AND THE BANK EACH HEREBY IRREVOCABLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
-50-
56
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 25th day of March, 1998.
▇▇▇▇▇▇ OIL CORPORATION
By:
Name:
Title:
Accepted and agreed to in Chicago, Illinois as of the day and year last
above written.
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By:
Name:
Title:
-51-
57
EXHIBIT A
▇▇▇▇▇▇ OIL CORPORATION
REVOLVING CREDIT NOTE
Chicago, Illinois
$20,000,000 March 25, 1998
On the Termination Date, for value received, the undersigned, ▇▇▇▇▇▇
OIL CORPORATION, a Delaware corporation (the "Company"), hereby promises to pay
to the order of ▇▇▇▇▇▇ TRUST AND SAVINGS BANK (the "Bank") at its office at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, the principal sum of (i) TWENTY MILLION
and no/100 DOLLARS ($20,000,000), or (ii) such lesser amount as may at the time
of the maturity hereof, whether by acceleration or otherwise, be the aggregate
unpaid principal amount of all Loans owing from the Company to the Bank under
the Revolving Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences Loans made and to be made to the Company by the
Bank under the Revolving Credit provided for under that certain Credit Agreement
dated as of March ___, 1998 between the Company and the Bank (said Credit
Agreement, as the same may be amended, modified or restated from time to time,
being referred to herein as the "Credit Agreement"), and the Company hereby
promises to pay interest at the office specified above on each Loan evidenced
hereby at the rates and at the times and in the manner specified therefor in the
Credit Agreement.
Each Loan made against this Note and any repayment of principal hereon
shall be endorsed by the holder hereof on a schedule to this Note or recorded on
the books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof), and the
Company agrees that in any action or proceeding instituted to collect or enforce
collection of this Note, the entries endorsed on a schedule to this Note or
recorded on the books and records of the holder hereof shall be prima facie
evidence of the unpaid principal balance of this Note.
This Note is issued by the Company under the terms and provisions of
the Credit Agreement and is secured by, among other things, the Collateral
Documents, and this Note and the holder hereof are entitled to all of the
benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms
-2-
58
and with the effects provided in the Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
are defined in the Credit Agreement.
The Company hereby promises to pay all reasonable costs and expenses
(including reasonable attorneys' fees) suffered or incurred by the holder hereof
in collecting this Note or enforcing any rights in any collateral therefor. The
Company hereby waives presentment for payment and demand. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
▇▇▇▇▇▇ OIL CORPORATION
By:
Name:
------------------------------------
Title:
------------------------------------
-2-
