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EXHIBIT 10.12
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF THE SENIOR DEBT (AS DEFINED IN THE SUBORDINATION AND
INTERCREDITOR AGREEMENT DEFINED BELOW) PURSUANT TO, AND TO THE EXTENT PROVIDED
IN, THE SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF EVEN DATE HEREWITH
BY AND AMONG THE BORROWER (AS DEFINED BELOW), THE SUBORDINATED AGENT (AS DEFINED
BELOW), AND THE SENIOR AGENT (AS DEFINED THEREIN).
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[EXECUTION VERSION]
SUBORDINATED LOAN AGREEMENT
AMONG
SIERRA WELL SERVICE, INC.
AS BORROWER
THE SUBORDINATED LENDERS NAMED IN THIS
AGREEMENT,
AS SUBORDINATED LENDERS
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
AS AGENT
DATED AS OF MARCH 31, 1999
$25,000,000 SUBORDINATED LOAN FACILITY
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS.................................................................1
Section 1.1 Certain Definitions.......................................1
Section 1.2 Accounting Principles....................................10
ARTICLE 2
AMOUNT AND TERM OF THE SUBORDINATED LOAN...................................11
Section 2.1 Subordinated Loan........................................11
Section 2.2 Repayment Obligations; Prepayments.......................11
Section 2.3 Payments and Computations................................12
Section 2.4 Interest.................................................13
Section 2.5 Subordinated Notes.......................................14
Section 2.6 Taxes....................................................14
Section 2.7 Increased Costs..........................................15
Section 2.8 Illegality...............................................16
ARTICLE 3
CONDITIONS OF CLOSING......................................................16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.............................................19
Section 4.1 Corporate Existence......................................19
Section 4.2 Corporate Power and Authorization........................19
Section 4.3 Binding Obligations......................................19
Section 4.4 No Legal Bar Or Resultant Lien...........................20
Section 4.5 No Consent...............................................20
Section 4.6 Financial Condition......................................20
Section 4.7 Liabilities..............................................20
Section 4.8 Litigation...............................................20
Section 4.9 Taxes; Governmental Charges..............................20
Section 4.10 Ownership of Property; Liens; Leases of Equipment........21
Section 4.11 Intellectual Property....................................21
Section 4.12 Defaults.................................................21
Section 4.13 Casualties; Taking of Properties.........................21
Section 4.14 Margin Stock.............................................22
Section 4.15 Location of Business and Offices.........................22
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Section 4.16 Compliance with the Law..................................22
Section 4.17 No Material Misstatements................................22
Section 4.18 ERISA....................................................23
Section 4.19 Environmental Matters....................................23
Section 4.20 Subsidiaries; Partnerships...............................24
Section 4.21 Certain Fees.............................................24
Section 4.22 Purpose of Loans.........................................25
Section 4.23 Support and Security Documents...........................25
Section 4.24 Employment...............................................25
Section 4.25 Year 2000 Compliance.....................................25
Section 4.26 Insurance................................................26
Section 4.27 Hedging Agreements.......................................26
Section 4.28 Capital Stock............................................27
ARTICLE 5
AFFIRMATIVE COVENANTS......................................................27
Section 5.1 Financial Statements and Reports.........................27
Section 5.2 Certificates of Compliance...............................28
Section 5.3 Accountants' Certificate.................................28
Section 5.4 Taxes Other Liens........................................28
Section 5.5 Compliance with Laws.....................................29
Section 5.6 Further Assurances.......................................29
Section 5.7 Insurance................................................29
Section 5.8 Accounts and Records.....................................29
Section 5.9 Right of Inspection......................................29
Section 5.10 Notice of Certain Events.................................30
Section 5.11 ERISA Information and Compliance.........................30
Section 5.12 Environmental Reports and Notices........................30
Section 5.13 Maintenance..............................................30
Section 5.14 New Subsidiary...........................................31
Section 5.15 Performance on Borrower's Behalf.........................31
Section 5.16 Change of Principal Place of Business....................31
Section 5.17 New Bank Accounts........................................31
Section 5.18 Year 2000 Compliant......................................32
ARTICLE 6
NEGATIVE COVENANTS.........................................................33
Section 6.1 Liens....................................................33
Section 6.2 Mergers..................................................33
Section 6.3 Indebtedness and Other Obligations.......................33
Section 6.4 Dividends; Compensation..................................34
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Section 6.5 Investments................................................34
Section 6.6 Sale or Discount of Receivables............................35
Section 6.7 Nature of Business.........................................35
Section 6.8 Amendment of Articles of Incorporation or Bylaws...........35
Section 6.9 Asset Sales................................................35
Section 6.10 Transactions with Affiliates...............................35
Section 6.11 Partnerships...............................................36
Section 6.12 Subsidiaries...............................................36
Section 6.13 Equity Proceeds............................................36
Section 6.14 Public Disclosures.........................................36
Section 6.15 Limitation on Payment Restrictions Affecting Subsidiaries..36
Section 6.16 Fixed Charge Coverage Ratio................................37
ARTICLE 7
EVENTS OF DEFAULT............................................................37
Section 7.1 Events of Default..........................................37
Section 7.2 Acceleration...............................................39
Section 7.3 Default Interest...........................................39
Section 7.4 Other Subordinated Loan Documents..........................40
Section 7.5 Right of Setoff............................................40
Section 7.6 Cumulative Remedies........................................40
Section 7.7 Application of Payments....................................40
ARTICLE 8
THE SUBORDINATED AGENT.......................................................41
Section 8.1 Authorization and Action...................................41
Section 8.2 Subordinated Agent's Reliance, Etc.........................41
Section 8.3 The Subordinated Agent and Its Affiliates..................42
Section 8.4 Subordinated Lender Loan Decision..........................42
Section 8.5 Indemnification............................................42
Section 8.6 Successor Subordinated Agent...............................43
ARTICLE 9
MISCELLANEOUS................................................................44
Section 9.1 Interpretation and Survival of Provisions..................44
Section 9.2 Costs, Expenses and Taxes..................................44
Section 9.3 No Waiver; Modifications in Writing........................47
Section 9.4 Binding Effect; Assignment.................................47
Section 9.8 Communications.............................................50
Section 9.9 Interest...................................................50
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Section 9.10 Governing Law..............................................51
Section 9.11 WAIVER OF JURY TRIAL.......................................51
Section 9.12 LIMITATION ON DAMAGES......................................51
Section 9.13 Execution in Counterparts..................................51
EXHIBITS:
Exhibit A - Form of Subordinated Note
Exhibit 5.1(a) - Consolidating Schedules
Exhibit 5.1(d) - Budget Requirements
Exhibit 5.2 - Form of Compliance Certificate
SCHEDULES:
Schedule 4.7 - Liabilities
Schedule 4.8 - Litigation
Schedule 4.10 - Certain Assets; Permitted Liens
Schedule 4.19 - Environmental
Schedule 4.20(a) - Subsidiaries
Schedule 4.20(b) - Partnerships; Joint Ventures
Schedule 4.26 - Insurance
Schedule 4.27 - Hedging Arrangements
Schedule 4.28 - Capital Stock
Schedule 6.3 - Certain Indebtedness
Schedule 6.9 - Excluded Asset Sales
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SUBORDINATED LOAN AGREEMENT
This Subordinated Loan Agreement (the "Subordinated Loan Agreement") is
made and entered into as of March 31, 1999, among SIERRA WELL SERVICE, INC., a
Delaware corporation, as borrower, the SUBORDINATED LENDERS, as defined below,
and JOINT ENERGY INVESTMENTS II LIMITED PARTNERSHIP, a Delaware limited
partnership, as agent for the Subordinated Lenders ("Subordinated Agent").
The Loan Agreement dated September 30, 1997 (the "Original Loan
Agreement") was entered into between the Borrower and Joint Energy Development
Investments Limited Partnership ("JEDI"). The Original Loan Agreement was
assigned to Joint Energy Development Investments II Limited Partnership ("JEDI
II") from JEDI pursuant to the Notice of Assignment and Amendment. In
conjunction with the restructuring of the Borrower's capital structure, the
Borrower, the Subordinated Lenders and the Subordinated Agent have agreed to
amend, restate, and convert the Original Loan Agreement into two separate loan
facilities: (1) this Subordinated Loan Agreement and (2) the Senior Loan
Agreement dated as of even date herewith among the Borrower, the Senior Lenders
identified therein, and the Senior Agent (the "Senior Loan Agreement").
In consideration of the mutual covenants and agreements herein
contained and of the loans hereinafter referred to, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Definitions.
As used in this Agreement the following terms shall have the following
meanings:
"Acquisition" shall mean any direct or indirect acquisition, whether in
one or more related transactions, of all or substantially all of the assets,
liabilities, or securities of a Person, a division or business unit of a Person,
or any related group of the foregoing.
"Advance" shall mean the outstanding principal from a Subordinated
Lender which represents such Subordinated Lender's Pro Rata Share of the
Subordinated Loan.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided that no Person which would otherwise be an Affiliate of Enron Capital &
Trade Resources Corp. if not for this proviso shall be considered as an
Affiliate of the Borrower or its Subsidiaries.
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"Auction Package" means the auction of various vehicles and
miscellaneous obsolete equipment on or before May 31, 1999 in an amount not to
exceed $150,000.
"Basic Documents" shall mean, collectively, the Subordinated Loan
Documents and the Equity Documents.
"Board of Directors" shall mean the Board of Directors of SWRH, SWRI or
the Borrower, as applicable, or any committee thereof duly authorized to act on
behalf of the applicable Board of Directors.
"Borrower" shall mean Sierra Well Service, Inc., a Delaware
corporation.
"Business Day" shall mean any day other than Saturday, Sunday, or a day
on which banking institutions in New York City are not required to open for
business.
"Capital Lease" shall mean any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Capitalized Lease Obligation" shall mean the amount of the liability
under any Capital Lease that, in accordance with GAAP, is required to be
capitalized and reflected as a liability on the balance sheet.
"Capital Stock" of any Person shall mean any and all shares, interests,
participations, or other equivalents (however designated) of, or rights or
warrants, or options to purchase, corporate stock or any other equity interest
(however designated) of or in such Person.
"Change of Control" shall mean (i) the occurrence of any time when X.X.
Xxxxxxx III ever owns less than 51% of the voting securities of SWRH, (ii) any
time at which a wholly owned subsidiary of SWRH ceases to be the general partner
of Southwest Partners II, L.P. and Southwest Partners III, L.P., or (iii) any
time at which SWRH, SWRI, Southwest Partners II, L.P. and Southwest Partners
III, L.P. collectively own less than 45% of the voting securities of the
Borrower, or (iv) during any period of twelve (12) consecutive months beginning
with and after the Effective Date, the individuals who at the beginning of such
twelve (12) month period were directors of SWRH, or of the Borrower, shall cease
for any reason to constitute a majority of the Board of Directors of either SWRH
or the Borrower at any time during such period; provided, however, that "Change
of Control" shall not include any change of control occasioned by any of the
Senior Loan Documents, the Subordinated Loan Documents or the Equity Documents.
"Change of Management" shall mean the occurrence of any time when X.X.
Xxxxxxx III ceases to act as chief executive officer of SWRH, whether in the
capacity of President or Chairman.
"Closing Date" shall mean the date upon which each of the conditions
precedent contained
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in Article 3 have been either (a) satisfied in full to the Subordinated Agent's
satisfaction or (b) waived by the Subordinated Agent in its sole discretion;
provided that in no event shall the Closing Date be a date occurring after May
15, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, any successor statute, and the rules and regulation thereunder.
"Collateral" shall mean any real or personal property which may now or
hereafter be subject to a Lien securing the Subordinated Loan Obligations,
including the Liens granted by the Borrower concurrently with the execution of
this Subordinated Loan Agreement for the benefit of the Subordinated Lenders.
"Commitment" shall mean, for any Subordinated Lender, such Subordinated
Lender's commitment to make its Pro Rata Share of the Subordinated Loan pursuant
to the terms of this Subordinated Loan Agreement in an aggregate outstanding
amount not to exceed the Subordinated Lender's Maximum Commitment.
"Common Stock" shall mean the common stock, no par value per share, of
the Borrower or such other Capital Stock or other securities as shall constitute
the common equity of the Company.
"Debt/Lease Service" means, with respect to the Borrower and its
Subsidiaries and for any period of its determination, the sum of (a) the
aggregate amount of consolidated principal payments that became due and payable
or that were paid on account of long-term Indebtedness of the Borrower and its
Subsidiaries during such period, including any such amounts related to the
Capital Leases of the Borrower and its Subsidiaries, plus (b) the aggregate
consolidated lease expense of the Borrower and its Subsidiaries that became due
and payable or that was paid during such period, plus (c) the aggregate
consolidated interest expense of the Borrower and its Subsidiaries that became
due and payable or that was paid during such period, plus (d) the consolidated
Capital Expenditures of the Borrower and its Subsidiaries during such period. In
clarification of the foregoing, any interest amount deferred pursuant to Section
2.4(b) of the Subordinated Loan Agreement shall not be included in clause (c) of
this definition until the earlier of (i) the date such interest amount becomes
due and payable or (ii) the date such interest amount is paid.
"Default" shall mean any event which is, or after notice or passage of
time, or both, would be, an Event of Default.
"Default Rate" shall mean, for the applicable period, a per annum
interest rate equal to the applicable interest rate on the outstanding principal
balance of the respective Subordinated Notes as set forth in Section 2.6(c) for
such period plus 3.00% per annum.
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"EBITDA" means, with respect to any Person and for any period of its
determination, the consolidated net income of such Person for such period, plus
the consolidated interest expense, income taxes, and depreciation and
amortization of such Person for such period, in each case excluding (a)
unrealized gains or losses with respect to such Person's investment portfolio,
(b) any extraordinary gains or losses, (c) any gains or losses on the sale of
fixed assets, and (d) any non-cash impairments of assets.
"Effective Date" shall mean the date of this Subordinated Loan
Agreement.
"Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Authority
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or its Subsidiaries are conducting or at any time have
conducted business, or where any property of the Borrower or its Subsidiaries is
located, or where any hazardous substances generated by or disposed of by the
Borrower or its Subsidiaries are located, including but not limited to the Oil
Pollution Act of 1990 ("OPA"), as amended, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, and other
environmental conservation or protection laws. The term "oil" has the meaning
specified in OPA; the terms "hazardous substance," "release" and "threatened
release" have the meanings specified in CERCLA, and the terms "solid waste,"
"disposal" and "disposed" have the meanings specified in RCRA; provided,
however, if either CERCLA, RCRA or OPA is amended so as to broaden the meaning
of any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and provided, further, that, to the extent the
laws of the state in which any property of the Borrower or its Subsidiaries is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply with respect to such property.
"Equipment" shall mean all of Borrower's and its Subsidiaries' present
and future owned or leased fixtures, equipment, mobile equipment, vehicles,
interstate commercial vehicles, workover rigs and inventory comprised of such
items, wherever located, including Vehicles, tongs, hooks, tubing elevators,
pumps, pipes, engines, containers, tires, parts inventory, and other oil-field
service equipment, and all parts thereof and all accessions and additions
thereto.
"Equity Documents" shall mean the Securities Purchase Agreement between
the Borrower and JEDI II dated as of the Effective Date, the Certificate of
Designation of Preferred Stock - Series A, the Certificate of Designation of
Preferred Stock - Series B, the Certificate of Designation of Preferred Stock -
Series C, and the Stockholders' Agreement, and Registration Rights Agreement,
each as defined therein.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute, and the rules and
regulations thereunder.
"Event of Default" shall have the meaning specified in Section 7.1.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Subordinated Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Maturity Date" shall mean June 30, 2004.
"Financial Statements" shall mean consolidated balance sheets,
statements of operation and statements of cash flow, the consolidating schedules
used to prepare the same and, on an annual basis, appropriate footnotes prepared
in accordance with GAAP.
"Financing Statement" shall mean any document executed by either the
Borrower or any of its Subsidiaries required to perfect the pledge or security
interest granted by the Subordinated Loan Parties in any of the Collateral.
"GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants or in statements of
the Financial Accounting Standards Board or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in preceding periods.
"Governmental Authority" shall mean any (domestic or foreign) federal,
native American Indian, state, province, county, city, municipal, or other
political subdivision or government, department, commission, board, bureau,
court, agency, or any other instrumentality of any of them, which exercises
jurisdiction over the Borrower, any of its Subsidiaries, or any of their
respective property.
"Guaranteed Debt" of any Person shall mean, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such
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Indebtedness against loss, (iii) to supply funds to, or in any other manner
invest in, the debtor (including any agreement to pay for property or services
to be acquired by such debtor irrespective of whether such property is received
or such services are rendered), (iv) to maintain working capital or equity
capital of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor, or (v) otherwise to assure a creditor against
loss; provided that the term "guarantee" shall not include endorsements for
collection or deposit, in either case in the ordinary course of business, or any
obligation or liability of such Person in respect of leasehold interests
assigned by such Person to any other Person.
"Guaranty" shall mean any present or future guaranty in favor of the
Subordinated Agent for the benefit of the Subordinated Lenders guaranteeing the
payment and performance of the Subordinated Loan Obligations.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade accounts
payable and other accrued current liabilities incurred in the ordinary course of
business, (ii) all obligations of such Person evidenced by bonds, notes,
debentures, or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (iv) all Capitalized Lease
Obligations of such Person, (v) all indebtedness referred to in (but not
excluded from) clause (i), (ii), (iii), or (iv) above of other Persons, the
payment of which is secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, (vi) all Guaranteed Debt of such Person, (vii) all
Redeemable Capital Stock that has any redemptions, dividend payments, or other
obligations that are or could become due before the Final Maturity Date issued
by such Person.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Capital Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under any applicable version of the Uniform Commercial Code in effect
from time to time or any comparable law of any jurisdiction in respect of any of
the foregoing).
"Majority Subordinated Lenders" shall mean, at any time, Subordinated
Lenders holding more than 50% of the then aggregate unpaid principal amount of
the Subordinated Loan at such time.
"Material Adverse Effect" shall mean any circumstances or events which
could (i) have a material adverse effect on the assets or properties,
liabilities, financial condition, business,
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operations, affairs, or circumstances of the Borrower from the facts represented
or warranted in any Subordinated Loan Document or Equity Document (other than
any representation or warranty related solely to a different point in time), or
(ii) materially impair the ability of the Borrower to carry out its business as
it exists on the date of this Subordinated Loan Agreement or proposed at the
date of this Subordinated Loan Agreement to be conducted or to meet its
obligations under the Subordinated Loan Documents or Equity Documents on a
timely basis.
"Maximum Rate" shall mean, at any particular time in question, the
maximum rate of interest which under applicable law may then be charged on the
Subordinated Notes. If such maximum rate changes after the date hereof, the
Maximum Rate shall be automatically increased or decreased, as the case may be,
without notice to the Borrower from time to time as of the effective date of
each change in such maximum rate.
"Mortgages" shall mean (a) such Security Documents requested by the
Subordinated Agent in form and substance satisfactory to the Subordinated Agent
which shall replace and/or amend and restate the existing Deeds of Trust,
Security Agreements, and Fixture Filings, and Mortgages, Security Agreements,
and Fixture Filings executed in connection with the Original Loan Agreement, and
(b) any present or future deeds of trust, mortgages, or similar agreements made
by the Borrower or any Subsidiary, granting a first and prior lien and security
interest, subject only to Permitted Liens, in all real property, fixtures and
improvements owned by the respective Subordinated Loan Parties, including any
leasehold estate in real property, fixtures and improvements, in favor of the
Subordinated Agent for the benefit of the Subordinated Lenders securing the
Subordinated Loan Obligations.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Payment Date" shall mean the last Business Day of each March, June,
September, and December following the Effective Date until the Final Maturity
Date.
"Permitted Lien" shall mean (i) Liens disclosed in Schedule 4.10, (ii)
ad valorem taxes not yet due and payable, laborers', vendors', repairmen's,
mechanics', worker's, or materialmen's liens arising by operation of law or
incident to the construction or improvement of property if the obligations
secured thereby are not yet due or are being contested in good faith by
appropriate legal proceedings, (iii) minor irregularities in title to real
property which do not materially interfere with the occupation, use and
enjoyment by the Borrower or any Subsidiary of any of their respective
properties in the normal course of business as presently conducted or materially
impair the value thereof for such business, (iv) Liens securing the Senior Loan
Obligations (as defined in the Senior Loan Agreement).
"Person" shall mean any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or Government Authority.
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"Plan" shall mean any plan subject to Title IV of ERISA and maintained
by the Borrower or any Subsidiary, or any such plan to which the Borrower or any
Subsidiary is required to contribute on behalf of their employees.
"Pledge Agreements" shall mean the Pledge Agreements dated as of the
Effective Date, made by each of the Pledgors in favor of the Subordinated Agent
for the benefit of the Subordinated Lenders pledging the Capital Stock of the
Borrower owned by the Pledgors to the Subordinated Agent for the benefit of the
Subordinated Lenders.
"Pledgors" shall man (a) Southwest Partners II, L.P., a Delaware
limited partnership, (b) Southwest Partners III, L.P., a Delaware limited
partnership, (c) Xxxx X. Xxxxxx, and (d) Xxxx X. Xxxxxxxx.
"Pro Rata Share" shall mean, with respect to any Subordinated Lender,
(i) while no Advances are outstanding, the ratio (expressed as a percentage) of
such Subordinated Lender's Maximum Commitment, at any given time, to the total
of the Maximum Commitments at such time and (ii) while Advances are outstanding,
the the ratio (expressed as a percentage) outstanding principal amount of
Advances of such Subordinated Lender at such time to the aggregate outstanding
amount of Advances at such time.
"Redeemable Capital Stock" of any Person means any Capital Stock of
such Person or any Subsidiary of such Person that, either by its terms, by the
terms of any security into which it is convertible or exchangeable or otherwise,
(i), is, or upon the happening of an event or passage of time would be, required
to be redeemed on or prior to the Final Maturity Date, or (ii) is redeemable at
the option of the holder thereof at any time prior to the Final Maturity Date,
or (iii) is convertible into or exchangeable for debt securities at any time
prior to the Final Maturity Date.
"Requirement of Law" shall mean as to any Person, the Certificate of
Incorporation and By- laws or other organizational or governing documents of
such Person, and any law, treaty, rule, or regulation or determination of an
arbitrator or a court or other Governmental Authority, domestic or foreign, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean the chief executive officer,
president, executive vice president, general counsel, treasurer, or corporate
secretary of the Borrower or any of its Subsidiaries, as the case may be.
"Security Agreements" shall mean (a) the Security Agreement dated as of
the Effective Date, made by the Borrower, in favor of the Subordinated Agent for
the benefit of the Subordinated Lenders as security for the payment or
performance of the Subordinated Loan Obligations and (b) any future security
agreements made by the Borrower or any of the Subsidiaries, granting a first and
prior security interest in all of the assets and properties of the Subordinated
Loan Parties, in favor
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of the Subordinated Agent for the benefit of the Subordinated Lenders as
security for the payment or performance of the Subordinated Loan Obligations.
"Security Documents" shall mean this Subordinated Loan Agreement, the
Senior Loan Agreement, the Mortgages, the Financing Statements, the Pledge
Agreements, the Security Agreement, the Financing Statements, the Guaranties,
the Bank Account Letter and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower, the Subsidiaries, or any other
Person as security or support for the payment or performance of the Subordinated
Loan Obligations.
"Senior Loan Documents" shall have such meaning as defined in the
Senior Loan Agreement.
"Structuring Fee Agreements" means (a) the letter agreement dated as of
even date herewith between the Borrower and ECT Securities Limited Partnership
and (b) the letter agreement dated as of even date herewith between the Borrower
and JEDI II.
"Subordinated Agent's Account" shall mean the account located in New
York specified by the Subordinated Agent as the Subordinated Agent's Account
shall by written notice to the Borrower.
"Subordinated Lenders" shall mean the Subordinated Lenders listed on
the signature pages of this Subordinated Loan Agreement and each assignee that
shall become a party to this Subordinated Loan Agreement pursuant to Section
9.4.
"Subordinated Lender's Account" shall mean, for any Subordinated
Lender, the account specified by such Subordinated Lender as its Subordinated
Lender's Account by notice in writing to the Subordinated Agent.
"Subordinated Loan" shall mean the loan evidenced by this Subordinated
Loan Agreement consisting of the Advances by the Subordinated Lenders.
"Subordinated Loan Documents" shall mean, collectively, the
Subordinated Loan Agreement, the Subordinated Notes, the Structuring Fee
Agreement, the Guaranty, the Security Documents, the Subordination Agreement,
and all other documents, agreements, and other instruments executed in
connection with the Subordinated Loan Agreement.
"Subordinated Loan Obligations" shall mean all principal, interest,
fees, reimbursements, indemnifications, and other amounts or obligations now or
hereafter owed or performable by the Subordinated Loan Parties under the
Subordinated Loan Documents.
"Subordinated Loan Parties" shall mean the Borrower and the
Subsidiaries.
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"Subordinated Note" shall mean a promissory note in substantially the
form of Exhibit A made by the Borrower and payable to the order of any
Subordinated Lender evidencing indebtedness of the Borrower to such Subordinated
Lender resulting from the Subordinated Loan.
"Subordination Agreement" shall mean the Subordination and
Intercreditor Agreement dated as of even date herewith among the Borrower, the
Subordinated Agent, and the agent for the lenders under the Senior Loan
Agreement.
"Subsidiary" shall mean as to any Person, a corporation, partnership,
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership, or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Subordinated Loan Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"SWRH" shall mean Southwest Royalties Holdings, Inc., a Delaware
corporation.
"SWRI" shall mean Southwest Royalties, Inc., a Delaware corporation.
"Vehicles" means all of Borrower's present and future owned or leased
crew cabs, pick-ups, vans, trucks, automobiles, tractors, trailers, and other
mobile equipment.
Section 1.2 Accounting Principles.
(a) The Borrower shall not, and shall not permit any
of its Subsidiaries to, materially change any method of accounting employed in
the preparation of their Financial Statements from the methods employed in the
preparation of the audited consolidated Financial Statements dated as of
December 31, 1998, unless required to conform to GAAP or approved in writing by
the Subordinated Agent.
(b) Except as expressly provided for in this
Subordinated Loan Agreement, all accounting terms, definitions, ratios, and
other tests described herein shall be construed in accordance with GAAP with the
same basis applied in the Financial Statements described in paragraph (a) above.
(c) When the Financial Statements or financial
results of any group of Persons are described as "combined," that reference is
to the financial statements or financial results of such Persons, but not their
Subsidiaries, taken together on a combined basis after eliminating significant
inter-entity balances and transactions.
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ARTICLE 2
AMOUNT AND TERM OF THE SUBORDINATED LOAN
Section 2.1 Subordinated Loan. Subject to the terms, conditions and
notice requirements and relying on the representations and warranties contained
in this Subordinated Loan Agreement and the other Subordinated Loan Documents,
on the Closing Date but effective as of the Effective Date Twenty-Five Million
and No/100 Dollars ($25,000,000) of the outstanding principal amount owed by the
Borrower under the Original Loan Agreement shall be converted into the
Subordinated Loan which shall consist of Advances owed to each Subordinated
Lender in an amount equal to such Subordinated Lender's Pro Rata Share of
$25,000,000.
Section 2.2 Repayment Obligations; Prepayments.
(a) Principal.
(i) The Borrower shall pay to the
Subordinated Agent for the ratable benefit of the
Subordinated Lenders the aggregate outstanding
principal amount of the Subordinated Loan on the
Final Maturity Date.
(ii) In the event of a Change of Control,
Borrower shall repay to the Subordinated Agent for
the ratable benefit of the Subordinated Lenders
within thirty days (30) of the Majority Subordinated
Lenders demand therefore, the aggregate outstanding
principal amount of the Subordinated Loan and all
unpaid interest thereon. The Majority Subordinated
Lenders reserve the right to exercise the terms and
provision of this section at any time following a
Change of Control, regardless of the length of time
following the Change of Control that the Majority
Subordinated Lenders exercises their rights
hereunder. Until such time as the Majority
Subordinated Lenders make a demand pursuant to the
terms of this section, the Borrower shall repay the
principal amount of the Subordinated Loan in
accordance with the terms of Section 2.2(a)(i).
(b) Voluntary Prepayments. The Subordinated Loan
may be prepaid in whole or in part, from time to time, without penalty or
premium, following ten (10) days prior written notice to the Subordinated Agent.
Any voluntary partial prepayments of principal must be in whole multiples of
$100,000 and voluntary prepayments may only be made on a Payment Date and shall
include all interest accrued on the Subordinated Loan and unpaid to the date of
payment. Voluntary prepayments of principal may not be reborrowed. Any
prepayments shall be made to the Subordinated Agent for the ratable benefit of
the Subordinated Lenders.
(c) Mandatory Prepayments. Upon the Senior Loan
Obligations (as defined in the Senior Loan Agreement) repayment in full, in the
event of any disposition or transfer,
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including, without limitation, any transfer by merger or operation of law, by
the Borrower or any Subsidiary of any of their respective assets, Capital Stock
or debt securities, or should the Borrower or any Subsidiary secure any loans
other than the Subordinated Loan or the Senior Loan, and whether such sales or
loans are undertaken with or without the consent of the Majority Subordinated
Lenders, the net proceeds thereof (after deducting all reasonable costs and
expenses incurred by the Borrower or Subsidiary in connection therewith) shall
be delivered to the Subordinated Agent for the ratable benefit of the
Subordinated Lenders as a mandatory prepayment of the Subordinated Loan provided
that with regard to any disposition or transfer of any assets of the Borrower or
its Subsidiaries, such prepayment shall only be required to the extent that such
disposition or transfer does not require the Subordinated Majority Lenders
consent pursuant to Section 6.9 and (ii) the mandatory prepayment provision
contained within this Section shall not apply to the Borrower's sale of its
Lampasas Ranch property. All mandatory prepayments shall be applied to the
Subordinated Loan Obligations in accordance with Section 7.7. Mandatory
prepayments of principal may not be reborrowed. Any disposition or transfer of
Equipment of which the proceeds are reinvested in like-kind Equipment within 60
days shall not be subject to the terms hereof.
Section 2.3 Payments and Computations.
(a) All payment hereunder shall be made in U.S.
Dollars. The Borrower shall make each payment under the Subordinated Loan
Agreement and under the Subordinated Notes not later than 12:00 noon (New York,
New York time) on the day when due to the Subordinated Agent's Account in
immediately available funds. All payments by the Borrower hereunder shall be
made without any offset, abatement, withholding, deduction, counterclaim, or
reduction. Upon receipt of payment from the Borrower of any principal, interest,
or fees due to the Subordinated Lenders, the Subordinated Agent shall promptly
after receipt thereof distribute to the Subordinated Lenders their ratable share
of such payments for the account of their respective Subordinated Lender's
Account. If and to the extent that the Subordinated Agent shall not have so
distributed to any Subordinated Lender its ratable share of such payments, the
Subordinated Agent agrees that it shall pay interest on such amount for each day
after the day when such amount is made available to the Subordinated Agent by
the Borrower until the date such amount is paid to such Subordinated Lender by
the Subordinated Agent at the Federal Funds Rate in effect from time to time.
Interest on such amount shall be due and payable by the Subordinated Agent upon
demand by such Subordinated Lender. Upon receipt of other amounts due solely to
the Subordinated Agent or a specific Subordinated Lender, the Subordinated Agent
shall distribute such amounts to the appropriate party to be applied in
accordance with the terms of the Subordinated Loan Agreement. Whenever any
payment shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.
If the time for payment for an amount payable is not specified in the
Subordinated Loan Documents, or in any other document, the payment shall be due
and payable ten (10) days after the date on which the Subordinated Agent or
applicable Subordinated Lender demands payment therefor.
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(b) Unless the Subordinated Agent shall have received
written notice from the Borrower prior to any date on which any payment is due
to the Subordinated Lender that the Borrower shall not make such payment in
full, the Subordinated Agent may assume that the Borrower has made such payment
in full to the Subordinated Agent on such date and the Subordinated Agent may,
in reliance upon such assumption, cause to be distributed to each Subordinated
Lender on such date an amount equal to the amount then due such Subordinated
Lender. If and to the extent the Borrower shall not have so made such payment in
full to the Subordinated Agent, each Subordinated Lender shall repay to the
Subordinated Agent forthwith on demand such amount distributed to such
Subordinated Lender, together with interest thereon from the date such amount is
distributed to such Subordinated Lender until the date such Subordinated Lender
repays such amount to the Subordinated Agent, at an interest rate equal to, the
Federal Funds Rate in effect from time to time.
(c) Each Subordinated Lender agrees that if it should
receive any payment (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Subordinated Loan
Documents, or otherwise) in respect of any obligation of the Borrower to pay
principal, interest, fees, or any other obligation incurred under the
Subordinated Loan Documents in a proportion greater than the total amount of
such principal, interest, fees, or other obligation then owed and due by the
Borrower to such Subordinated Lender bears to the total amount of principal,
interest, fees, or other obligation then owed and due by the Borrower to the
Subordinated Lenders immediately prior to such receipt, then such Subordinated
Lender receiving such excess payment shall purchase for cash without recourse
from the other Subordinated Lenders an interest in the obligations of the
Borrower to such Subordinated Lenders in such amount as shall result in a
participation by all of the Subordinated Lenders, in proportion with the
Subordinated Lenders' respective pro rata shares, in the aggregate unpaid amount
of principal, interest, fees, or any such other obligation, as the case may be,
owed by the Borrower to all of the Subordinated Lenders; provided that if all or
any portion of such excess payment is thereafter recovered from such
Subordinated Lender, such purchase shall be rescinded and the purchase price
restored to the extent of such recovery, in proportion with the Subordinated
Lenders' respective Pro Rata Shares.
Section 2.4 Interest.
(a) The outstanding principal balance of the
Subordinated Loan shall bear interest at a rate per annum equal to ten percent
(10%). The Borrower shall pay to the Subordinated Lenders all accrued but unpaid
interest on the Subordinated Loan (i) except as permitted by Section 2.4(b), on
each Payment Date and (ii) on the Final Maturity Date.
(b) With regard to interest payments due on any
Payment Date prior to September 30, 2001, the Borrower may elect to defer the
payment of such accrued interest on such date by giving the Subordinated Agent
five (5) Business Days' prior written notice thereof, in which case (i) all
accrued interest for which payment is so deferred shall bear interest at a rate
per annum equal to twelve percent (12%) and (ii) on September 30, 2001, the
Borrower shall pay to the
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Subordinated Agent for the ratable benefit of the Subordinated Lenders all
accrued but unpaid interest on the Subordinated Loan including all amounts
deferred pursuant to this Section 2.4(b) and the interest accrued thereon.
(c) Past due interest, principal and other amounts
hereunder shall bear interest at a fluctuating interest rate per annum that is
equal to the lesser of (i) the Default Rate or (ii) the Maximum Rate from the
date due until paid.
(d) All computations of interest shall be made on the
basis of a 365/366 day year, as the case may be. All such computations shall be
made for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such computation is being performed.
Interest provided for under this Subordinated Loan Agreement and the
Subordinated Notes shall be calculated on the unpaid sums actually loaned and
outstanding pursuant to the terms of this Subordinated Loan Agreement and the
Subordinated Notes and only for the period from the date or dates advanced until
repaid. Each determination by the Subordinated Agent of an interest rate shall
be conclusive and binding for all purposes, absent manifest error.
Section 2.5 Subordinated Notes. To evidence the Advance made by
each of the Subordinated Lenders pursuant to this Subordinated Loan Agreement,
the Borrower will issue, execute and deliver a Subordinated Note to each
Subordinated Lender in the principal amount of each Subordinated Lender's
Maximum Commitment dated as of the Effective Date. The records of the
Subordinated Agent shall be deemed rebuttably presumptive evidence of the
principal amount owing on the Subordinated Notes. The liability for payment of
principal and interest evidenced by Subordinated Notes shall be limited to the
principal amounts actually loaned and outstanding under the Subordinated Notes
and this Subordinated Loan Agreement and interest on such amounts calculated in
accordance with the Subordinated Notes and this Subordinated Loan Agreement.
Section 2.6 Taxes.
(a) Any and all payments by the Subordinated Loan
Parties shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges, or withholdings,
and all liabilities with respect thereto, excluding, in the case of the
Subordinated Lenders, taxes imposed on its income and franchise taxes imposed on
it by any jurisdiction of which any the Subordinated Lenders is a citizen or
resident or any political subdivision of such jurisdiction (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If any Subordinated Loan Party shall be
required by law to deduct any Taxes from or in respect of any sum payable to any
Subordinated Lender, (i) the sum payable shall be increased as may be necessary
so that, after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.6), such Subordinated Lender
receive an amount equal to the sum it would have received had no such deductions
been made; (ii) such Subordinated Loan Party shall make such deductions; and
(iii) such Subordinated Loan Party shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
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(b) The Borrower agrees to pay and hold each
Subordinated Lender harmless from and against any and all present and future
stamp and other similar taxes with respect to this Subordinated Loan Agreement
and any other Subordinated Loan Documents and save each Subordinated Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission to pay such taxes, and indemnify each Subordinated
Lender for the full amount of taxes paid by the Subordinated Lenders in respect
of payments made or to be made under this Subordinated Loan Agreement or any
other Subordinated Loan Document and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such taxes were correctly or legally asserted (excluding taxes imposed on
its income and franchise taxes imposed on it by any jurisdiction of which such
Subordinated Lender is a citizen or resident or any political subdivision of
such jurisdiction).
Section 2.7 Increased Costs.
(a) Cost of Funds. If, due to either the introduction
of or any change in or in the interpretation, application, or applicability of,
any law or regulation, or the compliance with any guideline or request from any
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Subordinated Lender of funding or maintaining
the Subordinated Loan, or any reduction of any Subordinated Lender's reasonably
anticipated return on its investment, then the Borrower shall from time to time
upon demand by such Subordinated Lender pay to such Subordinated Lender such
additional amounts sufficient to compensate such Subordinated Lender for such
increased cost or reduced return. A certificate as to the amount of such
increased cost or reduced return detailing the calculation thereof prepared by
the Subordinated Lenders and submitted to the Borrower shall be conclusive and
binding for all purposes, absent manifest error.
(b) Capital Adequacy. If due to any change in any law
or regulation or any interpretation, directive, or request of any court or
governmental or monetary authority, whether or not having the force of law,
there shall be any increase by an amount which any Subordinated Lender
reasonably deems to be material in the capital requirements of such Subordinated
Lender or its parent or holding company related to its commitments to make or
the making, funding, or maintaining the Subordinated Loan hereunder, as such
capital requirements are reasonably allocated by such Subordinated Lender, then
the Borrower shall from time to time upon demand by such Subordinated Lender pay
to the Subordinated Lenders additional amounts sufficient to compensate such
Subordinated Lender or its respective parent or holding companies for such
increase in costs (including an amount equal to any reduction of the rate of
return on assets or equity of the Subordinated Lenders or their respective
parent or holding companies to a level below that which the Subordinated Lenders
or their respective parent or holding companies could have achieved but for such
change in law, regulation, interpretation, directive, or request). A certificate
as to such amounts and detailing the calculation of such amounts prepared by
such Subordinated Lender and submitted to the Borrower shall be conclusive and
binding for all purposes, absent manifest error.
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Section 2.8 Illegality. Notwithstanding any other provision in
this Subordinated Loan Agreement, if it becomes unlawful for any Subordinated
Lender to maintain the Subordinated Loan or to give effect to its obligations
hereunder, the Subordinated Lender will so notify the Borrower and the
Subordinated Agent, and to the extent necessary to prevent the violation of law
the aggregate outstanding principal amount of the Subordinated Loan made by the
Subordinated Lenders, all accrued but unpaid interest thereon, and any other
amounts payable to the Subordinated Lenders under this Subordinated Loan
Agreement and the other Subordinated Loan Documents will be prepaid as provided
in such notice.
ARTICLE 3
CONDITIONS OF CLOSING
The amendment and restatement of the Original Loan Agreement pursuant
to this Subordinated Loan Agreement is subject to the following conditions
precedent:
(a) The Subordinated Agent shall have received copies
of each of the following documents in form and content satisfactory to the
Subordinated Agent and its counsel, duly executed by the parties thereto and,
where applicable, acknowledged:
(i) The Subordinated Loan Documents.
(ii) Opinions of counsel to the Borrower
delivered on the Effective Date and on the Closing Date as the Subordinated
Agent may request and that are acceptable to the Subordinated Agent addressing
the existence and good standing of the Borrower and each Subsidiary, the
authorization of the Subordinated Loan Documents, the enforceability of the
Subordinated Loan Documents and the perfection of the liens under the
Subordinated Loan Documents, the absence of conflicts with law, other material
agreements, and court orders, the absence of litigation, and such other matters
as the Subordinated Agent may request.
(iii) Certificates, dated as of the
Effective Date, of the Secretary or an Assistant Secretary of each of the
Borrower and the Subsidiaries (A) certifying as true, complete and correct the
charter and by-laws of the Borrower and each Subsidiary, and resolutions of the
Board of Directors of the Borrower and each respective Subsidiary attached
thereto, (B) as to the absence of proceedings or other action for dissolution,
liquidation or reorganization of the Borrower and each Subsidiary, (C) as to the
incumbency of the officers of the Borrower and the Subsidiaries who shall have
executed instruments, agreements, and other documents in connection with the
transactions contemplated hereby or by the Subordinated Loan Documents, and (D)
covering such other matters, and with such other attachments thereto, as the
Subordinated Agent may request, and such certificate and the attachments thereto
shall be satisfactory in form and substance to the Subordinated Agent.
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(iv) Original Certificates of Title to each
of the certificated vehicles owned by the Borrower or any of the Subsidiaries,
each endorsed by the applicable Subordinated Loan Party to evidence that such
vehicle is subject to a security interest in favor of the Subordinated Agent for
the benefit of the Subordinated Lenders.
(v) All other documents reasonably requested
by the Subordinated Agent in connection with the transaction contemplated by
this Subordinated Loan Agreement.
(b) Each of the Mortgages, Financing Statements, and
Certificates of Title referenced in subparagraph (a) above, and any other
document reasonably required by the Subordinated Agent to be filed of record,
shall have been filed of record with the appropriate party in order to put third
parties on notice of the liens, security interests or other rights granted by
the Subordinated Loan Parties in the Collateral.
(c) Stock certificates of Capital Stock of the
Borrower pledged pursuant to the Pledge Agreements, along with stock powers
endorsed in blank and financing statements executed by each of the Pledgors in
connection with the perfection of the Liens created by the Pledge Agreements.
(d) The Subordinated Agent shall have completed its
due diligence review of such matters as it shall deem appropriate, and all other
documents relating thereto, the Borrower's and each Subsidiaries' properties and
operations thereof, compliance with Environmental Laws, and any available
reports related thereto, and the results of such due diligence review shall be
satisfactory to the Subordinated Agent.
(e) The Subordinated Agent shall have received
insurance certificates for the Borrower and its Subsidiaries reflecting the
insurance coverage required under this Senior Loan Agreement.
(f) The Borrower shall have provided the Subordinated
Agent with a copy of a twelve (12) month projected income statement and capital
budget, commencing with the Effective Date, which has been approved by Board of
Director's of Borrower and which is satisfactory to the Subordinated Agent in
its sole discretion.
(g) The Borrower shall have delivered to the
Subordinated Agent copies of audited Financial Statements of the Borrower as of
December 31, 1998, unaudited Financial Statements of the Borrower as of January
31, 1999, and there shall not have occurred any Material Adverse Effect in the
business, assets or financial condition of any of the Borrower or any of its
Subsidiaries since January 31, 1999.
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(h) As of the Effective Date and the Closing Date, no
Default exists or would reasonably be expected to occur by virtue of making the
Subordinated Loan or the Senior Loan or after giving effect to the transactions
contemplated by the Basic Documents.
(i) All of the representations and warranties of the
Borrower and the Pledgors contained in the Basic Documents shall be true and
correct as of the Effective Date and as of the Closing Date of the Subordinated
Loan, and the making of any extension of credit hereunder, shall be deemed to be
a restatement, representation, and additional warranty of the representations
and warranties made by the Borrower and the Pledgors in each Subordinated Loan
Document as of each such date (taking into account certain fixed dates specified
for certain representations and warranties in the Basic Documents). The
Subordinated Loan Documents shall have been executed and delivered by the
Subordinated Loan Parties as appropriate and such documents shall be in full
force and effect.
(j) As of the Effective Date and the Closing Date,
the Borrower shall have performed and complied with all agreements and
conditions set forth in or contemplated hereunder or in any other Subordinated
Loan Document or in the Equity Documents required to be performed or complied
with by it at or prior to each of such dates.
(k) As of the Effective Date and the Closing Date, no
Change of Control or Change of Management shall have occurred and all attached
and requested information in accordance with Section 2.3.
(l) The Borrower shall have paid to Subordinated
Agent for the benefit of the Subordinated Lenders all amounts payable pursuant
to Section 9.2 of this Subordinated Loan Agreement and shall have paid to ECT
Securities Limited Partnership and JEDI II all payments required under the terms
of the Structuring Fee Agreement.
(m) The Borrower shall have provided schedules to the
Basic Documents in form and substance satisfactory to the Subordinated Agent.
(n) (i) The Senior Loan Agreement shall have been
executed and delivered by all parties thereto and the conditions precedent set
forth in Article 3 of the Senior Loan Agreement shall have been satisfied and
(ii) the conditions precedent set forth in Article V of the Securities Purchase
Agreement shall have been satisfied.
(o) The Borrower shall have paid to the lender under
the Original Loan Agreement, all accrued interest, fees, and other amounts owed
thereunder as of the date of this Agreement.
(p) The Borrower shall have provided to the
Subordinated Agent such other information, documents, and agreements as it may
reasonably have requested.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Subordinated Lenders to enter into this
Subordinated Loan Agreement and to make the Subordinated Loan hereunder, the
Borrower represents and warrants to the Subordinated Agent and each of the
Subordinated Lenders that as of the Effective Date and as of the Closing Date:
Section 4.1 Corporate Existence. The Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated and is
duly qualified as a foreign corporation in all jurisdictions in which
qualification is required.
Section 4.2 Corporate Power and Authorization. The Borrower is
duly authorized and empowered to create and issue the Subordinated Notes and is
duly authorized and empowered to execute, deliver, and perform its obligation
pursuant to, each of the Subordinated Loan Documents to which it is a party.
Each Subsidiary is duly authorized and empowered to execute, deliver, and
perform its obligations pursuant to, each of the Subordinated Loan Documents to
which it is a party. All corporate and other action on the Borrower's and each
Subsidiaries' part, requisite for the due execution, delivery, and performance
of the Subordinated Loan Documents to which each is a party has been duly and
effectively taken.
Section 4.3 Binding Obligations. The Subordinated Loan Documents
constitute valid and binding obligations of the Borrower and each Subsidiary,
respectively, enforceable in accordance with their respective terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency, or similar
debtor relief laws now or hereafter in effect and relating to or affecting the
enforcement of creditors rights generally).
Section 4.4 No Legal Bar Or Resultant Lien. The Subordinated Loan
Documents do not and will not violate any provisions of any contract, agreement,
law, regulation, order, injunction, judgment, decree, or writ to which the
Borrower or any of its Subsidiaries is subject, or result in the creation or
imposition of any lien or other encumbrance upon any assets or properties of the
Borrower or any of its Subsidiaries other than those contemplated by this
Subordinated Loan Agreement.
Section 4.5 No Consent. The execution, delivery, and performance
by the Borrower and each Subsidiary of the Subordinated Loan Documents to which
each is a party does not require the consent or approval of any other person or
entity, including without limitation any Governmental Authority.
Section 4.6 Financial Condition. The audited consolidated
Financial Statements of the Borrower dated December 31, 1998, which have been
delivered to the Subordinated Agent are
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complete and correct in all material respects, and fully and accurately reflect
in all material respects the financial condition and results of the operations
of the Borrower and the Subsidiaries as of the date or dates and for the period
or periods stated, and such Financial Statements have been prepared in
accordance with GAAP. The unaudited consolidated Financial Statements of the
Borrower dated January 31, 1999, which have been delivered to the Subordinated
Agent are complete and correct in all material respects, and fully and
accurately reflect in all material respects the financial condition and results
of the operations of the Borrower and the Subsidiaries as of the date or dates
and for the period or periods stated, and such Financial Statements have been
prepared in accordance with GAAP. Since January 31, 1999, no change has occurred
in the condition, financial or otherwise, of the Borrower or any of the
Subsidiaries which could have a Material Adverse Effect.
Section 4.7 Liabilities. Neither the Borrower nor any of its
Subsidiaries have any material (individually or in the aggregate) liability,
direct or contingent, except as disclosed in the Financial Statements described
in Section 4.6 and on Schedule 4.7 attached hereto. No unusual or unduly
burdensome restrictions, restraint, or hazard exists by contract, law or
governmental regulation, or otherwise relative to the business, assets, or
properties of the Borrower or any of its Subsidiaries.
Section 4.8 Litigation. Except as described in the consolidated
Financial Statements of the Borrower described in Section 4.6, or as otherwise
disclosed in Schedule 4.8 attached hereto, there is no litigation, legal or
administrative proceeding, investigation, or other action of any nature pending
or, to the knowledge of the officers of the Borrower, threatened against or
affecting the Borrower or any of its Subsidiaries which involves the possibility
of any judgment or liability not fully covered by insurance.
Section 4.9 Taxes; Governmental Charges. The Borrower and each of
its Subsidiaries have filed all tax returns and reports required to be filed and
has paid all taxes, assessments, fees, and other governmental charges levied
upon it or its assets, properties, or income which are due and payable,
including interest and penalties or has provided adequate reserves, if required,
in accordance with GAAP for the payment thereof, except such as are being
contested in good faith by appropriate proceedings and for which adequate
reserves for the payment thereof as required by GAAP has been provided and levy
and execution thereon have been stayed and continue to be stayed.
Section 4.10 Ownership of Property; Liens; Leases of Equipment.
Attached hereto as Schedule 4.10 is a true and correct list of (i) all real
property owned by the Borrower and each Subsidiary, (ii) all real property
leased by the Borrower and each Subsidiary, (iii) all Capital Leases of the
Borrower and each Subsidiary, and (iv) all motorized vehicles owned by the
Borrower and each Subsidiary, whether such vehicle is certificated or not, and
in each instance identifying such vehicle by year, type and make (where
available), its vehicle registration number (where certificated) and its serial
number (where not certificated), including all work-over rigs, semis, trailers,
trucks and other rolling stock. Each of the Borrower and its Subsidiaries has
good and marketable title in fee simple (except for exceptions to title as will
not in the aggregate materially interfere with the present or contemplated use
of the property affected thereby) to, or a valid leasehold interest in, all its
real
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property, and good and marketable title to all its other property, and in all
cases enjoys peaceful and undisturbed possession thereof, and none of such
property is subject to any Lien except Permitted Liens. None of the equipment or
inventory owned by Borrower or any of its Subsidiaries has been leased by such
Person as lessor.
Section 4.11 Intellectual Property. Borrower and each Subsidiary
owns, or is licensed to use, all trademarks, trade names, trade secrets,
copyrights, technology, know-how, and processes necessary for the conduct of its
business as currently conducted (the "Intellectual Property"). No claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any valid basis for any
such claim. The use of such Intellectual Property by the Subordinated Loan
Parties does not infringe on the rights of any Person.
Section 4.12 Defaults. Neither the Borrower nor any of its
Subsidiaries are in default and no event or circumstance has occurred which, but
for the passage of time or the giving of notice, or both, would constitute a
default under any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement, or other agreement or instrument to which the Borrower or
any of its Subsidiaries is a party. No Event of Default hereunder has occurred
and is continuing.
Section 4.13 Casualties; Taking of Properties. Since the date of
the Financial Statements described in Section 4.6, neither the business nor the
assets or properties of the Borrower or any of its Subsidiaries have been
affected, as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike, or other labor disturbance, embargo, requisition,
or taking of property or cancellation of contracts, permits, or concessions by
any domestic or foreign Governmental Agency thereof, riot, activities of armed
forces, or acts of God or of any public enemy.
Section 4.14 Margin Stock. The Borrower is not engaged principally
or as one of its important activities in the business of extending credit for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
part 221), or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
said Regulation U. Neither the Borrower nor any person or entity acting on
behalf of the Borrower have taken or will take any action which might cause the
loans hereunder or any of the Subordinated Loan Documents to violate Regulation
U or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
Section 4.15 Location of Business and Offices. The principal place
of business of the Borrower is located at 000 X. Xxx Xxxxxx, Xxxxxxx, Xxxxx
00000-0000.
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Section 4.16 Compliance with the Law. Neither the Borrower nor any
of its Subsidiaries:
(a) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which the Borrower or
any of its Subsidiaries, or any of their assets or properties are
subject;
(b) have failed to obtain any license, permit, franchise
or other governmental authorization necessary to the ownership of any
of its assets or properties or the conduct of their business; which
violation or failure is individually, or in the aggregate, reasonably
expected to have a Material Adverse Effect.
Section 4.17 No Material Misstatements.
(a) There are no facts or conditions relating to the
Subordinated Loan Documents or the financial condition, assets, or business
prospects of the Borrower or any of its Subsidiaries that could, collectively or
individually, have a Material Adverse Effect. No certificate or representation
or warranty of Borrower or its Subsidiaries in the Basic Documents contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements in such Basic Documents not misleading.
(b) The Financial Statements and other related financial
data (excluding all projections and pro forma financial data) furnished to the
Subordinated Agent by or at the direction of the Borrower or any of its
Subsidiaries in connection with the negotiation of this Subordinated Loan
Agreement do not contain any material misstatement of fact and, when considered
with all other written statements furnished to the Subordinated Agent in that
connection, such Financial Statements, related financial data (excluding all
projections and pro forma financial data) do not omit to state a material fact
or any fact necessary to make the statement contained therein not misleading.
Section 4.18 ERISA. The Borrower and of its Subsidiaries are in
compliance in all respects with the applicable provisions of ERISA, and no
"reportable event", as such term is defined in Section 4043 of ERISA, has
occurred with respect to any Plan of the Borrower or any of its Subsidiaries.
Section 4.19 Environmental Matters. Except as disclosed on
Schedule 4.19:
(a) Environmental Laws, etc. None of the property of
the Borrower or any of its Subsidiaries nor the operations conducted thereon
violate any applicable order of any court or Governmental Authority or
Environmental Laws which could reasonably be expected to result in remedial
obligations assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions, and circumstances, if any, pertaining to the
relevant property.
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(b) No Litigation. Without limitation of paragraph
(a) above, no property of the Borrower or any of its Subsidiaries, nor the
operations currently conducted thereon or by any prior owner or operator of such
property or operation, are in violation of or subject to any existing, pending,
or threatened action, suit, investigation, inquiry, or proceeding by or before
any Governmental Authority or to any remedial obligations under Environmental
Laws which could reasonably be expected to result in remedial obligations
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions, and circumstances, if any, pertaining to the relevant
property.
(c) Notices, Permits, etc. All notices, permits,
licenses, or similar authorizations, if any, required to be obtained or filed by
the Borrower or any of its Subsidiaries in connection with the operation or use
of any and all property of the Borrower or any of its Subsidiaries, including
but not limited to past or present treatment, storage, disposal, or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed which could reasonably be expected to result in remedial obligations
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions, and circumstances, if any, pertaining to the relevant
property.
(d) Hazardous Substances Carriers. All hazardous
substances or solid waste generated at any and all property of the Borrower or
any of its Subsidiaries have in the past been transported, treated, and disposed
of only by carriers maintaining valid permits under any Environmental Law and
only at treatment, storage, and disposal facilities maintaining valid permits
under any Environmental Law, which carriers and facilities have been and are
operating in compliance with such permits which could reasonably be expected to
result in remedial obligations assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions, and circumstances, if
any, pertaining to the relevant property.
(e) Hazardous Substances Disposal. The Borrower and
Subsidiaries have taken all reasonable steps necessary to determine and have
determined that no hazardous substances or solid waste have been disposed of or
otherwise released and there has been no threatened release of any hazardous
substances on or to any property of the Borrower or any of its Subsidiaries,
except in compliance with Environmental Laws which could reasonably be expected
to result in remedial obligations assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions, and circumstances, if
any, pertaining to the relevant property.
(f) OPA Requirements. To the extent applicable, the
Borrower and each of its Subsidiaries have complied with all design, operation,
and equipment requirements imposed by OPA or scheduled to be imposed by OPA, and
the Borrower does not have reason to believe that either it or its Subsidiaries
will not be able to maintain such compliance with OPA requirements through the
Final Maturity Date.
(g) No Contingent Liability. Neither the Borrower nor
any of its Subsidiaries have any contingent liabilities in connection with any
release or threatened release of
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of hazardous substance or solid waste into the environment other than such
contingent liabilities at any one time and from time to time which could
reasonably be expected to exceed an aggregate of $500,000 in excess of
applicable insurance coverage and for which adequate reserves for the payment
thereof as required by GAAP have not been provided, or which could reasonably be
expected to result in remedial obligations assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions, and circumstances, if
any, pertaining to such release or threatened release.
Section 4.20 Subsidiaries; Partnerships.
(a) There are no Subsidiaries of the Borrower other
than as set forth on Schedule 4.20(a). All of the issued and outstanding shares
of Capital Stock of the Subsidiaries of the Borrower have been duly and validly
authorized and issued and are fully paid and non-assessable and free of
preemptive rights, and, such shares are owned by the Borrower or one of its
Subsidiaries free and clear of any Lien. Except as set forth on Schedule
4.20(a), there are no outstanding warrants, options, or other rights to purchase
or acquire any of the shares of Capital Stock of any Subsidiary, nor any
outstanding securities convertible into such shares or outstanding warrants,
options, or other rights to acquire any such convertible securities.
(b) There are no partnerships, joint ventures, or
similar arrangements involving the Borrower or any of its Subsidiaries except as
set forth in Schedule 4.20(b).
Section 4.21 Certain Fees. Except for the structuring fee payable
to ECT Securities Limited Partnership L.P. pursuant to the Structuring Fee
Agreement, no fees or commissions will be payable by the Borrower to brokers,
finders, investment bankers, the Subordinated Agent or Subordinated Lenders with
respect the consummation of the transactions contemplated by this Subordinated
Loan Agreement. The Borrower agrees that it will indemnify and hold harmless the
Subordinated Agent and the Subordinated Lenders from and against any and all
claims, demands, or liabilities for broker's, finders, placement or other
similar fees or commissions incurred by the Borrower or alleged to have been
incurred by the Borrower in connection with the consummation of the transactions
contemplated by this Subordinated Loan Agreement.
Section 4.22 Purpose of Loans. As more fully set forth in Section
2.2, the proceeds of the Subordinated Loan and the Senior Loan shall be used
only for restructuring the Indebtedness owed to JEDI II under the terms of the
Original Loan Agreement and for the reasonable fees, expenses, and financing
costs incurred by the Borrower in connection with the foregoing. The proceeds of
the Subordinated Loan shall not be used for any purpose which violates
applicable Requirements of Law, including laws regulating investments in foreign
jurisdictions.
Section 4.23 Support and Security Documents. The Security
Documents are effective to create in favor of the Subordinated Agent for the
benefit of the Subordinated Lenders, a legal, valid, and enforceable mortgage
lien, security interest, or other interest in the Collateral pledged thereunder
and the proceeds thereof in accordance with the terms of the Security Documents.
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Section 4.24 Employment. All inventory of Borrower and each
Subsidiary has been and will hereafter be produced, and all services of Borrower
and each Subsidiary has been and will hereafter be rendered, in compliance with
all applicable material laws, rules, regulations, and governmental standards,
including, without limitation, the minimum wage and overtime provisions of the
Fair Labor Standards Act, as amended (29 U.S.C. Sections 201-219), and the
regulations promulgated thereunder.
Section 4.25 Year 2000 Compliance.
(a) To the Borrower's knowledge after due inquiry,
all devices, systems, machinery, information technology, computer software and
hardware, and other date sensitive technology (jointly and severally the
"Systems") used by the Borrower and each of its Subsidiaries to carry on their
businesses as presently conducted and as contemplated to be conducted in the
future are Year 2000 Compliant or will be Year 2000 Compliant within a period of
time calculated to result in no material disruption of any of the Borrower and
each of its Subsidiaries' business operations. For purposes of these provisions,
"Year 2000 Compliant" means that such Systems are designed to be used prior to,
during and after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century.
(b) The Borrower and its Subsidiaries have or will
have by September 30, 1999: (1) undertaken a detailed inventory, review, and
assessment of all areas within their businesses and operations that could be
adversely affected by the failure of the Borrower and each of its Subsidiaries
to be Year 2000 Compliant on a timely basis; (2) developed a detailed plan and
time line for becoming Year 2000 Compliant on a timely basis, and (3) to date,
implemented that plan in accordance with that timetable in all material
respects.
(c) The Borrower and its Subsidiaries have made or
will make by September 30, 1999, inquiry of each of its key suppliers, vendors,
and customers, and is undertaking to obtain in writing confirmations from all
such Persons as to whether such Persons have initiated programs to become Year
2000 Compliant and on the basis of such confirmations, the Borrower and each of
its Subsidiaries reasonably believe that all such Persons will be or become so
compliant. For purposes hereof, "key suppliers, vendors, and customers" refers
to those suppliers, vendors, and customers of the Borrower and each of its
Subsidiaries whose business failure would, with reasonable probability, result
in a material adverse change in the business, properties, condition (financial
or otherwise), or prospects of any of the Borrower and each of its Subsidiaries.
(d) The fair market value of all real and personal
property pledged to the Subordinated Agent as Collateral to secure the
Subordinated Loan hereunder is not and shall not be less than currently
anticipated or subject to substantial deterioration in value because of the
failure of such Collateral to be Year 2000 Compliant.
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Section 4.26 Insurance. Schedule 4.26 contains an accurate and
complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by the Borrower and each
of its Subsidiaries. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Effective Date and the Closing Date have been or will be paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and of
all agreements to which the Borrower and each of its Subsidiaries is a party;
are valid, outstanding and enforceable policies; provide adequate insurance
coverage in at least such amounts and against at least such risks (but including
in any event public liability) as are usually insured against in the same
general area by companies engaged in the same or a similar business for the
assets and operations of the Borrower and each of its Subsidiaries; will remain
in full force and effect through the respective dates set forth in Schedule 4.26
without the payment of additional premiums; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Subordinated Loan Agreement. None of the Borrower nor any of its Subsidiaries
has been refused any insurance with respect to its Property or operations, nor
has its coverage been limited below usual and customary policy limits, by an
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last three years.
Section 4.27 Hedging Agreements. Schedule 4.27 sets forth, as of
the date hereof, a true and complete list of all hedging agreements, financing
transactions and swap transactions (including commodity price swap agreements,
forward agreements or contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of the Borrower
and each of its Subsidiaries, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
xxxx to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied), and the counter party to each such
agreement.
Section 4.28 Capital Stock. As of the Closing Date, the authorized
Capital Stock of the Company consists of 500,000 shares of Common Stock, no par
value per share and 2,500 shares of serial preferred stock. No shares of Capital
Stock are issued other than those shares of Common Stock listed on the attached
Schedule 4.28 and the preferred shares issued pursuant to the Equity Documents.
All outstanding shares of the Company's Capital Stock are validly issued, fully
paid and nonassessable. Other than the preferred shares issued pursuant to the
Equity Documents, there are no (i) outstanding securities convertible or
exchangeable into Capital Stock of the Company or (ii) contracts, commitments,
agreements, understandings, or arrangements of any kind to which the Company is
a party relating to the issuance of any Capital Stock of the Company.
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ARTICLE 5
AFFIRMATIVE COVENANTS
From the Effective Date and for so long as any part of the Commitments
or the Subordinated Loan Obligations is outstanding, the Borrower shall and
shall cause each of its Subsidiaries to (and where applicable shall cause other
Persons to):
Section 5.1 Financial Statements and Reports. The Borrower shall
promptly furnish to the Subordinated Agent from time to time upon request such
information regarding the business and affairs and financial condition of the
Borrower and its Subsidiaries as the Subordinated Agent may request, and will
furnish to the Subordinated Agent:
(a) Annual Audited Financial Statements - as soon as
available, and in any event within ninety (90) days after the close of each
fiscal year, the annual audited Financial Statements (consolidated and
consolidating) of the Borrower, certified, without any qualification or limit of
the scope of the examination of matters relevant to the Financial Statements, by
KPMG Peat Marwick, L.L.P., any nationally recognized public accounting firm or
any other accounting firm approved by the Subordinated Agent, such consolidating
schedules being prepared in accordance with Exhibit 5.1(a).
(b) Quarterly Financial Statements - as soon as
available, and in any event within forty-five (45) days after the last day of
each calendar quarter (except the last calendar quarter in any fiscal year), the
quarterly unaudited Financial Statements (consolidated and consolidating) of the
Borrower and its Subsidiaries.
(c) Monthly Financial Statements - as soon as
available, and in any event within forty-five (45) days after the last day of
each calendar month (except the last calendar month in any fiscal year), the
monthly unaudited Financial Statements (consolidated and consolidating) of the
Borrower.
(d) Budgets - as soon as available and in any event
on or before the last Business Day of each November, the detailed income
statements and capital budgets for the coming calendar year as of the date of
the budget approved by the Board of Director's of Borrower for the Borrower and
its Subsidiaries, such budget being prepared in accordance with Exhibit 5.1(d).
(e) Field Office - promptly following the request of
the Subordinated Agent, the income statements for each field office of Borrower
or any of its Subsidiary.
(f) Additional Information - promptly upon request of
the Subordinated Agent from time to time any additional financial information or
other information that the Subordinated Agent may reasonably request.
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All such information, reports, and Financial Statements referred to in this
Section 5.1 shall be in such detail as the Subordinated Agent may reasonably
request and shall be prepared in a manner consistent with the requirements set
forth above and in Section 1.2.
Section 5.2 Certificates of Compliance. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to Section 5.1(a)
hereof, the quarterly unaudited Financial Statements pursuant to Section 5.1(b),
and each of the monthly unaudited Financial Statements pursuant to Section
5.1(c) hereof, the Borrower will furnish or cause to be furnished to the
Subordinated Agent a certificate in the form of Exhibit 5.2. Borrower will
furnish to Subordinated Agent at Borrower's expense all certifications which the
Subordinated Agent from time to time reasonably requests, as to the accuracy and
validity of or compliance with all representations, warranties and covenants
made by Borrower in any of the Subordinated Loan Documents, the satisfaction of
all conditions contained therein and all other matters pertaining thereto.
Section 5.3 Accountants' Certificate. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to Section 5.1(a)
hereof, the Borrower will furnish a statement from the firm of independent
public accountants which prepared such statements to the effect that nothing has
come to their attention to cause them to believe that there existed on the date
of such statements any Event of Default.
Section 5.4 Taxes Other Liens. The Borrower shall, and shall
cause each Subsidiary to, pay and discharge promptly all taxes, assessments, and
governmental charges or levies imposed upon the income or any assets or property
of any of such entities as well as all claims of any kind (including claims for
labor, materials, supplies, and rent) which, if unpaid, might become a Lien or
other encumbrance upon any or all of the assets or property of any of such
entities; provided, however, that the Borrower and each Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted, levy and execution thereon have
been stayed and continue to be stayed, and the Borrower and each Subsidiary, or
any of them, as the case may be, shall have set up adequate reserves therefor,
if required, under GAAP.
Section 5.5 Compliance with Laws. The Borrower shall, and shall
cause each Subsidiary to, observe and comply, in all material respects, with all
applicable laws, statutes, codes, acts, ordinances, orders, judgments, deuces,
injunctions, rules, regulations, orders, and restrictions of applicable
Governmental Authorities, including those relating to Environmental Laws.
Section 5.6 Further Assurances. The Borrower shall, and shall
cause each Subsidiary to, cure promptly any defects in the creation and issuance
of the Subordinated Loan Documents. The Borrower shall, and shall cause each
Subsidiary at their sole expense to, promptly execute and deliver to the
Subordinated Agent upon its reasonable request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the covenants and agreements in the Subordinated Loan Documents including all
documents, agreements and instruments necessary
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to grant the Subordinated Agent for the benefit of the Subordinated Lenders a
first and prior lien on all assets of the Subordinated Loan Parties.
Section 5.7 Insurance. The Borrower will at all times keep all of
its and each Subsidiaries' properties which are of an insurable nature insured
with insurers reasonably believed by the Borrower to be financially sound,
reputable and responsible, against loss or damage to the extent that property of
similar character is usually so insured by corporations similarly situated and
owning like properties, as determined by the Subordinated Agent. The Borrower
shall, and shall cause each of its Subsidiaries to, maintain the insurance
required by the Security Documents.
Section 5.8 Accounts and Records. The Borrower shall, and shall
cause each of its Subsidiaries to, keep books, records, and accounts in which
full, true, and correct entries will be made of all dealings or transactions in
relation to its business and activities, prepared in a manner consistent with
the requirements of Section 1.2. Upon request of the Subordinated Agent, the
Borrower shall furnish profit and loss statements for each field office of the
Borrower and its Subsidiaries.
Section 5.9 Right of Inspection. The Borrower shall, and shall
cause each of its Subsidiaries to, permit any officer, employee, or agent of the
Subordinated Agent to examine their books, records, and accounts, and take
copies and extracts therefrom, all at such reasonable times and as often as the
Subordinated Agent may reasonably request. The Subordinated Agent will keep all
such information confidential and will not without prior written consent
disclose or reveal the information or any part thereof to any person other than
the Subordinated Lenders and each of the Subordinated Agent's and Subordinated
Lenders' officers, employees, legal counsel, regulatory authorities, or advisors
to whom it is necessary to reveal such information for the purpose of
effectuating the agreements and undertakings specified herein or as otherwise
required by law or in connection with the enforcement of the Subordinated
Agent's and the Subordinated Lenders' rights and remedies under the Subordinated
Loan Documents.
Section 5.10 Notice of Certain Events. The Borrower shall promptly
and in any event within five (5) days notify the Subordinated Agent if the
Borrower or any of its Subsidiaries learns of the occurrence of (i) an Event of
Default (including but not limited to, a Change of Control or Change of
Management) together with a detailed statement by the Borrower of the steps
being taken to cure the Event of Default; or (ii) any legal, judicial, or
regulatory proceedings affecting the Borrower or any of its Subsidiaries or any
of the assets or properties of the Borrower or any of its Subsidiaries; or (iii)
any dispute between the Borrower or any of its Subsidiaries and any Governmental
Authority or any other person or entity which, if adversely determined, could
cause a Material Adverse Effect; or (iv) any judgment, liability, casualty or
other loss that is not insured by the Borrower or its Subsidiaries; or (v) any
other matter that could reasonably be expected to have a Material Adverse
Effect.
Section 5.11 ERISA Information and Compliance. The Borrower shall
promptly furnish to the Subordinated Agent immediately upon becoming aware of
the occurrence of any "reportable
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event", as such term is defined in Section 4043 of ERISA, or of any "prohibited
transaction", as such term is defined in Section 4975 of the Internal Revenue
Code of 1986, as amended, in connection with any Plan or any trust created
thereunder, a written notice signed by the president or the chief financial
officer of the Borrower, specifying the nature thereof, what action the Borrower
is taking or proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto.
Section 5.12 Environmental Reports and Notices. The Borrower will
deliver to the Subordinated Agent (i) promptly upon its becoming available, one
copy of each report sent by the Borrower or any of its Subsidiaries to any
court, Governmental Agency, or instrumentality pursuant to any Environmental
Law, (ii) notice, in writing, promptly upon the Borrower's or any of its
Subsidiaries' learning that they have received notice or otherwise learned of
any claim, demand, action, event, condition, report, or investigation indicating
any potential or actual liability arising in connection with (x) the
non-compliance with or violation of the requirements of any Environmental Law;
(y) the release or threatened release of any toxic or hazardous waste into the
environment or which release the Borrower or any of its Subsidiaries would have
a duty to report to any court or Government Agency or instrumentality, or (iii)
prompt notice of the existence of any Lien related to violation of Environmental
Laws or any liabilities for cleanup thereunder on any properties or assets of
the Borrower or any of its Subsidiaries.
Section 5.13 Maintenance. The Borrower shall, and shall cause each
Subsidiary to (i) observe and comply in all material respects with all
Environmental Laws; (ii) (A) maintain all of the assets and properties of such
Person in good and workable condition at all times and (B) make all repairs,
replacements, additions, betterments, and improvements to such assets and
properties as are needed and proper so that with respect to clauses (A) and (B)
the business carried on by the Borrower and its Subsidiaries may be conducted
properly and efficiently at all times in accordance with the good faith
reasonable business judgment of the Borrower and its Subsidiaries provided,
however, that nothing in this Section shall prevent the Borrower and its
Subsidiaries from discontinuing the maintenance of any of their properties if
such discontinuance is, in the good faith reasonable business judgment of the
Borrower and its Subsidiaries, desirable in the conduct of the business of the
Borrower or any such Subsidiary and not disadvantageous in any material respect
to the Subordinated Lenders;(iii) take or cause to be taken whatever actions are
necessary or desirable to prevent an event or condition of default by the
Borrower or any Subsidiary under the provisions of any contract, agreement, or
lease comprising a part of the Collateral hereunder; and (iv) furnish to the
Subordinated Agent upon request evidence satisfactory to the Subordinated Agent
that there are no Liens, claims, or encumbrances superior to the Liens of the
Subordinated Lenders on such assets and properties, except Permitted Liens.
Section 5.14 New Subsidiary. Upon the formation or acquisition of
any new Subsidiary, the Borrower shall cause such Subsidiary to promptly execute
and deliver to the Subordinated Agent any joinder agreements requested by the
Subordinated Agent to cause such new Subsidiary to become a party to a Guaranty
and any security agreements, pledge agreements, mortgages, and other agreements
requested by the Subordinated Agent to cause such new Subsidiary to pledge its
assets
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to the Subordinated Agent for the benefit of the Subordinated Lenders. In
connection therewith, the Borrower shall provide corporate documentation and
opinion letters reasonably satisfactory to the Subordinated Agent reflecting the
corporate status of such new Subsidiary of the Borrower and the enforceability
of such agreements.
Section 5.15 Performance on Borrower's Behalf. If Borrower fails
to pay any taxes, insurance premiums or other amounts it is required to pay
under any Subordinated Loan Document, Subordinated Agent may pay the same.
Borrower shall immediately reimburse Subordinated Agent for any such payments
and each amount paid shall constitute a part of the Subordinated Loan
Obligations, shall be secured by the Security Documents and shall bear interest
at the rate described herein, from the date such amount is paid by Subordinated
Agent, until the date such amount is repaid to the Subordinated Agent.
Section 5.16 Change of Principal Place of Business. The Borrower
shall, and shall cause the Subsidiaries to, give Subordinated Agent at least
thirty (30) days prior written notice of its intention to move its principal
place of business from the address set forth in Section 4.15 hereof.
Section 5.17 New Bank Accounts. The Borrower shall, and shall
cause the Subsidiaries to, promptly give notice to the Subordinated Agent of the
creation of any bank accounts after the date hereof. Prior to any funding of
such account and in no event later than 3 Business Days after the opening of
such account, the Borrower shall provide the Subordinated Agent with such
information with respect to such accounts and other documentation relating
thereto as Subordinated Agent may request including a letter from the bank in
the form of the Bank Account Letter as attached as Exhibit A to the Security
Agreement.
Section 5.18 Year 2000 Compliant. The Borrower will, and will
cause each of its Subsidiaries to:
(a) Furnish such additional information, statements
and other reports with respect to the Borrower and each of its Subsidiaries
activities, course of action and progress towards becoming Year 2000 Compliant
as the Subordinated Agent may request from time to time.
(b) In the event of any change in circumstances that
causes or will likely cause any of the Borrower's representations and warranties
with respect to its or any of its Subsidiaries being or becoming Year 2000
Compliant to no longer be true (hereinafter, referred to as a "Change in
Circumstances") then the Borrower shall promptly, and in any event within ten
(10) days of receipt of information regarding a Change in Circumstances, provide
the Subordinated Agent with written notice (the "Notice") that describes in
reasonable detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause the Borrower's representations and
warranties with respect to being or becoming Year 2000 Compliant to no longer be
true. The
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Borrower shall, within ten (10) days of a request, also provide the Subordinated
Agent with any additional information the Subordinated Agent requests of the
Borrower in connection with the Notice and/or a Change in Circumstances.
(c) Upon reasonable notice, give any representative
of the Subordinated Agent access during all reasonable business hours to, and
permit such representative to examine, copy or make excerpts from, any and all
books, records and documents in the possession of Borrower or any of its
Subsidiaries and relating to their affairs, and to inspect any of the properties
and Systems of the Borrower or any of its Subsidiaries, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of the Borrower.
ARTICLE 6
NEGATIVE COVENANTS
From the Effective Date and for so long as any part of the Commitments
or the Subordinated Loan Obligations is outstanding, the Borrower shall not and
shall cause each of its Subsidiaries not to (and where applicable shall cause
other Persons not to):
Section 6.1 Liens. The Borrower shall not, and shall not permit
any Subsidiary to, create, incur, assume, or permit to exist any Lien on any of
its assets or properties except for Permitted Liens.
Section 6.2 Mergers. The Borrower shall not, and shall not permit
any of its Subsidiaries to, consolidate or merge with or into any other Person,
to liquidate, dissolve or incur a name change, including a change of trade name.
Section 6.3 Indebtedness and Other Obligations. The Borrower
shall not, and shall not permit any of the Subsidiaries to incur, create,
assume, or in any manner become or be liable in respect of any Indebtedness,
liabilities, or other obligations, or guarantee or otherwise in any manner
become or be liable in respect of any Indebtedness, liabilities, or other
obligations of any other Person, whether by agreement to purchase the
Indebtedness, liabilities, or other obligations of any other Person or agreement
for the furnishing of funds to any other Person through the purchase or lease of
goods, supplies, or services (or by way of stock purchase, capital contribution,
advance, or loan) for the purpose of paying or discharging the Indebtedness,
liabilities, or other obligations of any other Person, or otherwise, except that
the foregoing restrictions shall not apply to:
(a) Indebtedness under the Subordinated Loan
Documents;
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(b) Indebtedness under the Senior Loan Documents (as
defined in the Senior Loan Agreement);
(c) Indebtedness disclosed in Schedule 6.3;
(d) Indebtedness in the form of Capitalized Lease
Obligations, including those shown on the Financial Statements, incurred in
connection with the financing of assets in an aggregate outstanding amount not
to exceed $1,500,000;
(e) taxes, assessments, or other government charges
which are not yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall be
required by GAAP shall have been made therefor and levy and execution thereon
have been stayed and continue to be stayed;
(f) obligations for trade payables and ordinary
operating liabilities payable within one hundred twenty (120) days from the date
incurred, incurred in the ordinary course of business as conducted on the
Effective Date; and
(g) any renewals, extensions, substitutions,
refinancings or replacements (each, for purposes of this clause, a
"refinancing") by the Borrower of any Indebtedness of the Borrower described in
clause (a) and (b) above, including any successive refinancings by the Borrower,
so long as in each case the refinanced Indebtedness meets the requirements of
the Indebtedness being refinanced as set forth above and, without limiting the
foregoing, (i) any such new Indebtedness shall be in a principal amount that
does not exceed the principal amount so refinanced, (ii) in the case of any
refinancing of nonrecourse indebtedness such new Indebtedness is also
nonrecourse indebtedness, and (iii) such new Indebtedness has a stated maturity
that is no shorter than the stated maturity of the Indebtedness being
refinanced.
Section 6.4 Dividends; Compensation. The Borrower shall not
declare or pay any cash dividend, purchase, redeem or otherwise acquire for
value any of its Capital Stock now or hereafter outstanding, return any capital
to stockholders, or make any distribution of its assets to its stockholders as
such. No salary, bonus or other compensation shall be paid by Borrower to an
officer or director of Borrower that is also a director of SWRH or SWRI, other
than standard board of director's fees.
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Section 6.5 Investments.
(a) Without the Majority Subordinated Lenders' prior
written consent, Borrower shall not, and shall not permit any Subsidiary to make
any Acquisition, make or hold any direct or indirect investment in any Person or
any Equipment, including capital contributions to the Person, investments in the
debt or equity securities of the Person, and loans, guaranties, trade credit, or
other extensions of credit to the Person, individually or in the aggregate, in
excess of $50,000 per year, without the Majority Subordinated Lenders prior
written consent except for (i) trade credit issued by the Borrower and its
Subsidiaries to any Person in the ordinary course of business in an aggregate
outstanding amount not to exceed $1,000,000 which is not outstanding greater
than sixty (60) days or more past the date of invoice and (ii) capital
expenditures of the Borrower and its Subsidiaries in an aggregate amount not to
exceed $1,500,000 during any fiscal year of the Borrower. Notwithstanding the
foregoing, all investments made by Borrower shall be in the oil-field service
industry.
(b) The Borrower shall not, and shall not permit any
Subsidiary to, make or hold any direct or indirect investment in any Affiliate
of the Borrower, including capital contributions to the Affiliate investments in
the debt or equity securities of the Affiliate and loans, guaranties, trade
credit, or other extensions of credit to the Affiliate without the Majority
Subordinated Lenders' prior written consent; provided that subject to Section
6.5(a), the Borrower may extend trade credit to SWRI and SWRH on terms
consistent with that required by Section 6.10.
Section 6.6 Sale or Discount of Receivables. The Borrower shall
not, and shall not permit any Subsidiary to, discount or sell with recourse, or
sell for less than the greater of the face or market value thereof, any of their
notes receivable or accounts receivable.
Section 6.7 Nature of Business. The Borrower shall not, and shall
not permit any Subsidiary to, allow any material change to be made in the
character of their business as carried on at the date hereof.
Section 6.8 Amendment of Articles of Incorporation or Bylaws. The
Borrower shall not, and shall not permit any Subsidiary to, allow any amendment
to, or other alteration of, their Articles of Incorporation, Bylaws or any
contract, agreement or instrument that could have a detrimental affect on the
Collateral.
Section 6.9 Asset Sales. With the exception of (i) the sales in
conjunction with the Auction Package, (ii) the sale of the Lampasas Ranch
property, and (iii) any sales of assets received by the Company in lieu of cash
from arms-length exchanges of services by the Company for assets, the Borrower
shall not and shall not permit any Subsidiary to, sell, transfer or otherwise
convey any interest of the Borrower or the Subsidiary in any of their respective
assets without the prior written
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consent of the Majority Subordinated Lenders if the aggregate amount of the
consideration received from all such sales, transfers, and conveyances during
any fiscal year of the Borrower would exceed $100,000. No sale, transfer or
conveyance shall be for less than the fair market value of the asset. The net
proceeds of any asset sale, transfer or conveyance which requires the Majority
Subordinated Lenders consent shall be delivered to the Subordinated Agent for
the ratable benefit of the Subordinated Lenders as a prepayment of interest and
principal on the Subordinated Loan in accordance with Section 2.2(c).
Section 6.10 Transactions with Affiliates. Without the prior
written consent of the Majority Subordinated Lenders, the Borrower shall not,
and shall not permit any of its Subsidiaries to, enter into any transaction with
any of its Affiliates, except transactions upon terms no less favorable to it
than would be obtained in a transaction negotiated at arm's length with an
unrelated third party.
Section 6.11 Partnerships. Neither the Borrower nor any of its
Subsidiaries will, without the prior written consent of the Majority
Subordinated Lenders, form any partnership, joint venture, or similar
partnership arrangement after the Effective Date that have the ability to incur
Indebtedness with recourse to the Borrower or any of its Subsidiaries, whether
contractual or through liability as a partner.
Section 6.12 Subsidiaries.
(a) The Borrower will not, without the prior written
consent of the Majority Subordinated Lenders, sell or otherwise dispose of any
of the equity securities of its Subsidiaries.
(b) The Borrower shall not, and shall not permit any
of the Borrower's Subsidiaries to, create or acquire any additional Subsidiaries
without the consent of the Majority Subordinated Lenders, such consent shall not
be unreasonably withheld.
Section 6.13 Equity Proceeds. The Borrower shall not, and shall
not permit any Subsidiary to, issue any additional Capital Stock or debt
securities following the Effective Date, without the prior written consent of
the Majority Subordinated Lenders. The net proceeds of any such issuance shall
be delivered to the Subordinated Agent for the ratable benefit of the
Subordinated Lenders as a prepayment of interest and principal on the
Subordinated Loan in accordance with Section 2.4(c).
Section 6.14 Public Disclosures. The Borrower will not, and will
not permit any Subsidiary to, disclose the identity of the Subordinated Agent or
any Subordinated Lender in any public announcement, governmental filing or
otherwise without the Subordinated Agent's and such Subordinated Lender, as
applicable, prior written consent unless such disclosure is compelled or
required by law, stock exchange rule or by order of a court of competent
jurisdiction.
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Section 6.15 Limitation on Payment Restrictions Affecting
Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries
to, create or otherwise cause to exist or become effective any consensual
encumbrance or consensual restriction of any kind, on the ability of any
Subsidiary of the Borrower to (a) pay dividends or make any other distribution
on its Capital Stock to the Borrower or any Subsidiary, (b) pay any Indebtedness
owed to the Borrower or any Subsidiary, (c) make investments in the Borrower or
any Subsidiary, or (d) transfer any of its property or assets to the Borrower or
any Subsidiary, except, in each case (i) any encumbrances or restrictions
binding upon a Person at the time such Person becomes a Subsidiary (unless the
agreement creating such encumbrance or restrictions was entered into in
connection with, or in contemplation of, such entity becoming Subsidiary),
provided that such encumbrances or restrictions shall not encumber or restrict
any assets of the Borrower or its other Subsidiaries other than such Subsidiary,
(ii) any encumbrance or restriction pursuant to any customary non-assignment
provisions in leases, (iii) any encumbrances or restrictions due to applicable
law, (iv) any such encumbrance or restriction with respect to a Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary or any
such encumbrance or restriction referred to in clause (d) above with respect to
the assets of a Subsidiary and imposed pursuant to an agreement entered into for
the sale of such assets (in either case, so long as such encumbrance or
restriction, by its terms, terminates on the earlier of the termination of such
agreement or the consummation of such agreement), and (v) any such encumbrance
or restriction pursuant to any agreement that amends, extends, refinances,
renews or replaces any agreement described in the foregoing clauses (i), (ii),
and (iii), provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the Borrower than those under
or pursuant to the agreement amended, extended, refinanced, renewed or replaced.
Section 6.16 Fixed Charge Coverage Ratio. Beginning June 30, 2000
and as of the last day of each fiscal quarter of the Borrower thereafter, the
Borrower shall not permit the ratio of (i) the consolidated EBITDA of the
Borrower less cash income taxes for the preceding four fiscal quarters then most
recently ended to (ii) the consolidated Debt/Lease Service of the Borrower for
the preceding four fiscal quarters then most recently ended, to be less than
1.00 to 1.00.
ARTICLE 7
EVENTS OF DEFAULT
Section 7.1 Events of Default. The occurrence of any of the
following shall be an "Event of Default" for the purposes of this Subordinated
Loan Agreement and the other Subordinated Loan Documents:
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(a) Any Subordinated Loan Party shall fail to pay
when due or declared due any principal, interest, fee or any other amounts due
under this Subordinated Loan Agreement or any other Subordinated Loan Document;
or
(b) Any representation or warranty made by any
Subordinated Loan Party under this Subordinated Loan Agreement, any other
Subordinated Loan Document, the Equity Documents, or in any certificate or
statement furnished or made to the Subordinated Agent or any Subordinated Lender
pursuant thereto, or in connection therewith, or in connection with any document
furnished hereunder, shall prove to be untrue in any material respect as of the
date on which such representation or warranty is made (or deemed made), or any
representation, statement (including Financial Statements), certificate, report,
or other data furnished or to be furnished or made by the Borrower under any
Subordinated Loan Document proves to have been untrue in any material respect as
of the date as of which the facts therein set forth were stated or certified; or
(c) Any breach shall be made in the due observance or
performance of any of the affirmative covenants, negative covenants or the
agreements of any Subordinated Loan Party contained in the Subordinated Loan
Documents or the Equity Documents; or
(d) Default shall be made in respect of any
obligation for borrowed money, other than the Notes, for which any Subordinated
Loan Party is liable (directly, by assumption, as guarantor, or otherwise),
including any obligations secured by any Lien on any asset or property of any
Subordinated Loan Party, or in respect of any agreement relating to any such
obligations, and such default shall continue beyond the applicable grace period,
if any; or
(e) Any Subordinated Loan Party shall commence a
voluntary case or other proceedings seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking an appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action or authorizing the foregoing; or
(f) An involuntary case or other proceeding, shall be
commenced against any Subordinated Loan Party seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
60 days; or an order for relief shall be entered against either
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of any Subordinated Loan Party under the federal bankruptcy laws as now or
hereinafter in effect; or
(g) A final judgment or order for the payment of
money in excess of $500,000 (or judgments or orders aggregating in excess of
$500,000) that is not fully insured shall be rendered against any Subordinated
Loan Party and such judgements or orders shall continue unsatisfied and unstayed
for a period of thirty 30 days; or
(h) A Change of Management shall occur; or
(i) Any Guaranty shall at any time and for any reason
cease to be in full force and effect or shall be contested by the guarantor
thereunder, or any guarantor under a Guaranty shall deny it has any further
liability or obligation thereunder; or
(j) Any Security Document shall at any time and for
any reason cease to create the Lien on the property purported to be subject to
such agreement in accordance with the terms of such agreement, cease to be in
full force and effect, or shall be contested by any party thereto; or
(k) A Material Adverse Effect shall occur; or
(l) Any "Event of Default" shall occur under the
Senior Loan Agreement; or
(m) Any audited Financial Statement of the Borrower
required to be delivered hereunder shall be qualified, in the Majority
Subordinated Lenders' opinion, in any material respect.
Section 7.2 Acceleration. Upon the occurrence of any Event of
Default under Sections 7.1(e) or (f) ("Bankruptcy Event of Default"), the
outstanding principal amount of the Notes, all accrued but unpaid interest
thereon, and all other Subordinated Loan Obligations shall immediately and
automatically become due and payable. During the existence of any Event of
Default, the Subordinated Agent shall at the request of the Majority
Subordinated Lenders declare by written notice to the Borrower the outstanding
principal amount of the Notes, all accrued but unpaid interest thereon, and all
other Subordinated Loan Obligations to be immediately due and payable. In
connection with any of the foregoing, except for the notice provided for above,
the Borrower waives notice of intent to demand, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, grace, notice of dishonor,
notice of intent to accelerate, notice of acceleration, and all other notices.
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Section 7.3 Default Interest. During the existence of an Event of
Default, the Majority Banks may declare by written notice to the Borrower that
all Subordinated Loan Obligations (including the outstanding principal amount of
the Advances and, to the fullest extent permitted by law, all accrued but unpaid
interest thereon and all other Indebtedness) shall bear interest beginning on
the date of occurrence of such Event of Default, until paid in full, at the
applicable Default Rate, payable upon demand by the Subordinated Agent.
Section 7.4 Other Subordinated Loan Documents. During the
existence of an Event of Default, the Subordinated Agent shall at the request of
the Majority Banks take any and all actions permitted under the other
Subordinated Loan Documents, including the Security Documents.
Section 7.5 Right of Setoff. During the existence of an Event of
Default, the Subordinated Agent and each Subordinated Lender is hereby
authorized at any time, to the fullest extent permitted by law, to set off and
apply any indebtedness owed by the Subordinated Agent or such Subordinated
Lender to the Borrower against any and all of the obligations of the Borrower
under the Subordinated Loan Documents, irrespective of whether or not the
Subordinated Agent or such Subordinated Lender shall have made any demand under
the Subordinated Loan Documents and although such obligations may be contingent
and unmatured. The Subordinated Agent and each Subordinated Lender, as the case
may be, agree promptly to notify the Borrower after any such setoff and
application made by the Subordinated Agent or such Subordinated Lender provided
that the failure to give such notice shall not affect the validity of such
setoff and application.
Section 7.6 Cumulative Remedies. No right, power, or remedy
conferred in this Subordinated Loan Agreement or the Notes, or now or hereafter
existing at law, in equity, by statute, or otherwise shall be exclusive, and
each such right, power, or remedy shall to the full extent permitted by law be
cumulative and in addition to every other such right, power, or remedy. No
course of dealing and no delay in exercising any right, power, or remedy
conferred to the Subordinated Agent or any Subordinated Lender in this
Subordinated Loan Agreement or the Notes, or now or hereafter existing at law,
in equity, by statute, or otherwise shall operate as a waiver of or otherwise
prejudice any such right, power, or remedy.
Section 7.7 Application of Payments. Prior to any payment default
upon any maturity date or any acceleration of the Subordinated Loan Obligations,
all payments made on the Subordinated Loan Obligations hereunder shall be
applied to the Subordinated Loan Obligations as directed by the Borrower,
subject to the rules regarding the application of payments to certain
Indebtedness provided for hereunder and in the Subordinated Loan Documents.
Following any payment default upon any maturity date or any acceleration of the
Subordinated Loan Obligations, all payments and collections shall be applied to
the Subordinated Loan Obligations in the following order:
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First, to the payment of the costs, expenses, reimbursements,
and indemnifications of the Subordinated Agent that are due
and payable under the Subordinated Loan Documents;
Then, ratably to the payment of the costs, expenses,
reimbursements, and indemnifications of the Subordinated
Lenders that are due and payable under the Subordinated Loan
Documents;
Then, ratably to the payment of all outstanding principal due
and payable under the Subordinated Loan Documents;
Then, ratably to the payment of any other amounts due and
owing with respect to the Indebtedness; and
Finally, any surplus held by the Subordinated Agent and
remaining after payment in full of all the Subordinated Loan
Obligations and reserve for Indebtedness not yet due and
payable shall be promptly paid over to the Borrower or to
whomever may be lawfully entitled to receive such surplus.
ARTICLE 8
THE SUBORDINATED AGENT
Section 8.1 Authorization and Action. Each Subordinated Lender
hereby appoints and authorizes the Subordinated Agent to take such action as
agent on behalf of such Subordinated Lender and to exercise such powers under
this Subordinated Loan Agreement as are delegated to the Subordinated Agent by
the terms hereof and of the other Subordinated Loan Documents, together with
such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Subordinated Loan Agreement or any other
Subordinated Loan Document (including, without limitation, enforcement or
collection of the Notes), the Subordinated Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Subordinated Lenders, and
such instructions shall be binding upon all Subordinated Lenders and all holders
of the Notes; provided, however, that the Subordinated Agent shall not be
required to take any action which exposes the Subordinated Agent to personal
liability or which is contrary to this Subordinated Loan Agreement, any other
Subordinated Loan Document, or applicable law.
Section 8.2 Subordinated Agent's Reliance, Etc. Neither the
Subordinated Agent nor any of the Subordinated Agent's directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
(including the Subordinated Agent's own negligence) by it or them
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under or in connection with this Subordinated Loan Agreement or the other
Subordinated Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Subordinated Agent: (a) may treat the payee of any Note as the holder thereof
until the Subordinated Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the
Subordinated Agent; (b) may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Subordinated Lender and
shall not be responsible to any Subordinated Lender for any statements,
warranties or representations made in or in connection with this Subordinated
Loan Agreement or the other Subordinated Loan Documents; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Subordinated Loan Agreement or any
other Subordinated Loan Document on the part of SWRI, the Borrower, or its
Subsidiaries or to inspect the property (including the books and records) of
such Persons; (e) shall not be responsible to any Subordinated Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Subordinated Loan Agreement or any other Subordinated Loan
Document; and (f) shall incur no liability under or in respect of this
Subordinated Loan Agreement or any other Subordinated Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopy, telegram, cable or telex) reasonably believed by it to be
genuine and signed or sent by the proper party or parties.
Section 8.3 The Subordinated Agent and Its Affiliates. With
respect to its Commitment, the Loans made by it and the Note issued to it, the
Subordinated Agent shall have the same rights and powers under this Subordinated
Loan Agreement as any other Subordinated Lender and may exercise the same as
though it were not an Subordinated Agent hereunder. The term "Subordinated
Lender" or "Subordinated Lenders" shall, unless otherwise expressly indicated,
include the Subordinated Agent in its individual capacity. The Subordinated
Agent and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with the
Borrower or any of its Subsidiaries, and any Person who may do business with or
own securities of the Borrower, or any such Subsidiary, all as if the
Subordinated Agent were not an agent hereunder and without any duty to account
therefor to the Subordinated Lenders.
Section 8.4 Subordinated Lender Loan Decision. Each Subordinated
Lender acknowledges that it has, independently and without reliance upon the
Subordinated Agent or any other Subordinated Lender and based on the financial
statements referred to in Section 4.6 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Subordinated Loan Agreement. Each Subordinated Lender also
acknowledges that it will, independently and without reliance upon the
Subordinated Agent or any other Subordinated Lender and based on such documents
and information as it shall deem
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appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Subordinated Loan Agreement.
Section 8.5 Indemnification. The Subordinated Lenders severally
agree to indemnify the Subordinated Agent and each Affiliate thereof and their
respective directors, officers, employees and agents (to the extent not
reimbursed by the borrower), according to their respective pro rata shares from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Subordinated Agent in any way relating to or arising out of this Subordinated
Loan Agreement or any action taken or omitted by the Subordinated Agent under
this Subordinated Loan Agreement or any other Subordinated Loan Document
(INCLUDING THE AGENT'S OWN NEGLIGENCE), provided that no Subordinated Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Subordinated Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, each Subordinated Lender agrees to
reimburse the Subordinated Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by the agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Subordinated Loan Agreement or any other
Subordinated Loan Document, to the extent that the Subordinated Agent is not
reimbursed for such expenses by the Borrower.
Section 8.6 Successor Subordinated Agent. The Subordinated Agent
may resign at any time by giving written notice thereof to the Majority
Subordinated Lenders and the Borrower and may be removed at any time with cause
by the Majority Subordinated Lenders upon receipt of written notice from the
Majority Subordinated Lenders to such effect. Upon receipt of notice of any such
resignation or removal, the Majority Subordinated Lenders shall have the right
to appoint a successor Subordinated Agent with, if no Default exists, the
consent of the Borrower, which consent shall not be unreasonably withheld. If no
successor Subordinated Agent shall have been so appointed by the Majority
Subordinated Lenders with the consent of the Borrower, if required, and shall
have accepted such appointment, within 30 days after the retiring Subordinated
Agent's giving of notice of resignation or the Majority Subordinated Lenders'
removal of the retiring Subordinated Agent, then the retiring Subordinated Agent
may, on behalf of the Subordinated Lenders and the Borrower, appoint a successor
Subordinated Agent, which shall be an Eligible Assignee. Upon the acceptance of
any appointment as Subordinated Agent by a successor Subordinated Agent, such
successor Subordinated Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Subordinated
Agent, and the retiring Subordinated Agent shall be discharged from its duties
and obligations under this Subordinated Loan Agreement and the other
Subordinated Loan Documents. After any retiring Subordinated Agent's resignation
or removal hereunder as Subordinated Agent, the provisions of this Article 8
shall inure to its benefit as to any
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actions taken or omitted to be taken by it while it was Subordinated Agent this
Subordinated Loan Agreement and the other Subordinated Loan Documents.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Interpretation and Survival of Provisions. Article,
Section, Schedule, and Exhibit references are to this Subordinated Loan
Agreement, unless otherwise specified. All references to instruments, documents,
contracts, and agreements are references to such instruments, documents,
contracts, and agreements as the same may be amended, supplemented, and
otherwise modified from time to time, unless otherwise specified. The word
"including" shall mean "including but not limited to." Whenever the Borrower has
an obligation under the Subordinated Loan Documents, the expense of complying
with that obligation shall be an expense of the Borrower unless otherwise
specified. Whenever any determination, consent, or approval is to be made or
given by the Subordinated Agent or the Subordinated Lenders, such action shall
be in the Subordinated Agent's or Subordinated Lenders', as applicable, sole
discretion unless otherwise specified in this Subordinated Loan Agreement. If
any provision in the Subordinated Loan Documents is held to be illegal, invalid,
not binding, or unenforceable, such provision shall be fully severable and the
Subordinated Loan Documents shall be construed and enforced as if such illegal,
invalid, not binding, or unenforceable provision had never comprised a part of
the Subordinated Loan Documents, and the remaining provisions shall remain in
full force and effect. The Subordinated Loan Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel and shall not
be construed against the drafter. The representations, warranties, and covenants
made in this Subordinated Loan Agreement and the Notes shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Borrower, the Subordinated Agent, or any Subordinated Lender. All
indemnification obligations of the Borrower hereunder and the provisions of
Section 9.2 shall remain operative and in full force and effect unless such
obligations are expressly terminated in a writing referencing such obligations,
regardless of any purported general termination of this Subordinated Loan
Agreement.
Section 9.2 Costs, Expenses and Taxes. The Borrower agrees to:
(a) pay all costs and expenses reasonably incurred by the
Subordinated Agent in connection with negotiation, preparation, printing,
execution and delivery of the Subordinated Loan Documents and the transactions
contemplated hereby and thereby. The Borrower shall also pay any expenses of the
Subordinated Agent reasonably incurred after the date hereof in connection with
any amendment or supplement to or modification of any of the foregoing and any
and all other documents furnished pursuant hereto or thereto or in connection
herewith or therewith. In addition, the Borrower, to the extent permitted by
applicable law, shall pay any and all stamp, transfer, and
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other similar taxes payable or determined to be payable in connection with the
execution and delivery of this Subordinated Loan Agreement and shall save and
hold the Subordinated Agent and the Subordinated Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying, or omission to pay, such taxes;
(b) indemnify the Subordinated Agent, each Subordinated
Lender, and its respective officers, directors, employees, representatives,
agents, attorneys, and Affiliates (collectively, "Related Parties") from, hold
each of them harmless against and promptly upon demand pay or reimburse each of
them for, any and all actions, suits, proceedings (including any investigations,
litigation, or inquiries), claims, demands, and causes of action, and, in
connection therewith, all reasonable costs, losses, liabilities, damages, or
expenses of any kind or nature whatsoever (collectively the "Indemnity Matters")
which may be incurred by or asserted against or involve any of them (whether or
not any of them is designated a party thereto) as a result of, arising out of,
or in any way related to (i) any actual or proposed use by Borrower of the
proceeds of the Subordinated Loan or the Senior Loan, (ii) the operations of the
business of Borrower or any Subsidiary, (iii) any bodily injury or death or
property damage occurring in or upon or in the vicinity of any Collateral, (iv)
any claim by any third Person against any Collateral assigned to, or paid to,
the Subordinated Agent, for the benefit of the Subordinated Lenders pursuant to
any Security Agreement, (v) the failure of a Borrower or any Subsidiary to
comply with any Governmental Requirement, or (vi) any other aspect of this
Subordinated Loan Agreement and the other Subordinated Loan Documents,
including, without limitation, the reasonable fees and disbursements of counsel
and all other expenses incurred in connection with investigating, defending or
preparing to defend any such action, suit, proceeding (including any
investigations, litigation, or inquiries), or claim and INCLUDING ALL INDEMNITY
MATTERS ARISING BY REASON OF THE NEGLIGENCE OF ANY INDEMNITEE (but not Indemnity
Matters related to the gross negligence or wilful misconduct of any Indemnitee);
(c) pay and hold the Subordinated Agent and each Subordinated
Lender harmless from and against any and all present and future stamp and other
similar taxes with respect to this Subordinated Loan Agreement and Subordinated
Loan Documents and save the Subordinated Agent and each Subordinated Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission to pay such taxes, and will indemnify the
Subordinated Agent and each Subordinated Lender for the full amount of taxes
paid by the Subordinated Agent and each Subordinated Lender in respect of
payments made or to be made under this Subordinated Loan Agreement, any of the
Notes, or any other Subordinated Loan Document and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto,
whether or not such taxes were correctly or legally asserted;
(d) indemnify and hold harmless from time to time the
Subordinated Agent, each Subordinated Lender, and its respective Related Parties
from and against any and all losses, claims,
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cost recovery actions, administrative orders or proceedings, damages, and
liabilities to which any such Person may become subject (i) under any
Environmental Law applicable to Borrower, any Subsidiary or any of their
respective properties, (ii) as a result of the breach or non-compliance by
Borrower or any Subsidiary with any Environmental Law applicable to Borrower or
any Subsidiary, (iii) due to past ownership by Borrower or any Subsidiary of
their respective properties or past activity on any of their respective
properties, or past activity on any of their respective properties which, though
lawful and fully permissible at the time, could result in present liability,
(iv) the presence, use, release, storage, treatment, or disposal of hazardous
substances on or at any of the properties owned or operated by Borrower or any
Subsidiary, or (v) any other environmental, health, or safety condition in
connection with this Subordinated Loan Agreement or any other Subordinated Loan
Document, provided, however, no indemnity shall be afforded under this Section
9.2(d) in respect of any property for any occurrence arising solely and directly
from the acts or omissions of the Subordinated Lenders during the period after
which such Person, its successors or assigns shall have acquired such property
through foreclosure or deed in lieu of foreclosure;
(e) in the case of any indemnification hereunder, the
Subordinated Agent or other Person indemnified hereunder shall give notice to
the Borrower within a reasonable period of time of any such claim or demand
being made against the Subordinated Agent, the Subordinated Lenders or other
indemnified Person and the Borrower shall have the non-exclusive right to join
in the defense against any such claim or demand;
(f) no indemnitee may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent to
any settlement that an indemnitee proposes, if the indemnitor does not have the
financial ability to pay all its obligations outstanding and asserted against
the indemnitee at that time, including the maximum potential claims against the
indemnitee to be indemnified pursuant to this Section 9.2;
(g) this Section 9.2 shall not apply to actions, suits,
proceedings, investigations, demands, losses, liabilities, claims, damages,
deficiencies, interest, judgments, costs, or expenses arising solely and
directly from the acts or omissions of the Subordinated Agent or any
Subordinated Lender during the period after which such Person, its successors or
assigns shall have acquired such property through foreclosure or deed in lieu of
foreclosure; and
(h) the Borrower's obligations under this Section 9.2 shall
survive any termination of this Subordinated Loan Agreement and the payment of
the Indebtedness.
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Section 9.3 No Waiver; Modifications in Writing.
(a) No failure or delay on the part of the Subordinated
Agent or any Subordinated Lender in exercising any right, power, or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power, or remedy preclude any other or further
exercise thereof or the exercise of any right, power, or remedy. The remedies
provided for herein are cumulative and are not exclusive of any remedies that
may be available to the Subordinated Agent or any Subordinated Lender at law or
in equity or otherwise.
(b) No modification or waiver of any provision of the
Subordinated Loan Agreement or the Notes, nor any consent required under the
Subordinated Loan Agreement or the Notes, shall be effective unless the same
shall be in writing and signed by the Subordinated Agent and Majority
Subordinated Lenders and the Borrower, and then such modification, waiver, or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no modification, waiver, or
consent shall, unless in writing and signed by the Subordinated Agent, all the
Subordinated Lenders, and the Borrower do any of the following: (a) increase any
Commitment of any Subordinated Lender, (b) forgive or reduce any amount or rate
of any principal, interest, or fees payable under the Subordinated Loan
Documents, or postpone or extend any time for payment thereof, (c) release any
Guaranty or all or substantially all of the collateral securing the Indebtedness
(except as otherwise permitted or required herein), or (d) change the percentage
of Subordinated Lenders required to take any action under the Subordinated Loan
Agreement, the Notes, or the Security Documents, including any amendment of the
definition of "Majority Subordinated Lenders" or this Section 9.3. No
modification, waiver, or consent shall, unless in writing and signed by the
Subordinated Agent affect the rights or obligations of the Subordinated Agent
under the Subordinated Loan Documents. The Subordinated Agent shall not modify
or waive or grant any consent under any other Subordinated Loan Document of such
action would be prohibited under this Section 8.3 with respect to the Loan
Agreement or the Notes.
Section 9.4 Binding Effect; Assignment. This Agreement and the
Subordinated Loan Documents shall bind and inure to the benefit of the Borrower
and its successors and assigns and the Subordinated Agent and the Subordinated
Lenders and their respective successors and assigns. The Borrower may not assign
its rights or delegate its duties under the Subordinated Loan Agreement or any
Subordinated Loan Document.
(a) Assignments. Any Subordinated Lender may assign
to one or more banks or other entities all or any portion of its rights and
obligations with respect to the Subordinated Loan Agreement (including the
Advances owing to it, the Note held by it, and its Commitment); provided,
however, that (i) the parties to each such assignment shall execute and deliver
to the Subordinated Agent, for its acceptance and recording in the Register, an
assignment and acceptance in form and substance reasonably satisfactory to the
Subordinated Agent ("Assignment and
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Acceptance"), together with the Notes subject to such assignment and (ii) each
assignee shall pay to the Subordinated Agent a $3,500 administrative fee. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least three Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto for all purposes and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Subordinated
Lender hereunder and (B) the assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Subordinated Loan Agreement (and, in the case of an
Assignment and Acceptance covering all of such Subordinated Lender's rights and
obligations under the Subordinated Loan Agreement, such Subordinated Lender
shall cease to be a party hereto).
(b) Term of Assignments. By executing and delivering
an Assignment and Acceptance, the assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, the
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Subordinated Loan Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency of value of the Subordinated
Loan Agreement or any other instrument or document furnished pursuant hereto;
(ii) the assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Subordinated Loan
Party or the performance or observance by any Subordinated Loan Party of any of
its obligations under the Subordinated Loan Agreement or any other instrument or
document furnished pursuant hereto; (iii) the assignee confirms that it has
received a copy of the Subordinated Loan Agreement, together with such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) the
assignee shall, independently and without reliance upon the Subordinated Agent,
the assignor or any other Subordinated Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Subordinated Loan
Agreement; (v) the assignee appoints and authorizes the Subordinated Agent to
take such action as agent on its behalf and to exercise such powers under the
Subordinated Loan Agreement as are delegated to the Subordinated Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vi) the assignee agrees that it shall perform in accordance with their
terms all of the obligations which by the terms of the Subordinated Loan
Agreement are required to be performed by it as a Subordinated Lender.
9.5 The Register. The Subordinated Agent shall maintain
at its address referred to in Section 9.8 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Subordinated Lenders and the
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Commitments and Subordinated Notes of each Subordinated Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Subordinated
Agent, and the Subordinated Lenders may treat each Person whose name is recorded
in the Register as a Subordinated Lender hereunder for all purposes of the
Subordinated Loan Agreement. The Register shall be available for inspection by
the Borrower or any Subordinated Lender at any reasonable time and from time to
time upon reasonable prior notice.
9.6 Procedures. Upon its receipt of an Assignment and
Acceptance executed by the assignor thereunder and the assignee thereunder,
together with the Notes subject to such assignment, the Subordinated Agent
shall, if such Assignment and Acceptance has been completed in the appropriate
form, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt notice thereof to the
Borrower. Within five Business Days after its receipt of such notice, the
Borrower shall execute and deliver to the Subordinated Agent in exchange for the
surrendered Note new Notes in the appropriate amounts to the order of the
assignee and, if the assignor has retained any rights and obligations hereunder,
new Notes in the appropriate amounts to the order of the assignor. Such new
Notes shall be dated the effective date of such Assignment and Acceptance and
shall be in the appropriate form.
9.7 Participation. Each Subordinated Lender may sell
participation to one or more banks or other entities in or to all or a portion
of its rights and obligations under the Subordinated Loan Agreement (including
the Advances owing to it, the Notes held by it, and its Commitments); provided,
however, that (i) such Subordinated Lender's obligations under the Subordinated
Loan Agreement (including its Commitments to the Borrower hereunder) shall
remain unchanged, (ii) such Subordinated Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (iii) such
Subordinated Lender shall remain the holder of any Commitments and Notes for all
purposes of the Subordinated Loan Agreement, (iv) the Borrower, the Subordinated
Agent, and the other Subordinated Lenders shall continue to deal solely and
directly with such Subordinated Lender in connection with such Subordinated
Lender's rights and obligations under the Subordinated Loan Agreement, and (v)
such Subordinated Lender shall not require the participant's consent to any
matter under the Subordinated Loan Agreement except for those that require
approval of all of the Subordinated Lenders under Section 8.3. The Borrower
hereby agrees that participants shall have the same rights under Sections 2.6,
2.7, 2.8, and 9.2 as a Subordinated Lender to the extent of their respective
participation.
Section 9.8 Communications. All notices and demands provided for
hereunder shall be in writing, shall be given by registered or certified mail,
return receipt requested, telex, telegram, telecopy, air courier guaranteeing
overnight delivery or personal delivery, to the addresses specified under such
Person's signature block or to such other address as such Persons may designate
in writing. All other communications may be by regular mail. All such notices
and communications
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and all notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; four days after being sent
by certified mail, return receipt requested, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next Business Day
if timely delivered to an air courier guaranteeing overnight delivery.
Section 9.9 Interest. Notwithstanding anything herein or in the
other Subordinated Loan Documents or Equity Document to the contrary, it is the
intention of the parties hereto to conform strictly to usury laws applicable to
this transaction. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law, then, in that event, notwithstanding anything to
the contrary in the Notes, this Subordinated Loan Agreement, any other
Subordinated Loan Document, or any Equity Document or agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (a) the
aggregate of all consideration which constitutes interest under law applicable
to the Subordinated Lenders that is contracted for, taken, reserved, charged or
received under the Notes, this Subordinated Loan Agreement, any of the other
Subordinated Loan Documents, the Equity Documents or otherwise in connection
with this transaction shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and, if already paid, shall be credited by the Subordinated Lenders on the
principal amount of the Notes (or, to the extent that the principal amount of
the Notes shall have been or would thereby be paid in full, refunded to the
Borrower); and (b) in the event that the maturity of the Notes is accelerated
for any reason, or in the event of any required or permitted prepayment, then
such consideration that constitutes interest under law applicable to this
transaction may never include more than the maximum amount allowed by such
applicable law, and (c) excess interest, if any, provided for in this
Subordinated Loan Agreement or otherwise in connection with the Subordinated
Loans shall be canceled automatically and, if already paid, shall be credited by
the Subordinated Lenders on the principal amount of the Notes (or, to the extent
that the principal amount of the Notes shall have been or would thereby be paid
in full, refunded by the Subordinated Lenders to the Borrower). The right to
accelerate the maturity of the Notes does not include the right to accelerate
any interest which has not otherwise accrued on the date of such acceleration,
and the Subordinated Lenders do not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to the
Subordinated Lenders for the use, forbearance or detention of sums included in
the Indebtedness shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Notes until
payment in full so that the rate or amount of interest on account of the Notes
does not exceed the applicable usury ceiling, if any. As used in this Section
9.9, the term "applicable law" shall mean the laws which govern this
Subordinated Loan Agreement as described in Section 9.10 (or the law of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Subordinated Loan Agreement), or law of the United
States of America applicable to the Subordinated Lenders and the Subordinated
Loan and the Senior Loan which would permit the Subordinated Lenders to contract
for, charge, take, reserve or receive a greater amount of interest than under
any other applicable law. If the stated rate of interest under this Subordinated
Loan Agreement ever exceeds
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the Maximum Rate, then the outstanding principal amount of the Subordinated Loan
made hereunder shall bear interest at the Maximum Rate until the difference
between the interest which would have been due at the stated rates of interest
and the amount due at the Maximum Rate (the "Lost Interest") has been recaptured
by the Subordinated Lenders. If the Subordinated Loan made hereunder is repaid
in full and the Lost Interest has not been fully recaptured by the Subordinated
Lenders pursuant to the preceding sentence, then the Subordinated Loans made
hereunder shall be deemed to have accrued interest at the Maximum Rate since the
date the Subordinated Loan was made to the extent necessary to recapture the
Lost Interest not recaptured pursuant to the preceding sentence and, to the
extent allowed by law, the Borrower shall pay to the Subordinated Lenders the
amount of the Lost Interest remaining to be recaptured by the Subordinated
Lenders.
Section 9.10 Governing Law. The laws of the State of New York will
govern this Subordinated Loan Agreement without regard to principles of
conflicts of laws.
SECTION 9.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
SUBORDINATED AGENT, AND THE SUBORDINATED LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO ANY SUBORDINATED LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 9.12 LIMITATION ON DAMAGES. IN NO EVENT SHALL ANY PARTY
HERETO BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT
LIMITATION, LOST PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION GIVING
RISE TO SUCH A CLAIM FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT, INCLUDING
NEGLIGENCE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Section 9.13 Execution in Counterparts. This Subordinated Loan
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which counterparts, when so executed
and delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Subordinated Loan
Agreement.
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[SIGNATURE PAGE - SUBORDINATED LOAN AGREEMENT]
IN WITNESS WHEREOF, the parties hereto execute this
Subordinated Loan Agreement, effective as of the date first above written.
Borrower: SIERRA WELL SERVICE, INC.,
A Delaware corporation
By: /s/ Xxxx X. Xxxxxx
------------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice Chairman
Address for notification:
Sierra Well Service, Inc.
000 Xxxxx Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxx X. Xxxxxx
Telecopier: (000) 000-0000
Subordinated Agent: JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP, AS
SUBORDINATED AGENT
By: Enron Capital Management II Limited
Partnership, its sole general partner
By: Enron Capital II Corp., its sole general
partner
By: /s/ Xxxx X. Xxxxxx III
------------------------------------------
Name: Xxxx X. Xxxxxx III
Title: Agent and Attorney-in-Fact
S-1
57
[SIGNATURE PAGE - SUBORDINATED LOAN AGREEMENT]
Address for notification:
c/o Enron Capital & Trade Resources Corp.
Legal Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
c/o Enron Capital & Trade Resources Corp.
Compliance Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopier: (000) 000-0000 or
(000) 000-0000
Subordinated Lender: JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: Enron Capital Management II Limited
Partnership, its sole general partner
By: Enron Capital II Corp., its sole general
partner
By: /s/ Xxxx X. Xxxxxx III
------------------------------------------
Name: Xxxx X. Xxxxxx III
Title: Agent and Attorney-in-Fact
Address for notification:
c/o Enron Capital & Trade Resources Corp.
Legal Department
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
x/x Xxxxx Xxxxxxx & Xxxxx Xxxxxxxxx Xxxx.
X-0
58
[SIGNATURE PAGE - SUBORDINATED LOAN AGREEMENT]
Compliance
Department 0000
Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopier: (000) 000-0000 or
(000) 000-0000
S-3
