7.2. Corporate Power and Authority. The execution, delivery, and performance by Borrower of the Loan Documents have been duly authorized by all necessary corporate action and do not and will not (1) require any consent or approval of the stockholders which has not been given; (2) contravene Borrower's charter or bylaws; (3) violate any provision of any law, rule, regulation (including, without limitation, Regulations U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to Borrower; (4) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower is a party or by which it or its properties may be bound or affected; (5) result in, or require, the creation or imposition of any lien, upon or with respect to any of the properties now owned or hereafter acquired by Borrower; or (6) cause Borrower to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease, or instrument.
7.3. Legally Enforceable Agreement. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be, legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws affecting creditors' rights generally.
7.4. Financial Statements. The balance sheet of Borrower as of December 31, 2006, the related statements of income and retained earnings of Borrower for the twelve (12) months then ended contained in the Borrower’s Form 10-K filed with the Securities Exchange Commission, are complete and correct and fairly present the financial condition of Borrower at such dates and the results of the operations of Borrower for the periods covered by such statements, all in accordance with GAAP, and since December 31, 2006, there has been no material adverse change in the condition (financial or otherwise), business or operations of Borrower. There are no liabilities of Borrower, fixed or contingent, which are material but not reflected in such financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since December 31, 2006. No information, exhibit, or report furnished by the Borrower to any Bank in connection with the negotiation of this Agreement contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statement contained therein not materially misleading.
7.5. Labor Disputes and Acts of God. Neither the business nor the properties of Borrower is affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or other casualty (whether or not covered by insurance), materially adversely affecting such business or the operation of Borrower.
7.6. Other Agreements. Borrower is not a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or corporate restriction, the performance of which in accordance with the respective terms could have a material adverse effect on the business, properties, assets, operations, or condition, financial or otherwise, of Borrower or the ability of Borrower to carry out its obligations under the Loan Documents. Borrower is not in material default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party.
7.7. Litigation. There is no pending or threatened action or proceeding against or affecting Borrower before any court, governmental agency or arbitrator, which may, in any one case or in the aggregate, materially adversely affect the financial condition, operations, properties, or business of Borrower or the ability of Borrower to perform its obligations under the Loan Documents.
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Any litigation which does exist is set forth in detail satisfactory to Agent on Schedule "7.7" hereto, but Borrower represents to each Bank that such litigation does not violate this Section 7.7.
7.8. Ownership and Liens. Borrower has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets and leasehold interest reflected in the financial statements referred to in Section 7.4, and none of the properties and assets owned by Borrower, and none of its leasehold interests, are subject to any lien, except the Permitted Liens.
7.9. ERISA. Borrower is in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan been terminated; no circumstances exist which constitute grounds entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC instituted any such proceedings; neither Borrower nor any Commonly Controlled Entity has completely or partially withdrawn from a Multiemployer Plan; Borrower and each Commonly Controlled Entity have met their minimum funding requirements under ERISA with respect to all of their Plans and the present value of all vested benefits under each Plan exceeds the fair market value of all Plan assets allocable to such benefits, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA; and neither Borrower nor any Commonly Controlled Entity has incurred any liability to the PBGC under ERISA.
7.10. Operation of Business. Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted, and Borrower is not in violation of any valid rights of others with respect to any of the foregoing.
7.11. Taxes. Borrower has filed all tax returns (federal, state and local) required to be filed by law and has paid all taxes, assessments, and governmental charges and levies thereon to be due, including interest and penalties, except any such taxes, charges or levies which are being diligently contested in good faith by appropriate proceedings.
7.12. Debt. Schedule "7.12" is a complete and correct list of all credit agreements, indentures, purchase agreements, guaranties, Capital Leases, and other investments, agreements, and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which Borrower is in any manner directly or contingently obligated; and the maximum principal or face amounts of the debt in question, which are outstanding and which can be outstanding, are correctly stated, and all liens of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. With regard to any guaranty or other contingent obligation of Borrower, Borrower shall promptly notify Agent in the event any such obligation becomes non-contingent.
7.13. Environment. Borrower has duly complied with, and its business, operations, assets, equipment, property, leaseholds, or other facilities are in material compliance with, the provisions of all federal, state, and local environmental, health and safety laws, codes and ordinances, and all rules and regulations promulgated thereunder, as more fully set forth in the Mortgage.
7.14. Construction of Improvements. All labor and materials contracted for or utilized in connection with the construction of the Improvements shall be used and employed solely on the Land, and said construction shall be strictly in accordance with the Plans and free from encroachments upon building lines, easements and property lines.
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7.15. No Violations. Based upon a reasonable investigation, there exist no violations of any statutes, rules, orders, ordinances, regulations or requirements of any Governmental Authorities with respect to the Land, and the anticipated use thereof complies with all applicable statutes, rules, ordinances, regulations or requirements (including, without limitation, zoning, environmental, ecological, landmark and all other applicable categories) affecting the Land.
7.16. Zoning. The Land is not a part of a larger tract of land owned or leased by Borrower or any of its affiliates, or otherwise considered as part of one zoning lot, or, if it is, that any authorization or variance required for the subdivision of such larger tract which a sale of the Mortgaged Property would entail has been obtained from all the appropriate Governmental Authorities, so that the Land constitutes one zoning lot (including street access and parking and utility facilities, if relevant) capable of being conveyed as such. A "zoning lot" means a piece of property large enough to meet the minimum size for zoning requirements for "something" to be built on it.
7.17. Rights of Way. Necessary rights of way for all roads needed for the full utilization of the Land for its intended purposes have been acquired, and/or have been dedicated to public use and accepted by the appropriate Governmental Authority.
8. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid or any Bank shall have any Commitment under this Agreement, Borrower will comply with the following:
8.1. Maintenance of Existence. Preserve and maintain its corporate existence and good standing in the states in which it does business, and qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is required.
8.2. Maintenance of Records. Keep adequate records and books of account, in which complete entries will be made in accordance with GAAP, reflecting all financial transactions.
8.3. Maintenance of Properties. Maintain, keep, and preserve all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted.
8.4. Lockbox. Upon the request of Agent, Borrower shall establish and maintain a lockbox in Agent pursuant to an agreement in form and substance satisfactory to Agent which shall provide, in part, that: (a) Borrower shall deposit all checks and other instruments with respect to its notes, chattel paper or accounts receivable in the form received by them in the lockbox, (b) unless otherwise directed by Agent, Borrower shall direct its debtors and customers to make all payments in respect to their accounts receivable directly to the lockbox at Agent, (c) Agent shall deposit all items received by it to accounts designated by the Agent for the Borrower, provided no Event of Default shall have occurred and be continuing, and (d) if an Event of Default shall have occurred and be continuing, all such payments may be applied to the Indebtedness, at such times and in such order as Agent may elect.
8.5. Conduct of Business. Continue to engage in an efficient and economical manner in a business of the same general type as conducted by it on the date of this Agreement.
8.6. Maintenance of Insurance. Borrower will keep or cause to be kept adequately insured by financially sound and reputable insurers its plant, equipment, motor vehicles, and all other property of a character usually insured by businesses engaged in the same or similar businesses. Upon demand by the Agent, any insurance policies covering the Collateral shall include a loss payable endorsement to Agent, shall provide that such policies may not be canceled, reduced or affected in any manner for any reason without thirty (30) days prior notice to the Agent, and shall provide for any other matters which the Agent may reasonably require. Such insurance shall be
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against fire, casualty and any other hazards normally insured against and shall be in the amount of the full value (less a reasonable deductible not to exceed amounts customary in the industry for similarly situated businesses and properties) of the property insured. So long as no Event of Default exists and is continuing, the proceeds of said insurance policies may be used for repair or replacement of the damaged property. The Borrower shall at all times maintain adequate insurance against damage to persons or property, which insurance shall be by financially sound and reputable insurers and shall, without limitation, provide the following coverages: comprehensive general liability (including, without limitation, coverage, where applicable, damage caused by explosion, broad form property damage coverage, broad form coverage for contractually independent contractors), worker's compensation, products liability and automobile liability.
8.7. Compliance with Laws. Comply in all material respects with all applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property.
8.8. Right of Inspection. At any reasonable time and from time to time, and following twenty-four (24) hours prior written notice, permit the Agent or any agent or representative of any of the Banks, to reasonably examine and make copies of (with the cost to Borrower for such copies not to exceed $1,000) and abstracts from the records and books of account of, and visit the properties of, Borrower, and to discuss the affairs, finances, and accounts of Borrower with any of its officers and directors and Borrower's independent accountants. Agent contemplates conducting at least annual field audits of the Borrower's property, and any and all costs and expenses related thereto (except as set forth above) shall be reimbursed to Agent by Borrower.
| 8.9. | Reporting Requirements. Furnish to Agent and Banks: |
8.9.1. Quarterly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of Borrower, Borrower shall deliver to Agent and Banks interim balance sheets of Borrower as of the end of such quarter, statements of income of Borrower for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, and statements of cash flow of Borrower for the portion of the fiscal year ended with the last day of such quarter, all in sufficient detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year all prepared in accordance with GAAP and certified by the chief financial officer of Borrower (subject to normal year end audit adjustments);
8.9.2. Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of Borrower, commencing with the fiscal year ending December 31, 2007, balance sheets of Borrower as of the end of such fiscal year, statements of income and retained earnings of Borrower for such fiscal year, and statements of cash flow of Borrower for such fiscal year, with explanatory footnotes in sufficient detail acceptable to the Agent and Banks, and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP and as to the statements accompanied by an unqualified opinion thereon acceptable to the Agent and Banks by independent accountants selected by Borrower and which are acceptable to the Agent and Banks;
8.9.3. Management Letters. Promptly upon receipt thereof, copies of any reports submitted to Borrower by independent certified public accountants in connection with examination of the financial statements of Borrower made by such accountants;
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8.9.4. Compliance Certificate. Within forty-five (45) days after the end of each fiscal quarter of Borrower a certificate of compliance ("Compliance Certificate") executed by the chief financial officer of Borrower, in form and content as set forth in Schedule "8.9.4" hereto;
8.9.5. Notice of Litigation. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting Borrower, which, if determined adversely to Borrower, could have a material adverse effect on the financial condition, properties, or operations of Borrower;
8.9.6. Notice of Event of Defaults. As soon as possible and in any event within five (5) days after the occurrence of each Event of Default, a written notice setting forth the details of such Event of Default and the action which is proposed to be taken by the Borrower with respect thereto;
8.9.7. ERISA Reports. As soon as possible, and in any event within thirty (30) days after Borrower knows or has reason to know that any circumstances exist that constitute grounds entitling the PBGC to institute proceedings to terminate a Plan subject to ERISA with respect to Borrower or any Commonly Controlled Entity, and promptly but in any event within two (2) Business Days of receipt by the Borrower or any Commonly Controlled Entity of notice that the PBGC intends to terminate a Plan or appoint a trustee to administer the same, and promptly but in any event within five (5) Business Days of the receipt of notice concerning the imposition of withdrawal liability with respect to Borrower or any Commonly Controlled Entity, the Borrower will deliver to the Agent and Banks a certificate of the chief financial officer of the Borrower setting forth all relevant details and the action which the Borrower proposes to take with respect thereto;
8.9.8. Reports to Other Creditors. Promptly after the furnishing thereof, copies of any statement or report furnished to any other party pursuant to the terms of any indenture, loan, credit, or similar agreement and not otherwise required to be furnished to the Agent and Banks pursuant to any other clause of this Section 8; and
8.9.9. General Information. Such other information respecting the condition or operations, financial or otherwise, of Borrower as the Agent and Banks may from time to time reasonably request.
8.10. Environment. Be and remain in material compliance with the provisions of all federal, state, and local environmental, health and safety laws, codes and ordinances, and all rules and regulations issued thereunder, as more fully set forth in the Mortgage.
8.11. Operating Accounts. Maintain its primary operating accounts at Agent, with the exception of its payroll account.
8.12. Subsidiaries. At the time of creation or acquisition of any Subsidiary, Borrower shall cause such Subsidiary to properly become a Guarantor hereunder.
9. NEGATIVE COVENANTS. So long as any Notes shall remain unpaid or any Bank shall have any Commitment under this Agreement or any Letter of Credit issued in connection herewith, Borrower will not:
9.1. Negative Pledge. Create, incur, permit or suffer to exist any Liens upon any of its assets or properties, now owned or hereafter acquired, except for the Permitted Liens.
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| 9.2. | Debt. Create, incur, assume, or suffer to exist any Debt, except: |
| (1) | Indebtedness arising out of this Agreement; |
(2) Purchase money indebtedness not to exceed $500,000 in the aggregate for any given fiscal year;
(3) Current liabilities for taxes and assessments incurred in the ordinary course of business;
(4) Indebtedness in respect of current accounts payable or accrued (other than for borrowed funds or purchase money obligations) and incurred in the ordinary course of business, provided that all such liabilities, accounts and claims shall be promptly paid and discharged when due or in conformity with customary trade terms;
(5) Debt described in Schedule "7.12" but no voluntary prepayment, renewals, extensions, or refinancings thereof;
(6) Unsecured non-Bank Debt in addition to the debt described in Schedule "7.12" not to exceed $100,000 for the Borrower in the aggregate in any given fiscal year;
(7) Accounts payable to trade creditors for goods or services which are not past due more than ninety (90) days from the billing date, in each case incurred in the ordinary course of business, as presently conducted, and paid within the specified time, unless contested in good faith and by appropriate proceedings; and
| (8) | The Subordinated Debt. |
9.3. Mergers, etc. Without the prior written consent of Banks, wind up, liquidate or dissolve itself, reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person.
9.4. Leases. Without Agent's prior written consent, create, incur, assume, or suffer to exist, any obligation as lessee for the rental or hire of any real or personal property, except (1) the leases set forth on Schedule "9.4" hereto and any extensions or renewals thereof and (2) leases (other than Capital Leases) which do not in the aggregate require Borrower to make payments (including taxes, insurance, maintenance, and similar expenses which the Borrower is required to pay under the terms of any lease) in any fiscal year of Borrower in excess of Fifty Thousand and no/100ths Dollars ($50,000). Agent agrees not to unreasonably withhold its consent and will endeavor to respond within ten (10) days to Borrower's request therefor.
9.5. Sale and Leaseback. Sell, transfer, or otherwise dispose of any real or personal property to any Person and thereafter directly or indirectly lease back the same or similar property.
9.6. Dividends. Declare or pay any dividends; or purchase, redeem, retire, or otherwise acquire for value any of its capital stock now or hereafter outstanding; or make any distribution of assets to its stockholders as such whether in cash, assets, or in obligations of the Borrower; or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any shares of its capital stock; or make any distribution by reduction of capital or otherwise in respect of any shares of its capital stock.
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9.7. Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose of, any of its now owned or hereafter acquired assets (including, without limitation, shares of stock, receivables, and leasehold interests), except: (1) inventory disposed of or leased in the ordinary course of business; (2) the sale or other disposition of assets no longer used or useful in the conduct of its business; and (3) treasury stock; provided, however, that the sale of stock to raise equity required hereunder shall not violate this Section.
9.8. Guaranties, etc. Assume, guarantee, endorse, or otherwise be or become directly or contingently responsible or liable (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to maintain a minimum working capital net worth, or otherwise to assure the creditors of any Person against loss), for obligations of any Person, except guaranties by endorsement of negotiable instruments for deposits or collection or similar transactions in the ordinary course of business.
9.9. Transactions with Affiliates. Enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of each Borrower's business and upon fair and reasonable terms no less favorable to the Borrower than would obtain in a comparable arm's-length transaction with a Person not an Affiliate.
10. FINANCIAL COVENANTS. So long as any Notes shall remain unpaid or any Bank shall have any Commitment under this Agreement, Borrower shall comply with the following:
10.1. Funded Debt to EBITDA. Maintain, tested on the last day of each fiscal quarter for the trailing twelve months, a ratio of (i) Funded Debt of Borrower to (ii) EBITDA for the preceding four (4) consecutive fiscal quarters of Borrower, not greater than (a) for the fiscal quarter ending June 30, 2007, 4.5 to 1, (b) for the fiscal quarter ending September 30, 2007, and for each fiscal quarter thereafter, 4.0 to 1,.
| 10.2. | Fiscal Year. Not change its fiscal year end. |
10.3. Debt Service Coverage Ratio. Maintain, tested on the last day of each fiscal quarter for the trailing twelve months, commencing with the fiscal quarter ending June 30, 2007, and for each fiscal quarter thereafter, a Debt Service Coverage Ratio of not less than 1.25 to 1.00.
10.4. Capital Expenditures. Not make expenditures for fixed or capital assets if, after giving effect thereto, the aggregate of all such expenditures, excluding expenditures for the water pre-treatment facility not to exceed $3,000,000, would exceed (i) prior to Borrower meeting the Excess Cash Flow Threshold, $1,000,000 during any fiscal year of Borrower, and (ii) following Borrower meeting the Excess Cash Flow Threshold, $1,500,000 during any fiscal year of Borrower.
11.1. Assignment of Construction Contract. Borrower hereby Assigns to Agent, for the benefit of Banks, Borrower's interest in the Construction Contract and further represents to Agent that: (i) the Construction Contract is not subject to any claim, setoff or encumbrance; (ii) there have been no prior assignments of the Construction Contract; (iii) the Construction Contract constitutes the valid and binding obligations of the parties thereto, and is enforceable in accordance with its terms; (iv) neither Borrower nor Contractor is in default under the terms of the Construction Contract; (v) all covenants, conditions and agreements have been performed as required by the Construction Contract, except those which are not due to be performed until after the date of this Agreement; (vi) Borrower shall continue to be liable for all obligations of Borrower under the Construction Contract;
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(vii) Borrower hereby agrees to punctually perform and observe all of the terms, conditions and requirements of the Construction Contract to be performed or observed by Borrower; and (viii) Borrower agrees to indemnify and hold Agent harmless against and from any loss, cost, liability or expense (including, without limitation, reasonable attorneys' fees, court costs and investigation expenses) resulting from any failure of Borrower to perform its obligations under the Construction Contract.
11.2. Assignment of Contractor’s Plans. Borrower hereby assigns to Agent for benefit of the Banks, Borrower’s right, title and interest in and to the Plans. Borrower further represents to Agent that: (i) the list of the Plans provided to Agent is complete and accurate; (ii) the Plans have not been altered or amended except as may be reflected on such list of Plans, and will not hereafter be materially altered or amended without the prior written consent of Agent; (iii) all the Plans were prepared by the Contractor; (iv) Borrower is the sole and exclusive owner of the Plans (subject only to the interest, if any, of Contractor therein) and has the right and authority to make this Assignment; and (v) a true and correct copy of the Plans has heretofore been delivered to Agent by Borrower.
| 12.1. | Events of Default. If any of the following events shall occur: |
(1) Borrower should fail to pay the principal of, or interest on, the Notes, or any amount of the Commitment or other fee within ten (10) days as and when due and payable;
(2) Any representation or warranty made or deemed made by Borrower in this Agreement or the Security Agreement or which is contained in any certificate, document, opinion, or financial or other statement furnished at any time under or in connection with any Loan Document shall prove to have been incorrect, incomplete, or misleading in any material respect on or as of the date made or deemed made;
(3) Borrower shall fail to perform or observe any term, covenant, or agreement contained in this Agreement or any Loan Documents, following a thirty (30) day notice and cure period as to non-monetary covenant defaults;
(4) Borrower shall (a) fail to pay any indebtedness for borrowed money (other than the Notes) or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); or (b) fail to perform or observe any term, covenant, or condition on its part required to be performed or observed under any agreement or instrument relating to any such indebtedness, when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, after the giving of any applicable notice or passage of time, or both, the maturity of such indebtedness, whether or not such failure to perform or observe shall be waived by the holder of such indebtedness, or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof;
(5) Borrower or any Guarantor (a) shall generally not pay, or shall be unable to pay, or shall admit in writing its inability to pay its debts as such debts become due; or (b) shall make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee for it or a substantial part of its assets; or (c) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have had any such petition or application filed or any such proceeding commenced against it in which an order for relief is entered or an
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adjudication or appointment is made, and which remains undismissed for a period of thirty (30) days or more; or (e) shall take any corporate action indicating its consent to, approval of, or acquiescence in any such petition, application, proceeding, or order for relief or the appointment of a custodian, receiver, or trustee for all or any substantial part of its properties; or (f) shall suffer such custodianship, receivership, or trusteeship to continue undischarged for a period of thirty (30) days or more;
(6) One or more judgments, decrees, or orders for the payment of money in excess of Two Hundred Fifty Thousand and no/100ths Dollars ($250,000.00) in the aggregate shall be rendered against Borrower, and such judgments, decrees, or order shall continue unsatisfied and in effect for a period of sixty (60) consecutive days without being vacated, discharged, satisfied, or stayed or bonded pending appeal;
(7) The Collateral documents shall at any time after their execution and delivery and for any reason cease (a) to create a valid and perfected first priority security interest in and to the property purported to be subject to such Collateral documents; or (b) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Borrower, or Borrower shall deny it has any further liability or obligation under the Collateral documents, or Borrower shall fail to perform any of its obligations under the Collateral documents; or the validity or enforceability of the Guaranty Agreement of any Guarantor shall be contested, or liability thereunder is denied;
(8) Any of the following events shall occur or exist with respect to Borrower and any Commonly Controlled Entity under ERISA: any Reportable Event shall occur; complete or partial withdrawal from any Multiemployer Plans shall occur; any Prohibited Transaction shall occur; a notice of intent to terminate a Plan shall be filed, or a Plan shall be terminated; or circumstances shall exist which constitute grounds entitling the PBGC to institute proceedings to terminate a Plan, or the PBGC shall institute such proceedings; and in each case above, such event or condition, together with all other events or conditions, if any, could subject Borrower to any tax, penalty, or other liability which in the aggregate may exceed One Hundred Thousand and no/100ths Dollars ($100,000.00);
(9) If the Agent receives its first notice of a hazardous discharge or an environmental complaint from a source other than Borrower, and the Agent does not receive notice (which may be given in oral form, provided same is followed with all due dispatch by written notice by Certified Mail, Return Receipt Requested) of such hazardous discharge or environmental complaint from any Borrower within twenty-four (24) hours of the time the Agent first receives said notice from a source other than any Borrower; or if any federal, state, or local agency asserts or creates a Lien upon any or all of the assets, equipment, property, leaseholds, or other facilities of the Borrower by reason of the occurrence of a hazardous discharge or an environmental complaint; or if any federal, state, or local agency asserts a claim against Borrower and/or its assets, equipment, property, leaseholds, or other facilities for damages or cleanup costs relating to a hazardous discharge or an environmental complaint; provided, however, that such claim shall not constitute a default if, within five (5) Business Days of the occurrence giving rise to the claim, (a) the Borrower can prove to the Agent's satisfaction that the Borrower has commenced and is diligently pursuing either: (i) a cure or correction of the event which constitutes the basis for the claim, and continues diligently to pursue such cure or correction to completion or (ii) proceedings for an injunction, a restraining order, or other appropriate relief preventing such agency or agencies from asserting such claim, which relief is granted within ten (10) Business Days of the occurrence giving rise to the claim and the injunction, order, or relief is not thereafter resolved or reversed on appeal; and (b) in either of the foregoing events, the Borrower has posted a bond, letter of credit, or other security satisfactory in form, substance, and amount
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to both the Agent and the agency or entity asserting the claim to secure the proper and complete cure or correction of the event which constitutes the basis for the claim;
(10) Without the prior written consent of Banks, which consent shall not be unreasonably withheld, conditioned or delayed, any merger or other corporate restructure occurs;
(11) Material variance in construction of the Improvements from the approved Plans without prior written approval of Banks;
(12) The abandonment or cessation of the work on the Improvements for a period of five (5) consecutive business days, unless such cessation (but not such abandonment) shall have been the result of a cause which, with the exercise of due diligence, Borrower was unable to prevent or overcome;
(13) The issuance of any court order, decree or judgment pursuant to any judicial or administrative proceeding declaring that the Improvements or the construction thereof are in violation of any law, ordinance, rule or regulation of any Governmental Authority, which order, decree or judgment is not terminated or discharged within forty-five (45) calendar days from the issuance date; or
(14) Substantial damage to or destruction of the Improvements which is not repaired promptly to the satisfaction of Agent.
In any such event, Agent may, at the request of or with the consent of the Banks, (a) declare the Banks' obligation to make Loans to be terminated, whereupon the same shall forthwith terminate; and/or (b) declare the outstanding Notes, all interest thereon, and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest, and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower. Additionally, such Bank is hereby authorized at any time and from time to time, without further notice to Borrower (any such notice being expressly waived by the Borrower), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or the Notes or other Loan Documents, irrespective of whether or not such Bank shall have made any demand under this Agreement or the Notes or such other Loan document and although such obligations may be unmatured. The rights of the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Banks may have, in this Agreement, any other Loan Document or at law or equity, including without limitation the right to accelerate the Notes upon the occurrence of an Event of Default.
13.1. Authorization and Action. Each Bank hereby irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The duties of the Agent shall be mechanical and administrative in nature and the Agent shall not by reason of this Agreement be a trustee or fiduciary for any Bank. The Agent shall have no duties or responsibilities except those expressly set forth herein. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the 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 so refraining from
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acting) upon the instructions of the Banks, and such instructions shall be binding upon all Banks and all holders of Notes; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law.
13.2. Liability of Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement in the absence of its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent (1) may treat the payee of any Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (2) 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; (3) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties, or representations made in or in connection with this Agreement; (4) 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 Agreement on the part of the Borrower, or to inspect the property (including the books and records) of the Borrower; (5) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, perfection, sufficiency, or value of this Agreement or any other instrument or document furnished pursuant thereto; and (6) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate, or other instrument or writing (which may be sent by telegram, telex, or facsimile transmission) believed by it to be genuine and signed or sent by the proper party or parties.
13.3. Rights of Agent as a Bank. With respect to its Commitment, the Loans made by it and the Notes issued to it, the Agent shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The 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, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if the Agent were not the Agent and without any duty to account therefor to the Banks.
13.4. Independent Credit Decisions. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank 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 this Agreement. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall have no duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any of its Subsidiaries (or any of their Affiliates) which may come into the possession of the Agent or any of its Affiliates.
13.5. Indemnification. The Banks agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably based upon the Pro Rata Share of each Bank, 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 Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of any of the foregoing resulting from the Agent's gross negligence or willful
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misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent (to the extent not reimbursed by the Borrower) 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, administration, or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement.
13.6. Successor Agent. The Agent may resign at any time by giving at least sixty (60) days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Banks, and shall have accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement.
13.7. Sharing of Payments, Etc. If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Notes held by it in excess of its ratable share of payments on account of the Notes obtained by all the Banks, such Bank shall purchase from the other Banks such participations in the Notes held by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of the other Banks, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and each Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (1) the amount of such Bank's required repayment to (2) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 13.7 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Bank were the direct creditor of the Borrower in the amount of such participation.
14.1. Amendments. Subject to the provisions of this Section 14.1, the Majority Banks (or the Agent with the consent in writing of the Majority Banks) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Banks or the Borrower hereunder or waiving any Event of Default hereunder (subject to the limitations of clause (iv) below); provided, however, that no such supplemental agreement shall, without the written consent of all of the Banks:
(i) Extend the final maturity of any Loan, postpone any regularly scheduled payment of principal of any Loan, or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Majority Banks.
(iii) Extend the Termination Date, reduce the amount of or extend the payment date for, any mandatory payments required under any Loan Documents, increase the amount of the Commitment of any Bank hereunder, or permit the Borrower to assign its rights under this Agreement.
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(iv) Waive any Event of Default hereunder for a period of more than forty-five (45) consecutive days.
(v) Amend any of the Financial Covenants set forth in Section 10 hereof.
(vi) Amend this Section 14.1.
(vii) Release any Guarantor or release all or substantially all of the Collateral.
14.2. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent.
14.3. Notices, etc. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties):
If to the Borrower:
ORCHIDS PAPER PRODUCTS COMPANY
4826 Hunt Street
Pryor, Oklahoma 74361
Attention: Keith R. Schroeder
Facsimile No.: (918) 824-0900
With a copy to:
Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.
320 South Boston, Suite 400
Tulsa, Oklahoma 74103
Attention: Dean Luthey
Facsimile No.: (918) 594-0505
If to BOK as the Agent or as a Bank:
BANK OF OKLAHOMA, N.A.
P.O. Box 2300
Tulsa, Oklahoma 74192
Attention: Daniel Hughes
Facsimile No.: (918) 588-6155
With a copy to:
Riggs, Abney, Neal, Turpen, Orbison & Lewis
502 West Sixth Street
Tulsa, Oklahoma 74119
Attention: Janet G. Mallow
Facsimile No.: (918) 584-1603
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If to Banks:
BANCFIRST
7625 E. 51st Street, Suite 300
Tulsa, Oklahoma 74145
Attention: Elisabeth F. Blue
Facsimile: (918) 664-3418
COMMERCE BANK, N.A.
1000 Walnut Street
Kansas City, Missouri 64106
Attention: Dennis R. Block
Facsimile: (816) 234-7290
or at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.3. Except as is otherwise provided in this Agreement, all such notices and communications shall be effective when deposited in the mails addressed as aforesaid, except that notices for advances to the Agent pursuant to the provisions of Section 2.5 shall not be effective until received by the Agent. Any notices due from Borrower need only be sent to the Agent. The Agent shall provide copies of all notices from Borrower to the Banks.
14.4. No Waiver. No failure or delay on the part of any Bank or the Agent 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 other right, power, or remedy hereunder. The rights and remedies provided herein are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law or in equity or otherwise.
14.5. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, each Bank and the Agent, and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights under any Loan Document to which the Borrower is a party without the prior written consent of all the Banks.
14.6. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all costs and expenses incurred by the Agent in connection with the preparation, execution, delivery, filing, and initial administration of the Loan Documents, including without limitation the reasonable fees of Riggs, Abney, Neal, Turpen, Orbison & Lewis, and of any amendment, modification, or supplement to the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent or any of the Banks, incurred in connection with advising the Agent or any of the Banks as to their rights and responsibilities hereunder. The Borrower also agrees to pay all such costs, expenses and reasonable fees, including court costs, incurred in connection with enforcement of the Loan Documents, or any amendment, modification, or supplement thereto, whether by negotiation, legal proceedings, or otherwise. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing, and recording of any of the Loan Documents and the other documents to be delivered under any such Loan Documents, and agrees to hold the Agent and the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. This provision shall survive termination of this Agreement.
14.7. Integration. This Agreement and the Loan Documents contain the entire agreement between the parties relating to the subject matter hereof and supersede all prior and contemporaneous oral statements and writings with respect thereto.
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14.8. Indemnity. The Borrower hereby agrees to defend, indemnify, and hold each Bank harmless from and against any and all claims, damages, judgments, penalties, costs, and expenses (including reasonable attorneys' fees and court costs now or hereafter arising from the aforesaid enforcement of this clause) arising directly or indirectly from the activities of the Borrower, its predecessors in interest, or third parties with whom they have a contractual relationship, or arising directly or indirectly from the violation of any environmental protection, health or safety law, whether such claims are asserted by any governmental agency or any other Person, except where such claim or expense arose from the gross negligence or willful misconduct of Agent or any Bank. This indemnity shall survive termination of this Agreement.
14.9. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of Oklahoma.
14.10. Severability of Provisions. Any provision of any Loan Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
14.11. Counterparts. This Agreement may be executed in any number of counterparts, and all the counterparts taken together shall be deemed to constitute one and the same instrument.
14.12. Headings. Article and Section headings in the Loan Documents are included in such Loan Documents for the convenience of reference only and shall not constitute a part of the applicable Loan Documents for any other purpose.
14.13. Jury Trial Waiver. BORROWER AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. BORROWER AND EACH BANK ALSO SUBMITS ITSELF AND OTHERWISE CONSENTS TO THE JURISDICTION AND VENUE OF THE MAYES COUNTY DISTRICT COURT OR FEDERAL DISTRICT COURT (NORTHERN DISTRICT OF OKLAHOMA), AS TO ANY DISPUTES OR OTHER MATTERS ARISING OUT OF OR IN CONNECTION HEREWITH.
14.14. USA Patriot Act Notification. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower: When Borrower opens an account, if Borrower is an individual, Agent will ask for Borrower's name, taxpayer identification number, residential address, date of birth, and other information that will allow Agent to identify Borrower, and, if Borrower is not an individual, Agent will ask for Borrower's name, taxpayer identification number, business address, and other information that will allow Agent to identify Borrower. Agent may also ask, if Borrower is an individual, to see Borrower's driver’s license or other identifying documents, and, if Borrower is not an individual, to see Borrower's legal organizational documents or other identifying documents.
14.15. Conflicts. To the extent any conflict exists under any of the Loan Documents, this Agreement shall be controlling.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
[Signature Pages to Follow]
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"Borrower"
ORCHIDS PAPER PRODUCTS COMPANY
Keith R. Schroeder, Chief Financial Officer
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"Banks"
BANK OF OKLAHOMA, N.A.
Dan Hughes, Senior Vice President
Principal Office:
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
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BANCFIRST
Elisabeth F. Blue, Executive Vice President
Principal Office:
7625 E. 51st Street, Suite 300
Tulsa, Oklahoma 74145
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COMMERCE BANK, N.A.
Dennis R. Block, Senior Vice President
Principal Office:
1000 Walnut Street
Kansas City, Missouri 64106
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"Agent"
BANK OF OKLAHOMA, N.A.
Dan Hughes, Senior Vice President
Principal Office:
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
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