Exhibit 4.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is executed
effective as of the 22nd day of May, 1998 (the "Effective Date"),
by and between STRATUS VENTURES I BORROWER L.L.C., a Delaware
limited liability company ("Borrower"), and OLY LENDER STRATUS,
L.P., a Texas limited partnership ("Lender"), and, solely for the
purposes of acknowledging the provisions of Article XIV hereof
relating to the conversion of the Obligations (as hereinafter
defined) hereunder into Parent Common Stock (as hereinafter
defined), STRATUS PROPERTIES INC., a Delaware corporation
("Parent").
R E C I T A L S
WHEREAS, Borrower is a special purpose entity wholly-
owned by Parent, formed exclusively for the purpose of investing
in joint ventures for new land acquisitions and real estate
development projects for which borrowings can be made hereunder;
and
WHEREAS, Borrower has requested that Lender make a loan
to Borrower, available in multiple draws, in the maximum
principal amount of up to Ten Million Dollars ($10,000,000) (the
"Loan") strictly for the purposes set forth in this Agreement;
and
WHEREAS, Parent, as the sole owner of equity interests
in Borrower, will derive significant direct and indirect economic
benefit from the Loans and other financial accommodations made by
Lender to Borrower pursuant to this Agreement, and it is a
condition to the making of the Loans pursuant to this Agreement
that Parent shall enter into certain agreements and
acknowledgments contained herein, including without limitation,
those contained in Article XIV hereof; and
WHEREAS, Lender has agreed to make such Loan upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the
foregoing premises, the mutual covenants contained herein and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
A G R E E M E N T S
Article I
DEFINITIONS AND DETERMINATIONS
Section I.1 Definitions. As used in this Agreement
and in the other Loan Documents, unless otherwise expressly
indicated herein or therein, the following terms shall have the
following meanings (such meanings to be applicable equally both
to the singular and plural terms defined):
"Accountants" shall have the meaning given to such
term in Section 9.3(a).
"Advance" shall have the meaning given to such
term in Section 2.1.
"Affiliate" shall mean any Person that directly or
indirectly, through one or more intermediaries, controls or
is controlled by or is under common control with another
Person. The term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
For the purpose hereof, any Person which owns or controls,
directly or indirectly, thirty percent (30%) or more of the
equity securities, voting or otherwise, of another Person
shall be deemed to "control" such Person. Notwithstanding
the foregoing, under no circumstances shall Lender be
considered an Affiliate of Borrower.
"Agreement" means this Loan Agreement as the same
may be amended, restated, supplemented or otherwise modified
from time to time.
"Blockage Notice" shall have the meaning given to
such term in Section 14.4.
"Blockage Period" shall have the meaning given to
such term in Section 14.4.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Book Value of Assets" shall mean, as of any time,
the cost of any assets and properties as reflected on the
books and records of Parent and its Restricted Subsidiaries.
If the cost of such assets or property was included in the
balance sheet contained in the most recent Form 10-Q or Form
10-K filed with the SEC, the cost as so reflected, shall be
the "Book Value", as such amount is adjusted for the cost of
subsequent improvements and investments.
"Borrower" has the meaning set forth in the
preamble to this Agreement.
"Borrower Capital Stock" shall mean all of the
capital stock of Borrower, a description and the owners of
the outstanding shares of which is set forth in Exhibit 1.
"Business Day" shall mean any day other than a
Saturday, Sunday or holiday under the laws of the States of
Texas or New York, or a day on which banking institutions
located in the States of Texas or New York are authorized or
required by law or other governmental action to close.
"Capitalized Lease" shall mean any lease of
Property, the obligations for rental of which are required
to be capitalized in accordance with GAAP.
"Cash Collateral Account" shall have the meaning
given to such term in Section 2.3(d).
"Cash Collateral Agreement" shall have the meaning
given to such term in Section 2.3(d).
"CERCLA" means, collectively, the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. SS 9601 et seq.
"Closing Date" shall mean the date occurring on or
after the Effective Date on which the first borrowing under
the Loan occurs.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Property in which
Lender is granted the Security Interests pursuant to the
Loan Documents.
"Contingent Obligation" as applied to any Person,
means any direct or indirect liability, contingent or
otherwise, of that Person: (a) with respect to any
indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that
the holders of such liability will be protected (in whole or
in part) against loss with respect thereto; (b) with respect
to any letter of credit issued for the account of that
Person or as to which that Person is otherwise liable for
reimbursement of drawings; (c) under any foreign exchange
contract, currency swap agreement or other similar agreement
or arrangement designed to protect that Person against
fluctuations in currency values; or (d) under any commodity
futures contract. Contingent Obligations shall include
(i) the direct or indirect guaranty, endorsement (otherwise
than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another,
(ii) the obligation to make take-or-pay or similar payments
if required regardless of nonperformance by any other party
or parties to an agreement, and (iii) any liability of such
Person for the obligations of another through any agreement
to purchase, repurchase or otherwise acquire such obligation
or any property constituting security therefor, to provide
funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any
Contingent Obligation shall be equal to the amount of the
obligation so guarantied or otherwise supported or, if a
fixed and determined amount, the maximum amount so
guaranteed.
"Conversion" shall have the meaning given to such
term in Section 14.1.
"Conversion Limitations" shall mean the
limitations on the issuance of Parent Common Stock
identified in Section 14.2.
"Coverage Ratio" shall mean, as of any time, the
ratio of (A) the Book Value of Assets to (B) (i) the
aggregate amount of outstanding Debt of Parent and its
Restricted Subsidiaries, plus (ii) any outstanding Preferred
Obligations.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase
price of property or services, except accounts payable
arising in the ordinary course of business, (iv) all
obligations of such person as lessee under capital leases,
(v) all Debt of others secured by any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind
on any asset of such Person and (vi) all Debt of others
Guaranteed by such Person.
"Default Rate" shall mean the lesser of fifteen
percent (15%) per annum and the Maximum Lawful Rate.
"Default Rate Period" shall mean a period of time
commencing on the date that an Event of Default has occurred
and ending on the date that such Event of Default is cured
or waived in writing by Lender.
"Dollars" and the sign "$" shall mean freely
transferable lawful money of the United States.
"Effective Date" shall have the meaning set forth
in the preamble to this Agreement.
"Environmental Claim" means any written notice of
violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any
Governmental Body or any Person for damages, injunctive or
equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages,
nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or
restrictions resulting from or based upon: (a) the threat
or existence, or the continuation of the existence, of a
Release (including sudden or non-sudden, accidental or
nonaccidental Releases); (b) exposure to any Hazardous
material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or
(d) the violation of any Environmental Law or Environmental
Permit.
"Environmental Law" shall mean any and all
applicable treaties, laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by
any Governmental Body, relating in any way to the
environment, preservation or reclamation of natural
resources, the management, Release or threatened Release of
any Hazardous Material or to health and safety matters,
including CERCLA, the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
SS 6901 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. SS 1251 et
seq., the Clean Air Act of 1970, as amended, 42 U.S.C.
SS 7401 et seq., the Toxic Substances Control Act of 1976,
15 U.S.C. SS 2601 et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. SS 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. SS 11001 et seq., the Safe Drinking Water
Act of 1974, as amended, 42 U.S.C. SS 300(f) et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. SS 1801 et
seq., and any similar or implementing state or local law,
and all amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit,
approval, authorization, certificate, license, variance,
filing or permission required by or from any Governmental
Body pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations issued thereunder, as in effect from time to
time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated), that together with Parent, is
treated as a single employer under Section 414(b) or (c) of
the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (i) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan; (ii) the adoption of
any amendment to a Plan that would require the provision of
security pursuant to Section 401 (a)(29) of the Code; (iii)
the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code),
whether or not waived; (iv) the incurrence of any liability
under Title IV of ERISA with respect to any Plan or
Multiemployer Plan, other than any liability for
contributions not yet due or payment of premiums not yet
due; (v) the receipt by Parent or any ERISA Affiliate
thereof from the PBGC of any notice relating to the
intention of the PBGC to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (vi) the receipt
by Parent or any ERISA Affiliate thereof of any notice
concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected
to be, insolvent or in reorganization, within the meaning of
Title IV of ERISA; and (vii) any other similar event or
condition with respect to a Plan or Multiemployer Plan that
could reasonably result in liability of Parent.
"Event of Default" shall mean any of the Events of
Default set forth in Section 11.1.
"Exit Fee" shall mean an amount, which shall
constitute additional interest payable hereunder, necessary
to permit Lender to realize the Guaranteed Yield.
"Final Payment Date" shall mean the date on which
(a) all outstanding Obligations for principal and interest
under the Loan have been satisfied and extinguished, whether
by way of cash payment or Conversion, and (b) the Lender's
commitment to make Advances under the Loan has terminated.
"GAAP" shall mean generally accepted accounting
principles as in effect from time to time, which shall
include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.
"Governmental Body" shall mean any foreign,
federal, state, municipal or other government, or any
department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or
arbitrator.
"Governmental Rule" shall mean any statute, law,
treaty, rule, code, ordinance, regulation, permit,
certificate or order of any Governmental Body or any
judgment, decree, injunction, writ, order or like action of
any court, arbitration or other judicial or quasi judicial
tribunal.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, (i)
to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-
pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring
in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); provided, however, that the
Guarantee by any Person shall not include endorsements by
such Person for collection or deposit, in either case in the
ordinary course of business.
"Guaranteed Yield" shall mean the aggregate amount
of money determined as of the Final Payment Date equal to
fifteen percent (15%) per annum, calculated daily, on the
principal Obligations outstanding from time to time.
"Guaranty Agreement" shall mean the Guaranty
Agreement dated as of the Closing Date, executed by
Borrower.
"Hazardous Materials" means all explosive or
radioactive materials, substances or wastes, hazardous or
toxic materials, substances or wastes, pollutants, solid,
liquid or gaseous wastes, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, ("PCBs") or PCB-containing
materials or equipment, radon gas, infectious or medical
wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.
"Indebtedness" shall mean all liabilities,
obligations and reserves, contingent or otherwise, which, in
accordance with GAAP, would be reflected as a liability on a
balance sheet or would be required to be disclosed in a
financial statement, including, without duplication:
(i) all Indebtedness for Borrowed Money, (ii) all
obligations secured by any Lien upon Property, (iii) all
guaranties and other contingent obligations, including,
without limitation, letters of credit, and (iv) all
liabilities in respect of unfunded vested benefits under any
retirement plan and in respect of withdrawal liabilities
incurred under ERISA by Borrower.
"Indebtedness for Borrowed Money" shall mean,
without duplication, all Indebtedness which is owing with
respect to any of the following: (i) money borrowed,
(ii) obligations evidenced by a note, debenture or other
like written obligation to pay money (including, without
limitation, all of the Obligations, and the Loan),
(iii) obligations under Capitalized Leases or for the
deferred purchase price of Property, (iv) obligations under
conditional sales or other title retention agreements,
(v) any guaranty of any or all of the foregoing, or (vi)
trade payables.
"Joint Venture" shall mean any joint venture
entered into between Borrower or a Subsidiary and Olympus
for new land acquisition and development of such land, if
Borrower's contribution to such joint venture will be funded
with proceeds from the Loan, specifically excluding any land
owned or controlled by Parent or an Affiliate of Parent as
of the Effective Date and any projects involving the
development thereof.
"Joint Venture Distribution" shall mean, for any
period, any and all cash distributable to Borrower from the
Joint Ventures.
"Joint Venture Distribution Date" shall mean the
date occurring fifteen (15) days after any Joint Venture
Distribution.
"Lender" shall have the meaning set forth in the
preamble to this Agreement.
"Lien" shall mean any mortgage, pledge,
assignment, lien, charge, encumbrance or security interest
of any kind, or the interest of a vendor or lessor under any
conditional sale agreement or Capitalized Lease or other
title retention agreement.
"Loan" shall have the meaning set forth in the
recitals to this Agreement.
"Loan Documents" shall mean this Agreement, the
Note and the Security Documents and all certificates,
instruments, documents and other agreements executed
pursuant to any of the foregoing or otherwise in connection
with the Loan, and any and all renewals, extensions and
modifications of any of the foregoing described documents
and instruments and any and all replacements and
substitutions therefor.
"Margin Stock" has the meaning assigned to such
term in Regulation U.
"Market Value" means the last per share sale price
of the Parent Common Stock as reported by the Nasdaq
National Market (or any national stock exchange or
interdealer quotation system on which the Parent Common
Stock is then listed or quoted).
"Material Adverse Effect" shall have the meaning
given to such term in Section 6.3.
"Maturity Date" shall mean the date which is six
(6) years after the Closing Date, unless earlier accelerated
pursuant to the terms hereof.
"Maximum Lawful Rate" shall mean the maximum
nonusurious rate of interest permitted by the laws of the
United States or applicable state law, whichever laws allow
the greater rate of interest, as such laws now exist or may
be changed or amended or come into effect in the future.
"Nonrestricted Subsidiaries" shall have the
meaning attributed to such term in the Parent Credit
Agreement. If such agreement is terminated or no longer
includes the concept of Nonrestricted Subsidiaries and it is
not replaced by a successor agreement containing such
concept in connection with a refinancing, then the
definition of such term at the time of such termination
shall be the definition of such term hereunder.
"Note" shall mean that certain Convertible
Promissory Note dated as of the Closing Date, executed by
Borrower, payable to the order of Lender, in the original
principal amount of Ten Million Dollars ($10,000,000) and
any and all renewals, extensions and modifications thereof
and substitutions and replacements therefor.
"Obligations" shall mean (i) any and all
Indebtedness, due or to become due, now existing or
hereafter or howsoever arising from Borrower and/or any
other Obligor to Lender pursuant to the terms of the Loan
Documents, including, without limitation, the Loan, and
(ii) the performance of the covenants of Borrower contained
in the Loan Documents.
"Obligor" shall mean, as the context may require,
Borrower, each Subsidiary and any other Person (other than
Lender) to the extent such Person is obligated under this
Agreement or any other Loan Document.
"Olympus" shall mean Olympus Real Estate
Corporation, a Texas corporation, and any Affiliates
thereof.
"Parent" shall have the meaning set forth in the
recitals of this Agreement.
"Parent Common Stock" shall mean the common stock
of Parent, $0.01 par value, and any securities into which
the Parent Common Stock may hereafter be exchanged or
converted pursuant to any merger, consolidation,
recapitalization or reclassification effected by Parent.
"Parent Credit Agreement" shall mean the Amended,
Restated and Consolidated Credit Agreement dated as of
December 15, 1997 among FM Properties Operating Co., Circle
C Land Corp., the financial institutions party thereto and
The Chase Manhattan Bank, as agent, with respect to which
Parent is a guarantor, as the same may be amended,
supplemented, replaced, refinanced or otherwise modified
from time to time.
"Parent's Permitted Liens " shall have the meaning
given to such term in Section 7.9.
"Parent's Senior Debt" means all Debt of Parent
including principal, premium, if any, and interest on
(including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law,
whether or not allowed) or other amounts payable in
connection with any Debt of Parent, whether presently
outstanding or subsequently created, incurred or assumed
(other than any other Debt of Parent which expressly
provides by its terms or the terms of the instrument
creating or evidencing it that it is subordinate in right of
payment in any respect to any other Debt of Parent).
Notwithstanding the foregoing, Parent's Senior Debt shall
not include any Debt of Parent to any subsidiary of Parent
or any liability for federal, state or local taxes owed by
Parent.
"Payment Amount" shall mean the aggregate of all
payments received by Lender in connection with the
satisfaction of principal and interest Obligations, valued
as follows:
(a) any cash payment made to Lender or otherwise
received by Lender in respect of principal and interest
Obligations shall be valued at the face value of such
cash payment; and
(b) any Parent Common Stock that is delivered to
Lender in connection with the satisfaction of principal
Obligations pursuant to a Conversion shall be valued at
the average of the Market Value for the ten (10)
trading days immediately prior to the date of
Conversion, but not less than the Stock Price;
LESS the aggregate amount of all Advances made by Lender to
Borrower.
"Payment Obligations" shall have the meaning given
to such term in Section 14.4.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA.
"Permits" shall have the meaning given to such
term in Section 6.11.
"Permitted Liens" shall mean any of the following
Liens:
(i) the Security Interests;
(ii) Liens for taxes or assessments and
similar charges, which either are (A) not delinquent or
(B) being contested diligently and in good faith by
appropriate proceedings, and as to which Borrower or any
Subsidiary has set aside adequate reserves on its books;
(iii) statutory Liens, such as
mechanic's, materialman's, warehouseman's, carrier's or
other like Liens, incurred in good faith in the ordinary
course of business, which are paid in the ordinary course of
business or which are bonded in order to remove such Lien of
record within 30 days after the moneys become due and owing;
(iv) Liens in respect of judgments or
awards, the existence of which would not constitute an Event
of Default or Potential Default pursuant to Section 7.1.6;
(v) pledges or deposits made in the
ordinary course of business to secure payment of worker's
compensation, or to participate in any fund in connection
with worker's compensation, unemployment insurance, old-age
pensions or other social security programs;
(vi) Liens upon Property of Borrower or
any Subsidiary to secure Indebtedness of any Joint Venture,
which Liens may be senior to the Liens of Lender; and
(vii) Liens upon the interest of Borrower
or any Subsidiary in a Joint Venture granted in favor of
other holders of interests in such Joint Venture.
"Person" shall mean any individual, firm,
corporation, limited liability company, business enterprise,
trust, association, joint venture, partnership, Governmental
Body or other entity, whether acting in an individual,
fiduciary or other capacity.
"Plan" means any employee pension benefit plan
(other than a Multiemployer Plan) which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code
and in respect of which Parent, or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement
dated as of the Closing Date, executed by Borrower.
"Potential Default" shall mean any event or
condition which, with the giving of notice or the lapse of
time, or both, would become an Event of Default.
"Preferred Obligation" shall mean any obligation
for the payment of money that has matured in connection with
a decision by Parent to pay cash to the holders of any
Preferred Stock in connection with a Conversion of Preferred
Stock.
"Primary Bank Facility" shall mean the credit
facility evidenced by the Parent Credit Agreement.
"Property" shall mean all types of real, personal
or mixed property and all types of tangible or intangible
property owned by Borrower or a Subsidiary.
"Pursuit Costs" shall mean costs and expenses
incurred by Parent in connection with a Development
Opportunity (as such term is defined in that certain Master
Agreement (the "Master Agreement") among Oly Fund II GP
Investments, L.P., Oly/Stratus Equities, L.P., Lender,
Parent and Stratus Oly L.L.C. dated the date hereof that was
pursued for the purposes set forth in the Master Agreement
but did not close.
"Quarterly Payment Date" shall mean the last day
of each calendar quarter occurring after the Closing Date.
"Regulation U" means Regulation U of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing,
dispersing, emanating or migrating of any Hazardous
Materials in, into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action"
as such term is defined in CERCLA, 42 U.S.C. S 9601(24), and
(b) all other actions required by any Governmental Body or
voluntarily undertaken to (i) cleanup, remove, treat, abate
or in any other way address any Hazardous Material in the
environment, (ii) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material so
it does not migrate or endanger or threaten to endanger
public health, welfare or the environment or (iii) perform
studies and investigations in connection with, or as a
precondition to, (i) or (ii) above.
"Restricted Junior Payment" shall mean (a) any
dividend or other distribution, direct or indirect, on
account of any shares of any class of stock of, or any
partnership interest of, Borrower or any of its Subsidiaries
now or hereafter outstanding, other than dividends or other
distributions from a Subsidiary to Borrower; (b) any
redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of,
or of any partnership interest of, Borrower now or hereafter
outstanding; (c) any payment or prepayment of principal of,
premium, if any, or interest on, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or
similar payment with respect to, any Indebtedness other than
the Obligations; and (d) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of
Borrower now or hereafter outstanding.
"Restricted Subsidiaries" shall have the meaning
attributed to such term in the Parent Credit Agreement. If
such agreement is terminated or no longer includes the
concept of Restricted Subsidiaries and it is not replaced by
a successor agreement containing such concept in connection
with a refinancing, then the definition of such term at the
time of such termination shall be the definition of such
term hereunder.
"SEC" shall have the meaning given to such term in
Section 8.2.
"Securities" shall have the meaning given to such
term in Section 6.3.
"Securities Act" shall have the meaning given to
such term in Section 8.2.
"Security Documents" shall mean, collectively, the
Pledge Agreement, the Guaranty Agreement and all other
agreements and documents executed and delivered pursuant to
the foregoing and any and all renewals, extensions and
modifications of any of the foregoing and any and all
substitutions therefor.
"Security Interests" shall mean the Liens granted
to Lender pursuant to the Loan Documents.
"Senior Nonmonetary Default" shall have the
meaning given to such term in Section 14.4.
"Senior Payment Default" shall have the meaning
given to such term in Section 14.4.
"Specified Senior Debt" means (i) all Parent's
Senior Debt under Parent's primary bank credit facility
existing from time to time and (ii) other issue of Parent's
Senior Debt having a principal amount of at least
$10,000,000.
"Stated Rate" shall mean the lesser of (i) twelve
percent (12%) per annum or (ii) the Maximum Lawful Rate.
"Stock Price" shall mean a per share price for
Parent Common Stock equal to $7.31, as such price may be
adjusted from time to time pursuant to Section 14.5.
"Subsidiary" shall mean any Person in which
Borrower directly or indirectly owns one hundred percent
(100%) of the stock or other equity interest therein,
expressly excluding Joint Ventures.
"Withdrawal Liability" shall mean liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
Section I.2 Lender's Discretion. Whenever the terms
"satisfactory to," "determined by," "acceptable to," "shall
elect," "shall request," "consented to", "approved by" or similar
terms are used in this Agreement or any of the other Loan
Documents to apply to Lender, except as otherwise specifically
provided herein or therein, such terms shall mean satisfactory
to, determined by, acceptable to, at the election of, requested
by, consented to, or approved by as applicable, Lender, in its
sole discretion.
Section I.3 Approval in Writing. Any consent or
approval to be given by Lender hereunder shall not be effective
and shall not be deemed given unless in writing, duly executed
and delivered by Lender.
Article II
LOAN AND TERMS OF PAYMENT
Section II.1 Loan. Subject to the terms and
conditions set forth in the Loan Documents and in reliance upon
the representations and warranties of Borrower contained herein,
Lender agrees to make one or more advances to Borrower (each, an
"Advance" and collectively, the "Advances") in an aggregate
amount not to exceed Ten Million Dollars ($10,000,000), which
together shall constitute the Loan. Borrower's obligation to pay
the principal of, and interest on, the Loan shall be evidenced by
the Note. Borrower shall not be entitled to reborrow any portion
of the Loan which is repaid or prepaid.
Section II.2 Interest.
(a) Borrower agrees to pay interest in respect of
the unpaid principal amount of the Loan from the date of a
cash Advance until such Advance is repaid (whether by
acceleration, optional or mandatory prepayment, Conversion
or otherwise), at a rate per annum equal to the Stated Rate.
(b) During a Default Rate Period, the Obligations
shall bear interest at the Default Rate.
(c) Accrued (and theretofore unpaid) interest
shall be payable (i) quarterly in arrears on each Quarterly
Payment Date, (ii) upon any repayment or prepayment (on the
amount repaid or prepaid), (iii) at maturity (whether by
acceleration or otherwise) and, (iv) after maturity, upon
demand. Notwithstanding the foregoing, Lender may at any
time elect, in its sole discretion, to defer the payment of
such interest (or any portion thereof) by accruing and
compounding interest quarterly.
(d) Interest shall be computed on the basis of a
year consisting of 365 days and charged for the actual
number of days during the period for which the interest
accrues on the Loan.
(e) At least fifteen (15) Business Days prior to
each day on which a payment of interest would be required to
be made in accordance with this Section 2.2, Lender shall
deliver to Borrower a written notice indicating whether
Lender elects to receive the interest payment in cash or to
defer the payment of interest. In the event that Borrower
fails to receive such notice fifteen (15) Business Days
prior to any such interest payment date, Lender shall be
deemed to have elected to defer the payment of interest.
Section II.3 Prepayments; Payments.
(a) Borrower shall have the right to prepay the
Loans, without premium or penalty, in whole or in part at
any time and from time to time.
(b) In addition to other mandatory repayments,
and subject to Section 11.4 hereof, Borrower shall be
required to repay the entire outstanding principal balance
and all accrued but unpaid interest on the Loan on the
Maturity Date.
(c) Except as provided in Section 2.3(d) and (e)
hereinbelow, on each Joint Venture Distribution Date,
Borrower shall pay to Lender an amount equal to one hundred
percent (100%) of any Joint Venture Distributions as a
mandatory repayment of principal and accrued interest on the
outstanding Loan until such principal and accrued interest
is repaid in full.
(d) Upon written request of Borrower and the
approval of Lender, Borrower may retain Joint Venture
Distributions which it may use for the purposes permitted in
the Cash Collateral Agreement; provided, that Olympus shall
make a reasonable determination of the net collateralization
of the Loan relative to all of Borrower's Joint Venture
interests and may condition its approval of such retention
by Borrower on the establishment of a cash collateral
reserve in a reasonable amount (the "Cash Collateral
Account"), which shall serve as additional security for the
Loan, pursuant to a cash collateral agreement with Lender
(the "Cash Collateral Agreement") to allow Lender adequate
protection for repayment of the Loan. Withdrawal rights for
Borrower from the Cash Collateral Account will be specified
in the Cash Collateral Agreement.
(e) Borrower may upon written notice to Lender,
retain an amount of Joint Venture Distributions equal to any
cash interest required to be paid by Borrower pursuant to
this Agreement and for any taxes for which Borrower is
liable, provided that any such amounts shall be retained by
Borrower with recourse and such written notice shall specify
in reasonable detail the relevant terms of request to retain
such amounts.
(f) To the extent that, at any time, there is no
outstanding Indebtedness owed under the Loan, all Joint
Venture Distributions shall be made to Borrower and Borrower
shall be permitted to pay such amounts to Parent either to
repay Indebtedness owed by Borrower to Parent or as a
dividend.
(g) Any reserve accounts established pursuant to
this Section 2.3 shall be invested in money market accounts
pursuant to instructions from the Borrower and shall accrue
interest thereon.
Section II.4 Conversion into Parent Common Stock.
Lender may elect, at any time and from time to time, in its sole
and absolute discretion, to convert all or any portion of the
principal amount of the Loan into Parent Common Stock, pursuant
to Article XIV of this Agreement.
Section II.5 Payments After Event of Default. Any
provision of the Loan Documents to the contrary notwithstanding,
all payments received by Lender during the existence of an Event
of Default may be applied to the Obligations in such manner as
Lender may elect.
Section II.6 Method of Payment; Good Funds; Net
Payments.
(a) All payments to be made by Borrower to Lender
pursuant to the Loan Documents shall be made in Dollars in
immediately available funds by wire transfer to an account
of Lender, as designated by Lender.
(b) Whenever any payments to be made hereunder or
under any other Loan Document shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable
at the applicable rate during such extension.
(c) All payments made by Borrower hereunder or
under any Loan Document will be made without set-off
counterclaim or other defense.
Section II.7 Maximum Interest. Notwithstanding any
provision to the contrary herein contained, Lender shall not
collect a rate of interest on any obligation or liability due and
owing by Borrower to Lender in excess of the maximum contract
rate of interest permitted by applicable law. Lender and
Borrower have agreed that the interest laws of the State of Texas
shall govern the relationship among them, but in the event of a
final adjudication to the contrary, nunc pro tunc, Borrower shall
be obligated to pay to Lender only such interest as then shall be
permitted by the laws of the state found to govern the contract
relationship among Lender and Borrower. It is the intent of
Borrower and Lender in the execution of the Loan Documents and
all other agreements among them to contract in strict compliance
with applicable usury laws. In furtherance thereof, Borrower and
Lender stipulate and agree that none of the terms and provisions
contained in or pertaining to any of the Loan Documents or any
other agreements among the parties hereto or any of them shall
ever constitute or be construed to create (a) a contract to pay,
for the use, forbearance or detention of money, interest at a
rate or in an amount in excess of the maximum rate of interest
permitted by applicable law or (b) a charging of interest at a
rate or in an amount in excess of the maximum rate of interest
permitted by applicable law. Neither Borrower nor any other
obligor under the Loan Documents or any other agreements among
the parties hereto or any of them shall ever be required to pay
interest with respect to the Note or any of the other Obligations
at a rate in excess of the maximum interest rate that may be
lawfully charged under applicable law, and the provisions of this
paragraph shall control over all other provisions of the Loan
Documents or any other agreements among the parties hereto or any
of them which may be in apparent conflict herewith. Lender and
each other holder of the Note or any of the other Obligations
expressly disavows any intention to charge or collect excessive
unearned interest or finance charges in the event the maturity of
the Note or any of the other Obligations are accelerated. If the
maturity of the Note or any of the other Obligations shall be
accelerated for any reason or if the principal of the Note or any
of the other Obligations is paid prior to the end of the term of
such Obligations and as a result thereof the interest received
for the actual period of existence of such Obligations exceeds
the applicable maximum lawful rate, Lender shall, at its option,
either refund the amount of such excess or credit the amount of
such excess against the principal balance of the Obligations
outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of
such excess interest. If due to any circumstance whatsoever,
fulfillment of any of the provisions of the Loan Documents or any
other agreement among the parties hereto or any of them at the
time performance of such provision shall be due shall exceed the
maximum amount of interest permitted by applicable law, then,
automatically, the obligation to be fulfilled shall be modified,
reduced or eliminated to the extent necessary to limit such
interest to the maximum amount permitted by applicable law, and
if from any such circumstance Lender or any other holder of the
Note or other Obligations should ever receive anything of value
deemed interest by applicable law which would exceed the Maximum
Lawful Rate, such excessive interest shall be applied to the
reduction of the principal amount then outstanding on the Loan or
on account of the principal amount of any other indebtedness
secured by the Loan Documents and not to the payment of interest,
or if such excessive interest exceeds the unpaid principal
balance then outstanding thereunder and such other indebtedness,
such excess shall be refunded to Borrower or the agreement
creating such excess interest shall be cancelled, in which event
any and all penalties of any kind under applicable law as a
result of such excess interest shall be inapplicable. By
execution of this Loan Agreement, Borrower acknowledges that it
believes the Note and the other Obligations to be non-usurious
and agree that if, at any time, Borrower should have reason to
believe that the Note or any such other Obligation is in fact
usurious, Borrower shall give Lender notice of such condition and
Borrower agrees that Lender shall have ninety (90) days after
such notice in which to make appropriate refund or other
adjustment in order to correct such condition if in fact such
exists. All amounts paid or agreed to be paid in connection with
the Obligations which would under any law in effect and
applicable to Lender be deemed "interest" shall, to the extent
permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Obligations
and the Loan Documents. Any and all notices, pleadings or other
communications (whether oral or written) from Lender and/or any
agent, attorney or Affiliate of Lender to Borrower or any agent,
attorney or Affiliate of Borrower shall be conclusively deemed,
without the necessity of referencing this Loan Agreement and/or
this Paragraph, to incorporate, for all purposes, the terms and
provisions of this Paragraph. The term "applicable law" as used
in Paragraph shall mean the laws of the United States or
applicable state law, whichever laws allow the greater rate of
interest, as such laws now exist or may be changed or amended or
come into effect in the future.
Section II.8 Advances. Borrower shall notify Lender
not later than 10:30 a.m. ten (10) Business Days in advance of a
requested Advance, which notice shall specify the date on which
the Advance should be made and the payment instructions with
respect thereto. Lender agrees to make the requested Advance on
the date requested pursuant to the instructions provided to the
extent Borrower has provided Lender with reasonable assurances
that the Advance is permitted under Section 6.20. Each Advance
shall begin to accrue interest from and including the date of
funding.
Article III
CONDITIONS FOR CLOSING AND FUNDING OF LOAN
AND INITIAL ADVANCE
The obligation of Lender to make the initial Advance
shall be subject to the satisfaction on or before the Closing
Date of all of the conditions and the delivery of the documents
set forth below in this Article III, the form and substance of
each such document and the manner of the satisfaction of each
such condition to be satisfactory to Lender:
Section III.1 Representations and Warranties. On the
Closing Date and after giving effect to the initial Advance the
representations and warranties of the Borrower set forth in this
Loan Agreement and in any other of the Loan Documents shall be
true and correct in all material respects when made and at and as
of the time of the Closing, except to the extent that such
representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall
continue to be true and correct as of such earlier date.
Section III.2 Delivery of Documents. The following
shall have been delivered to Lender, each duly authorized and
executed:
(a) all of the Loan Documents, which shall be in
form and content acceptable to Lender.
(b) certificates representing all of the equity
interests of Borrower in any Joint Ventures and a signed,
undated stock power duly executed in blank for each such
certificate, or UCC-1 financing statements in connection
with the pledge of any such equity interests that are
uncertificated;
(c) a certificate of incumbency for Borrower;
(d) a certificate of existence and good standing
for Borrower and any initial Subsidiaries in the states in
which Borrower or any such Subsidiary is organized and
qualified to do business;
(e) certified copies of the articles of
incorporation and bylaws, and all amendments thereto, of
Borrower and any initial Subsidiary;
(f) certified copies of resolutions adopted by
the board of directors of Borrower and any initial
Subsidiary authorizing the execution by Borrower and such
Subsidiary of the Loan Documents to which each is a party
and the consummation of the transactions contemplated
therein; and
(g) such other documents, certificates, consents
and waivers as Lender may request and evidence that all
other actions necessary or, in the opinion of Lender,
desirable have been taken.
Section III.3 Security Interests. All filings and
actions necessary or, in the opinion of Lender, desirable to
perfect and maintain the Security Interests purported to be
created by the Loan Documents as valid and perfected Liens in the
Property covered thereby, subject only to Permitted Liens, shall
have been filed or taken and confirmation thereof received by
Lender.
Section III.4 Performance; No Default. Each of the
Borrower and any initial Subsidiaries shall have performed and
complied with all agreements and conditions contained in the Loan
Documents to be performed or complied with by Borrower or such
Subsidiary prior to or at the Closing.
Section III.5 Approval of Loan Documents and Security
Interests. The approval and/or consent shall have been obtained
(and shall remain in effect) from each Governmental Body and all
other Persons whose approval or consent is necessary or required
to enable Borrower or any initial Subsidiary to (i) enter into
and perform their respective obligations under the Loan
Documents, (ii) grant to Lender the Security Interests and
(iii) consummate the Loan.
Section III.6 Additional Items.
(a) No litigation, inquiry, judgement, injunction
or restraining order shall be pending, entered or threatened
(including any proposed statute, rule or regulation) which
has a reasonable likelihood of being adversely determined
and, if adversely determined, would reasonably be expected
to have a Material Adverse Effect on (i) the business,
assets, operations, condition (financial or otherwise) or
prospects of Borrower, (ii) Borrower's ability to perform
its obligations under the financing agreements or (iii) the
rights and remedies of Lender.
(b) There shall not have occurred any change, or
development or event involving a prospective change, which
in either case in the reasonable opinion of Lender could
have a Material Adverse Effect on (i) the business,
operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower, or
(ii) the rights and remedies of Lender.
(c) Lender shall not have become aware of any
material adverse information with respect to (i) the
business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower,
(ii) Borrower's ability to perform its obligations under the
financing agreements or (iii) the rights and remedies of
Lender.
(d) There shall exist no event of default (or
condition which would constitute an event of default with
the giving of notice or the passage of time) under any
capital stock, financing agreements, lease agreements or
other contracts of Borrower.
(e) All filings and other actions required to
create and perfect a first priority security interest with
respect to assets owned by Borrower shall have been duly
made or taken, and all Collateral shall be free and clear of
other Liens, subject to Permitted Liens.
(f) Lender shall have determined that the
transactions contemplated hereby or entered into in
connection herewith, including without limitation, the
making of the Loan, do not violate and conflict with any
applicable law or regulation in any material respect.
The acceptance of the initial Advance shall constitute
a representation and warranty by Borrower and any initial
Subsidiary to the Lender that all conditions specified in this
Article III have been satisfied as of that time.
Article IV
CONDITIONS FOR FUTURE FUNDING COMMITMENTS
The obligations of Lender to make Advances subsequent
to the initial Advance hereunder in connection with contributions
by Borrower to each new Joint Venture shall be subject to the
satisfaction on or before the date of such Advance of all the
conditions and delivery of all the documents set forth in this
Article IV, the form and substance of each such document and the
manner of satisfaction of each such condition to be reasonably
satisfactory to Lender:
Section IV.1 Representations Bringdown. The
representations and warranties contained in Article VI of this
Agreement are true and correct in all material respects on and as
of the date of such Advance with the same effect as if made on
and as of such date, except to the extent such representation and
warranty expressly relates to a specific date, in which event it
shall be true and correct as of such specific date. The
representations and warranties contained in Article VII of this
Agreement are true and correct as of the date of such Advance
with the same effect as if made on and as of such date where any
untrue or incorrect representation and warranty could have a
Material Adverse Effect on the business, assets, operations or
condition, financial or otherwise of Parent.
Section IV.2 No Default; Compliance With Terms.
Borrower shall be in compliance with all other terms and
provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and
immediately after such Advance no Potential Default or Event of
Default shall have occurred and be continuing.
Section IV.3 Delivery of Documents.
(a) All filings and actions that are necessary, or in
the opinion of Lender, desirable to perfect and maintain a
Security Interest in Borrower's interest in the Joint Venture
with respect to which the Advance relates, as a valid and
perfected Lien in the Property covered thereby, subject only to
Permitted Liens, shall have been filed or taken, and Lender shall
have received confirmation thereof;
(b) Lender shall have received a certificate of
incumbency for Borrower; and
(c) Lender shall have received such legal opinions
(including opinions (i) from counsel to Borrower and its
Subsidiaries, and (ii) from such special and local counsel as may
be reasonably required by Lender, in each case reasonably
acceptable to Lender) dated the date of the Advance, addressed to
Lender addressing issues relating to the Security Interest
created in the Borrower's Joint Venture interest and any other
matters incident to the transactions contemplated hereby as
Lender may reasonably require.
Section IV.4 Additional Items. Each of the items set
forth in Section 3.6 shall be true and correct.
Article V
CONDITIONS FOR OTHER ADVANCES
The obligations of Lender to make Advances other than
those identified in Article III and Article IV hereunder shall be
subject to the satisfaction on or before the date of such Advance
of all the conditions and delivery of all the documents set forth
in this Article V, the form and substance of each such document
and the manner of satisfaction of each such condition to be
reasonably satisfactory to Lender:
Section V.1 Representations Bringdown. The
representations and warranties contained in Article VI of this
Agreement are true and correct in all material respects on and as
of the date of such Advance with the same effect as if made on
and as of such date, except to the extent such representation and
warranty expressly relates to a specific date, in which event it
shall be true and correct as of such specific date. The
representations and warranties contained in Article VII of this
Agreement are true and correct as of the date of such Advance
with the same effect as if made on and as of such date where any
untrue or incorrect representation and warranty could have a
Material Adverse Effect on the business, assets, operations or
condition, financial or otherwise of Parent.
Section V.2 No Default; Compliance With Terms.
Borrower shall be in compliance with all other terms and
provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and
immediately after such Advance no Potential Default or Event of
Default shall have occurred and be continuing.
Article VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Lender to make the Loan, Borrower
makes the following representations, warranties and agreements,
in each case after giving effect to the making of the Loan, all
of which shall survive the execution and delivery of this
Agreement and the Note and the making of the Loan; provided,
however, none of the representations and warranties contained in
this Article V shall be deemed to relate to any matters or
affairs derived from or based upon any activities, operations or
occurrences relating to any Joint Venture.
Section VI.1 Organization and Good Standing.
Borrower and each Subsidiary is duly organized, validly existing
and in good standing under the laws of the state of its
organization. Borrower and each Subsidiary has the requisite
power and authority to own, lease or otherwise hold the assets
owned, leased or otherwise held by it and to carry on its
business as presently conducted by it. Borrower and each
Subsidiary is in good standing and duly qualified to conduct
business as a foreign corporation, partnership or limited
liability company, as applicable, in every state of the United
States in which its ownership or lease of property or conduct of
business makes such qualification necessary.
Section VI.2 Authorization of Agreement; Binding
Obligation. Borrower has the requisite corporate power to
execute and to deliver this Agreement and the other Loan
Documents and to perform the transactions contemplated hereby and
thereby to be performed by it. The execution and delivery by
Borrower of this Agreement and the other Loan Documents and the
performance by it of the transactions contemplated hereby and
thereby to be performed by it have been duly authorized by all
necessary corporate action on the part of Borrower. This
Agreement and the other Loan Documents have been duly executed
and delivered by duly authorized officers of Borrower and
constitute valid and binding obligations of Borrower and each
Subsidiary that owns a Joint Venture interest that is a party
thereto, enforceable against such Person in accordance with the
terms hereof or thereof, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
Section VI.3 Required Consents. The execution and
delivery of this Agreement and the other Loan Documents by
Borrower does not, and the performance by Borrower of the
transactions contemplated hereby or thereby to be performed by it
will not (a) conflict with the certificate of incorporation or
bylaws, partnership agreement, operating agreement, or other
organizational documents, as applicable, of Borrower or any
Subsidiary, (b) conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation
or acceleration of any material obligation or to loss of a
benefit under, any material contract, permit, order, judgment or
decree to which Borrower or any Subsidiary is a party or by which
any of their properties are bound, (c) constitute a violation of
any law or regulation applicable to Borrower or any Subsidiary,
or (d) result in the creation of any lien, charge or encumbrance
upon any of Borrower's or any Subsidiary's assets except, in the
case of (a) through (d) hereof, for those that, individually or
in the aggregate, could not reasonably be expected to have a
material adverse effect (i) on the business, assets, financial
condition, prospects, financial projections, or results of
operations of Borrower and any Subsidiary taken as a whole or
(ii) on the ability of Borrower to perform on a timely basis any
material obligation under this Agreement or the other Loan
Documents or to consummate the transactions contemplated hereby
or thereby (each, a "Material Adverse Effect"). No consent,
approval, order or authorization of, or registration, declaration
or filing with, any Governmental Body is required to be obtained
or made by or with respect to Borrower in connection with the
execution and delivery of this Agreement or any of the other Loan
Documents by Borrower or the performance by Borrower of the
transactions contemplated hereby or thereby to be performed by
it.
Section VI.4 Financial Statements. The financial
statements to be delivered to Lender on or before ninety (90)
days from the Closing Date by or on behalf of Borrower present
fairly the financial condition and results of the operations of
Borrower as of the dates and for the periods indicated therein.
No material adverse change in the business, operations, property,
assets, liabilities, condition (financial or otherwise ) or
prospects of Borrower has occurred since the date of the last
financial statements delivered to Lender by or on behalf of
Borrower. All of the foregoing financial statements and balance
sheets, except as otherwise indicated therein, have been prepared
in accordance with GAAP.
Section VI.5 Absence of Undisclosed Liabilities.
Neither Borrower nor any Subsidiary has any Indebtedness for
Borrowed Money or Contingent Obligations except for those
permitted pursuant to Sections 10.1 and 10.4.
Section VI.6 Books of Account. The books, records
and accounts of Borrower accurately and fairly reflect, in
reasonable detail, the transactions and the assets and
liabilities of Borrower and each Subsidiary and do not contain
any material inaccurate information or omit any material
information necessary in order to make such books, records and
accounts, in light of the circumstances under which they were
prepared, not misleading. Neither Borrower nor any Subsidiary
has engaged in any transaction, maintained any bank account or
used any of the funds of Borrower or any Subsidiary except for
transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of
Borrower.
Section VI.7 Title to Property; Liens. Borrower and
each Subsidiary has good, valid and indefeasible title to all of
its material Property free and clear of all Liens, except
Permitted Liens. The Security Instruments create valid and
perfected Liens on the Property described therein, subject only
to Permitted Liens.
Section VI.8 Condition of Assets. All of the assets
of Borrower and each Subsidiary, if any, are in good operating
condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and
materially conform to all applicable laws, ordinances, codes,
rules and regulations, and permits relating to their
construction, use and operation.
Section VI.9 Insurance. Borrower and each Subsidiary
has insurance policies in full force and effect for such amounts
as are sufficient for material compliance with all requirements
of law and of all material agreements to which Borrower or any
Subsidiary is a party or by which any of them is bound. No event
relating to Borrower or any Subsidiary has occurred that can
reasonably be expected to result in a material retroactive upward
adjustment in premiums under any such insurance policies or that
is likely to result in a material prospective upward adjustment
in such premiums. Excluding insurance policies that have expired
and been replaced in the ordinary course of business, no
insurance policy has been cancelled within the last two years
and, to Borrower's knowledge, no threat has been made to cancel
any insurance policy of Borrower or any Subsidiary during such
period. No event has occurred, including, without limitation,
the failure by Borrower or any Subsidiary to give any notice or
information or Borrower or any Subsidiary giving any inaccurate
or erroneous notice or information, which limits or impairs the
rights of Borrower or any Subsidiary under any such insurance
policies. Borrower has provided Lender with true and complete
copies of all regularly prepared loss run reports as of the date
hereof.
Section VI.10 Conduct of the Business. Except as
permitted under Article X and except for the transactions
contemplated by the Loan Documents and the other documents
entered into between Borrower, Lender and Affiliates of Lender,
from its date of formation through the Closing Date for the
initial Advance or the date of any future Advance, as applicable,
neither Borrower nor any Subsidiary has entered into any material
transactions or conducted any material business.
Section VI.11 Litigation. There are no actions,
suits, arbitration proceedings or claims (whether or not
purportedly on behalf of Borrower or any Subsidiary) pending or,
to the best knowledge of Borrower, threatened, against Borrower
or any Subsidiary maintained by Borrower or any Subsidiary, at
law or in equity (i) with respect to any Loan Document or (ii)
which have a reasonable likelihood of being adversely determined
and which, if adversely determined, could have a material adverse
effect on the business, operations, Property, assets,
liabilities, condition (financial or otherwise) or prospects of
Borrower or any Subsidiary.
Section VI.12 Compliance With Law; Permits. Borrower
and each Subsidiary has complied with each law, judgment, order
and decree, including ERISA and environmental laws, of any
Governmental Body to which Borrower or any Subsidiary or their
business, operations, assets or properties is subject and is not
currently in violation of any of the foregoing, except where the
failure to so comply with or violation of any of the foregoing
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Borrower and each
Subsidiary owns, holds, possesses or lawfully uses in the
operation of its business all material licenses, permits,
authorizations and approvals (collectively, "Permits") which are
necessary to conduct the business of Borrower and each Subsidiary
as now conducted or for the ownership and use of its assets, free
and clear of all Liens and in compliance with all laws. Neither
Borrower nor any Subsidiary is in default, nor has Borrower or
any Subsidiary received any notice of any claim of default, with
respect to any such Permits. All such Permits are renewable by
their terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to
pay any amounts other than routine filing fees. None of such
Permits will be adversely affected by consummation of the
transactions contemplated hereby. No shareholder, director,
officer, employee or former employee of Borrower or any
affiliates of Borrower, or any other person, firm or corporation
owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits which Borrower or any Subsidiary
owns, possesses or uses in the operation of the business of
Borrower or any Subsidiary as now conducted.
Section VI.13 Taxes. (a) All Tax Returns (as defined
in paragraph (e) below) that are required to be filed on or
before the Closing Date by Borrower or any Subsidiary have been
duly filed on a timely basis under the statutes, rules or
regulations of each applicable jurisdiction. To the best
knowledge of Borrower, all such Tax Returns were complete and
accurate in all material respects. All Taxes reflected on such
returns as owed by Borrower or any Subsidiary have been paid,
whether or not such Taxes are disputed. Neither Borrower nor any
Subsidiary has executed or filed with the Internal Revenue
Service or any other taxing authority any agreement extending the
period for filing any Tax Return.
(b) No claim for assessment or collection of Taxes has
been asserted against Borrower or any Subsidiary. Neither
Borrower nor any Subsidiary is a party to any pending action,
proceeding or investigation by any Governmental Body for the
assessment or collection of Taxes nor does Borrower have
knowledge of any such threatened action, proceeding or
investigation.
(c) No waivers of statutes of limitation in respect of
any Tax Returns have been given or requested by Borrower or any
Subsidiary nor has Borrower or any Subsidiary agreed to any
extension of time with respect to a Tax assessment or deficiency.
No claim has ever been made by a Governmental Body in a
jurisdiction where Borrower or any Subsidiary does not currently
file Tax Returns that it is or may be subject to taxation by that
jurisdiction nor is Borrower aware that any such assertion of
jurisdiction is threatened. No security interests have been
imposed upon or asserted against any of the assets of Borrower or
any Subsidiary as a result of or in connection with any failure,
or alleged failure, to pay any Tax.
(d) Borrower and each Subsidiary has withheld and paid
all Taxes required to be withheld in connection with any amounts
paid or owing to any employee, creditor, consultant, independent
contractor or other third party.
(e) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean all federal, state, local, or foreign
income, payroll, employee withholding, unemployment insurance,
social security, sales, use, service, service use, leasing,
leasing use, excise, franchise, gross receipts, value added,
alternative or add-on minimum, estimated, occupation, real and
personal property, stamp, transfer, workers' compensation,
severance, windfall profits, environmental (including taxes under
Section 59A of the Code), or other tax of the same or of a
similar nature, including any interest, penalty, or addition
thereto, whether disputed or not. The term "Tax Return" means
any return, declaration, report, claim for refund, or information
return or statement relating to Taxes or any amendment thereto,
and including any schedule or attachment thereto.
Section VI.14 Conflicting Agreements. Borrower is not
in default under any agreement to which Borrower is a party or by
which Borrower or any of its Property is bound, the effect of
which default might have a material adverse effect on the
business operations, Property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower.
Section VI.15 Patents, Trademarks, Franchises, Etc.
Borrower owns or possesses all patents, trademarks, service
marks, trade names, copyrights, franchises and licenses, and
rights with respect thereto, necessary for the conduct of its
business as now conducted and as presently proposed to be
conducted, without any known conflict with the rights of others
and, in each case, free of any Lien other than Permitted Liens.
Section VI.16 Full Disclosure. No representation or
warranty contained herein and no certificate, information or
report furnished or to be furnished by Borrower in connection
with any of the Loan Documents or any of the transactions
contemplated thereby, contains or will contain a misstatement of
material fact, or omits or will omit a material fact required to
be stated in order to make the statements contained herein or
therein not misleading in the light of the circumstances under
which such statements were made. There is no fact known to
Borrower, or so far as Borrower presently reasonably can foresee,
which has not been expressly disclosed to Lender in writing, that
will materially adversely affect Borrower or its business,
operations, Property, assets, liabilities, condition (financial
or otherwise) or prospects or the ability of Borrower to
consummate the transactions and perform its obligations pursuant
to the Loan Documents, other than facts which generally are known
to the public and relating to Borrower's business generally.
Section VI.17 Employee Matters. None of the employees
of Borrower or any Subsidiary is subject to any collective
bargaining agreement and there are no strikes, work stoppages or
material controversies pending, or to the best knowledge of
Borrower, threatened between Borrower or any Subsidiary and any
of its respective employees, other than employee grievances
arising in the ordinary course of business which would not in the
aggregate be expected to have a material adverse effect on the
business, operations, Property, assets, liabilities, condition
(financial or otherwise) or prospects of Borrower and the
Subsidiaries taken as a whole.
Section VI.18 Other Indebtedness. Borrower has not
incurred and as of the Closing Date will not have incurred any
Indebtedness for Borrowed Money or any Contingent Obligations
other than the Indebtedness and Contingent Obligations permitted
by Sections 10.1 and 10.4.
Section VI.19 Possession of Franchises, Licenses, Etc.
Borrower and each Subsidiary possesses all franchises,
certificates, licenses, permits, and other authorizations from
each Governmental Body, free from unduly burdensome restrictions,
that are necessary or advisable for the leasing, ownership,
maintenance and operation of its respective properties and
assets, and neither Borrower nor any Subsidiary is in violation
of any thereof in any respect.
Section VI.20 Use of Proceeds. Proceeds of the Loan
shall be used by Borrower solely for investment in the Joint
Ventures, for payment of interest on the Loan, if required to be
paid in cash, for investment in one or more Subsidiaries that
invest in Joint Ventures, and for Pursuit Costs.
Article VII
REPRESENTATIONS AND WARRANTIES OF PARENT
In order to induce Lender to make the Loan, Parent
makes the following representations, warranties and agreements,
in each case after giving effect to the making of the Loan, all
of which shall survive the execution and delivery of this
Agreement and the Note and the making of the Loan; provided,
however, none of the representations and warranties contained in
this Article VII shall be deemed to relate to any matters or
affairs derived from or based upon any activities, operations or
occurrences relating to any Joint Venture.
Section VII.1 Organization; Powers. Parent (i) is
duly organized, validly existing and in good standing under the
laws of the state of its organization, (ii) has the requisite
power and authority to own its property and assets and to carry
on its business as now conducted and as proposed to be conducted
and (iii) is qualified to do business in every jurisdiction where
such qualification is required, except where the failure so to
qualify would not have a Material Adverse Effect on its
condition, financial or otherwise. Parent has the corporate or
other equivalent power to execute, deliver and perform its
obligations under this Agreement and the other Loan Documents to
which it is or is to be a party. Parent has all requisite
corporate or other equivalent power, and has all material
governmental licenses, authorizations, consents and approvals
necessary to own its own assets and carry on its business as now
being or as proposed to be conducted.
Section VII.2 Authorization. The execution, delivery
and performance of this Agreement and the other Loan Documents to
which Parent is or is to be a party (i) have been duly authorized
by all requisite corporate or partnership, as applicable, and, if
required, stockholder or partner, as applicable, action on the
part of Parent and (ii) will not (A) violate (x) any Governmental
Rule or Parent's Certificate of Incorporation and By-laws or (y)
any provisions of any indenture, agreement or other instrument to
which Parent is a party, or by which Parent or any of its
properties or assets are or may be bound, (B) be in conflict
with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in (ii) (A) (y) above
or (C) result in the creation or imposition of any Lien, charge
or encumbrance of any nature whatsoever upon any property or
assets of Parent.
Section VII.3 Governmental Approvals. No registration
with or consent or approval of, or other action by, any
Governmental Body is or will be required in connection with the
execution, delivery and performance by Parent of this Agreement
or any other Loan Document to which it is, or is to be, a party
except such as have been made or obtained and are in full force
and effect. Other than routine authorizations, permissions or
consents which are of a minor nature and which are customarily
granted in due course after application or the denial of which
would not materially adversely affect the business, financial
condition or operations of Parent, Parent has all franchises,
licenses, certificates, authorizations, approvals or consents
from all national, state and local governmental and regulatory
authorities required to carry on its business as now conducted
and as proposed to be conducted.
Section VII.4 Enforceability. This Agreement and each
of the other Loan Documents to which Parent is a party
constitutes a legal, valid and binding obligation of Parent,
enforceable in accordance with their respective terms (subject,
as to the enforcement of remedies against Parent, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights against Parent, generally in
connection with the bankruptcy, reorganization or insolvency of
Parent or a moratorium or similar event relating to Parent.
Section VII.5 Financial Statements. Parent has
heretofore furnished to Lender an audited consolidated balance
sheet and statement of operations and changes in retained
earnings and cash flow as of and for the fiscal year ended
December 31, 1996 and 1997, and an unaudited consolidated balance
sheet and statement of operations and cash flow as of and for the
fiscal quarter ended March 31, 1998. All such balance sheets and
statements of operations and cash flow present fairly the
financial condition and results of operations of Parent and its
subsidiaries as of the dates and for the periods indicated. Such
financial statements and the notes thereto disclose all material
liabilities, direct or contingent, of Parent and its subsidiaries
as of the dates thereof which are required to be disclosed in the
footnotes to financial statements prepared in accordance with
GAAP. The financial statements referred to in this Section 7.5
have been prepared in accordance with GAAP. There has been no
material adverse change since March 31, 1998, in the businesses,
assets, operations, prospects or condition, financial or
otherwise, of Parent and its subsidiaries taken as a whole.
Section VII.6 Litigation; Compliance with Laws; etc.
(i) Except as disclosed in the Parent Annual
Report on Form 10-K for the fiscal year ended December 31,
1997, and any subsequent filings made by Parent pursuant to
the periodic reporting requirements of the SEC, there are no
actions, suits or proceedings at law or in equity or by or
before any Governmental Body now pending or, to the
knowledge of Parent, threatened against or affecting Parent,
or any of its subsidiaries or the businesses, assets or
rights of Parent, or any of its subsidiaries (x) which
involve this Agreement or any of the other Loan Documents or
any of the transactions contemplated hereby or thereby or
(y) as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined,
could, individually or in the aggregate, materially impair
the ability of Parent to conduct its business substantially
as now conducted, or materially and adversely affect the
businesses, assets, operations, prospects or condition,
financial or otherwise, of Parent, or impair the validity or
enforceability of, or the ability of Parent to perform its
obligations under, this Agreement or any of the other Loan
Documents to which it is a party.
(ii) Neither Parent nor any of its subsidiaries is
in violation of any Governmental Rule, or in default with
respect to any judgment, write, injunction, decree, rule or
regulation of any Governmental Body, where such violation or
default could result in a Material Adverse Effect. Without
limitation of the foregoing, Parent and each of its
subsidiaries have complied with all Environmental Laws where
any such noncompliance could have a Material Adverse Effect
on the business, assets, operations or condition, financial
or otherwise, of Parent or its subsidiaries. Neither Parent
nor any of its subsidiaries has received notice of any
material failure so to comply. Neither Parent's nor its
Subsidiaries' plants handle any Hazardous Materials in
violation of any Environmental Law where any such violation
could have a Material Adverse Effect on the business,
assets, operations or condition, financial or otherwise of
Parent. Parent is aware of no events, conditions or
circumstances involving contaminants or employee health or
safety that could reasonably be expected to result in
material liability on the part of Parent or any of its
subsidiaries.
Section VII.7 Title, etc. Parent and its subsidiaries
have good and valid title to its material properties, assets and
revenues (exclusive of oil, gas and other mineral properties on
which no development or production activities are being conducted
and commercially exploitable reserves have not been discovered),
free and clear of all Liens (as such term is defined in Parent's
Credit Agreement) except for the Permitted Liens (as such term is
defined in Parent's Credit Agreement).
Section VII.8 Federal Reserve Regulations; Use of
Proceeds. Neither Parent nor any of its subsidiaries is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying Margin Stock.
Section VII.9 Taxes. Parent and its subsidiaries have
filed or caused to be filed all material federal, state, local
and foreign tax returns which are required to be filed by them,
and have paid or caused to paid all taxes shown to be due and
payable on such returns or on any assessments received by any of
them, other than any taxes or assessments the validity of which
Parent or any of its subsidiaries is contesting in good faith by
appropriate proceedings, and with respect to which Parent or any
of its subsidiaries shall, to the extent required by GAAP, have
set aside on its books adequate reserves.
Section VII.10 Employee Benefit Plans. Parent and its
ERISA Affiliates are in compliance in all material respects with
the applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder. No ERISA
Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events, could materially
and adversely affect the financial condition and operations of
Parent and its ERISA Affiliates, taken as a whole. The present
value of all benefit liabilities under each Plan, determined on a
plan termination basis (based on those assumptions used for
financial disclosure purposes in accordance with Statement of
Financial Accounting Standards No. 87 of the Financial Accounting
Standards Board ("SFAS 87")), did not, as of the last annual
valuation date applicable thereto, exceed by more than $5,000,000
the value of the assets of such Plan, and the present value of
all benefit liabilities of all underfunded Plans, determined on a
plan termination basis (based on those assumptions used for
financial disclosure purposes in accordance with SFAS 87), did
not, as of the last annual valuation dates applicable thereto,
exceed by more than $5,000,000 the value of the assets of all
such underfunded Plans.
Section VII.11 Investment Company Act. Neither Parent
nor any of its subsidiaries is an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of
1940, as amended from time to time.
Section VII.12 Public Utility Holding Company Act.
Neither Parent nor any of its subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended from time to time.
Section VII.13 Environmental Matters.
(i) The properties of Parent and its subsidiaries
are in compliance, and in the last three years have been in
compliance, with all Environmental Laws, and all necessary
Environmental Permits have been obtained and are in effect,
and are not the subject of any pending or threatened
challenge by any Governmental Body or Person, except to the
extent that such noncompliance, challenge or failure to
obtain any necessary permits, in the aggregate, could not
reasonably be expected to result in a Material Adverse
Effect.
(ii) There have been no Releases or threatened
Releases at, from, under or proximate to its properties or
otherwise in connection with the operations of Parent or its
subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(iii) Neither Parent nor any of its subsidiaries
has received any notice of an Environmental Claim in
connection with its properties or the operations of Parent
or its subsidiaries or with regard to any Person whose
liabilities for environmental matters Parent or its
subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in
the aggregate, could reasonably be expected to result in
Material Adverse Effect, nor does Parent nor its
subsidiaries have reason to believe that any such notice
will be received or is being threatened.
(iv) Hazardous Materials have not been transported
from the properties of Parent or its subsidiaries, nor have
Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of such properties in a
manner that could give rise to liability under any
Environmental Law, nor has Parent nor any of its
subsidiaries retained or assumed any liability,
contractually, by operation of law or otherwise, with
respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation,
treatment, storage or disposal, or retained or assumed
liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
Section VII.14 No Material Misstatements. No
information, report (including any exhibit, schedule or other
attachment thereto or other document delivered in connection
therewith), financial statement, exhibit or schedule prepared or
furnished by Parent to Lender in connection with this Agreement
or any of the other Loan Documents or included therein contained
or contains any material misstatement of fact or omitted or omits
to state any material fact necessary to make the statements
therein, taken as a whole in the light of the circumstances under
which they were made, not misleading.
Article VIII
REPRESENTATIONS AND WARRANTIES OF LENDER
Lender makes the following representations, warranties
and agreements, all of which survive the execution and delivery
of this Agreement and the Note and the making of the Loan.
Section VIII.1 Investment Intent, etc. Lender is
acquiring the Note for its own account for investment and not
with a view to, or for sale or other disposition in connection
with any distribution thereof, not with any present intention of
selling or otherwise disposing of the same.
Section VIII.2 Sophistication; Financial Strength, etc.
Lender is an Accredited Investor (as that term is defined in
Rule 501 promulgated by the Securities Exchange Commission (the
"SEC")) under the Securities Act of 1933, as amended (the
"Securities Act"), with such knowledge and experience in business
and financial matters as to be capable of evaluting the merits
and risks of the investment contemplated to be made hereunder.
Lender has sufficient financial strength to hold the Note as an
investment and to bear the economic risks of such investment
(including possible loss of such investment) for an indefinite
period of time.
Section VIII.3 Restrictions on Transfer. Lender
understands that neither the Note nor the Parent Common Stock
into which the Note is convertible has been registered under the
Securities Act or the securities laws of any jurisdiction and
that neither the Note nor such Parent Common Stock may be offered
for sale, sold, transferred or otherwise disposed of unless
registered under the Securities Act and any applicable state
securities laws or Lender delivers to Borrower an opinion of
counsel reasonably acceptable to Borrower to the effect that the
proposed offer, sale, transfer or other disposition is exempt
from registration. Lender understands that Borrower has no
obligation to register the Note for distribution under the
Securities Act or the securities laws of any jurisdiction and
that Borrower has not agreed to comply with any exemption under
the Securities Act or the securities laws of any jurisdiction
respecting the resale or other transfer of the Note.
Article IX
AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that until all of
the Obligations are paid and performed in full:
Section IX.1 Legal Existence. Borrower and each
Subsidiary then holding a Joint Venture interest will maintain
its corporate or other legal existence and good standing in the
jurisdiction of its incorporation or organization and maintain
its good standing and authorization to do business in each
jurisdiction in which the failure so to qualify would have a
material adverse effect on the business, operations, Property,
assets, liabilities, condition (financial or otherwise) or
prospects of such Obligor.
Section IX.2 Inspection; Audit.
(a) Borrower will, upon forty eight (48) hours
notice, permit representatives of Lender to visit its
offices to (i) examine the books and records thereof
(including, without limitation, all accounts payable and
accounts receivable detail ledgers, all payroll records, all
bank statements and other documents, ledgers, statements or
instruments Lender may deem necessary or desirable) and
accountants' reports relating thereto, (ii) make copies or
extracts therefrom, (iii) discuss the affairs of Borrower
with the employees thereof, (iv) examine and inspect the
Property of Borrower, and (v) meet and discuss the affairs
of Borrower with its principal outside accountants.
(b) Upon forty eight (48) hours notice,
representatives of Lender shall have the right to conduct an
audit of the books of Borrower.
Section IX.3 Financial Statements and Other
Information. Borrower shall maintain a standard system of
accounting in accordance with GAAP and furnish to Lender:
(a) Financial Statements. As soon as available
and in any event within ninety (90) days after the close of
each year, a copy of each of the following for Borrower:
(1) the balance sheet as of the end of such year, and
(2) the statements of operations, cash flow, and
shareholder's equity for such year setting forth in each
case in comparative form the corresponding figures for the
preceding year (the balance sheet and the statements of
operations, cash flow and shareholder's equity hereinafter
are referred to as the "Basic Financial Statements"), all in
reasonable detail, and in each case, prepared by or on
behalf of Borrower and accompanied by an opinion of the
accountants (which accountants shall be an accounting firm
of nationally recognized standing, (hereinafter, the
"Accountants")), together with a certificate of the
accountants which shall state that (A) the examination by
the accountants in connection with such Basic Financial
Statements has been made in accordance with generally
accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing
procedures as were considered necessary in the
circumstances, (B) such Basic Financial Statements have been
prepared in accordance with GAAP and that such GAAP in
accordance with which such Basic Financial Statements were
prepared are consistent with those applied in prior fiscal
periods, and (C) such Basic Financial Statements fairly
present, in all material respects, the financial position of
Borrower and its Subsidiaries (on a consolidated basis).
(b) Audit Reports. Promptly upon receipt
thereof, a copy of each report, other than the reports
referred to in subsection (a) above, including any so-called
"Management Letter" or similar report, submitted to Borrower
by the Accountants in connection with any annual, interim or
special audit made by the Accountants of the books of the
Company.
(c) Notice of Defaults. Immediate written notice
if: (i) any Indebtedness of Borrower or any Subsidiary is
declared or shall become due and payable prior to its
declared or stated maturity, or called and not paid when
due, (ii) the holder of any note, or other evidence of
Indebtedness, certificate or security evidencing any such
Indebtedness of Borrower or any Subsidiary has the right to
declare such Indebtedness due and payable prior to its
stated maturity, or (iii) there shall occur and be
continuing a Potential Default or Event of Default,
accompanied by a statement of the Chief Financial Officer
setting forth what action Borrower proposes to take in
respect thereof.
(d) Notice of Suits, Adverse Events. Prompt
written notice of: (i) any citation, summons, subpoena,
order to show cause or other order naming Borrower or any
Subsidiary as a party to any proceeding before any
Governmental Body which may have a material adverse effect
on the business, operations, Property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower
or any Subsidiary, and include with such notice a copy of
such citation, summons, subpoena, order to show cause or
other order, (ii) any lapse or other termination of any
license, permit, franchise or other authorization issued to
Borrower or any Subsidiary by any Governmental Body,
(iii) any refusal by any Governmental Body to renew or
extend any license, permit, franchise or other authorization
of Borrower or any Subsidiary, and (iv) any dispute between
Borrower or any Subsidiary and any Governmental Body, which
lapse, termination, refusal or dispute, referred to in
clauses (ii), (iii) or (iv) above, has a reasonable
likelihood of being adversely determined and, if adversely
determined, could have a material adverse effect on the
business, operations, Property, assets, liabilities,
condition (financial or otherwise) or prospects of Borrower,
in each case excluding matters (A) relating solely to the
Joint Ventures and (B) with respect to which Borrower is
made aware by Lender.
(e) Other Information. Promptly upon request
therefor by Lender, such other information and reports
relating to the past, present or future financial condition,
operations, plans and projections of Borrower and the
Subsidiaries as Lender from time to time reasonably may
request.
Section IX.4 Insurance. Maintain or cause to be
maintained insurance against such other risks of the kinds and
amounts customarily insured against by similarly situated
companies and such other insurance as is required to conform with
the requirements of this Agreement. Such insurance shall, where
applicable, include but not be limited to, (a) workers'
compensation and employer's liability insurance and (b)
comprehensive general liability insurance. Lender shall be
provided a waiver of subrogation with respect to the insurance
described in the foregoing clause (a).
Section IX.5 Maintenance of Patents and Licenses.
Maintain in force at all times, all patents, trademarks, trade
names, licenses, approvals, permits and agreements necessary or
desirable for the continuation the businesses of Borrower and the
Subsidiaries.
Section IX.6 Payment of Taxes. Timely file all tax
returns required to be filed by or with respect to Borrower and
the Subsidiaries; timely pay all taxes that are due, or claimed
or asserted by any taxing authority to be due from or with
respect to Borrower and the Subsidiaries (other than taxes which
are contested in good faith and as to which adequate reserves
have been established in Borrower's and the Subsidiaries'
financial statements in accordance with GAAP); make all estimated
tax payments sufficient to avoid underpayment penalties; and
withhold and timely pay to the applicable taxing authority all
taxes required by all applicable laws to be withheld or paid in
connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
Section IX.7 Advances. Borrower and each Subsidiary
shall use any and all amounts received as an Advance solely for
the purposes of investing in a Joint Venture, except as otherwise
expressly permitted in this Loan Agreement.
Article X
NEGATIVE COVENANTS
Until all of the Obligations are paid and performed in
full Borrower will not:
Section X.1 Borrowing. Following the Closing Date,
create, incur or assume any liability for Indebtedness for
Borrowed Money owed by Borrower or any Subsidiary, except (a) the
Note, (b) trade debt incurred in the ordinary course of business,
(c) any guarantee of Indebtedness for Borrower Money of a Joint
Venture (which Indebtedness for Borrowed Money may be senior to
the Loan), and (d) any Indebtedness owed by Borrower to Parent
relating to (i) advances made by Parent to Borrower for the
payment by Borrower of taxes or interest on the Loan or in
connection with the making of a contribution by Borrower to a
Joint Venture following the drawdown by Borrower of all amounts
permitted or required to be drawn under the Loan and (ii)
reimbursement obligations owed by Borrower to Parent in
connection with letters of credit, surety bonds and other credit
enhancements provided by Parent on behalf of Borrower or any
Joint Venture; provided, that any such Indebtedness for Borrower
Money owed by Borrower to Parent shall be subordinated to the
Loan in a manner reasonably acceptable to Lender.
Section X.2 Liens. Create, incur, assume or suffer
to exist any Lien upon any of the Property of Borrower or any
Subsidiary, whether now owned or hereafter acquired, except
Permitted Liens.
Section X.3 Merger and Acquisition. Consolidate
with or merge into any Person, or acquire all or substantially
all of the capital stock or Property of any Person, other than
(a) any such activity relating to an acquisition of or investment
in a Joint Venture, and (b) the creation or acquisition of a
Subsidiary to the extent that either (i) the Borrower is not
liable for any Indebtedness for Borrowed Money of such
Subsidiary, except as permitted pursuant to Section 10.1 hereof,
or (ii) such Subsidiary is or is intended to be involved as a
partner, member or other equity interest owner in a Joint
Venture.
Section X.4 Contingent Liabilities. Assume,
guarantee, endorse, contingently agree to purchase, become liable
in respect of any letter of credit, or otherwise become liable
upon the obligation of any Person, except (i) liabilities arising
from the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business, (ii) any liability permitted under Section 10.1 and
(iii) any such liabilities in connection with or in support of
the activities of a Joint Venture, which such obligations may be
senior to the Loan.
Section X.5 Dividends and Other Distributions .
Declare or pay any dividends or apply any of its Property to the
purchase, redemption or other retirement of, or set apart any sum
for the payment of any dividends on, or make any other
distribution by reduction of capital or otherwise in respect of,
any shares of its capital stock, or pay or transfer to any
Affiliate any money or Property of Borrower, other than (a)
payments or transfers of money or Property to Joint Ventures
and/or to Subsidiaries in connection with Joint Ventures, and (b)
any amounts paid to Parent as a dividend or as a repayment on a
loan from Parent to Borrower to the extent and only to the extent
permitted by Sections 2.3(d), (e), or (f). Furthermore, Borrower
shall not declare, order, make, pay or set apart any sum for any
Restricted Junior Payment, except as permitted by the previous
sentence.
Section X.6 Scope of Borrower's Business. Borrower
shall not, and shall cause its Subsidiaries not to, engage in any
business activities other than the investment in Joint Ventures
and activities reasonably related to the Joint Ventures, except
to the extent that (i) Borrower or its Subsidiaries have made
other investments that are either funded entirely with capital
from Borrower, any Subsidiary, Parent or another affiliate of
Parent or (ii) Borrower and Parent have complied with the process
set forth in Article II of the Master Agreement.
Section X.7 Payments on Certain Indebtedness. Make
any voluntary or optional prepayment of any Indebtedness for
Borrowed Money permitted to exist under the terms of this Loan
Agreement except the Note and except as otherwise permitted by
Section 2.3(d), (e) or (f).
Section X.8 Amendment of Certificate of
Incorporation, etc. Amend, modify or waive any term or provision
of its certificate of incorporation or bylaws, unless required by
law.
Section X.9 Issuance, Conversion and Sale of Stock.
Issue or sell any shares of its capital stock or securities of
Borrower or any Subsidiary convertible into or exercisable for
any shares of its capital stock, or permit the conversion of any
shares of any class of its capital stock to shares of any other
class of its capital stock, except to the extent that following
any such transaction Parent directly or indirectly owns one
hundred percent (100%) of the outstanding shares or other equity
interests in Borrower and Borrower directly or indirectly owns
one hundred percent (100%) of the outstanding shares or other
equity interests in all Subsidiaries.
Section X.10 Transactions with Affiliates. Sell,
lease, assign, transfer or otherwise dispose of any Property of
Borrower or any Subsidiary to any Affiliate of Borrower or such
Subsidiary, or lease such Property, render or receive services or
purchase assets from any Affiliate, except for administrative
services in the ordinary course of business and on terms and
conditions substantially as favorable to Borrower or such
Subsidiary as would reasonably be obtained by Borrower or such
Subsidiary at that time in a comparable arm's-length transaction
with a Person other than an Affiliate.
Article XI
DEFAULT AND REMEDIES
Section XI.1 Events of Default. The occurrence of
any of the following shall constitute an Event of Default under
the Loan Documents:
(a) Default in Payment. If Borrower shall fail
to pay all or any portion of the Obligations within three
(3) Business Days after receipt by Borrower of written
notice from Lender that the same has become due and payable.
(b) Pledge. Borrower shall default in the due
performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to the
Security Documents.
(c) Breach of Covenants.
(i) If Borrower shall fail to observe or
perform any covenant or agreement made by Borrower
contained in Article IX or in Article X, and such
failure shall continue for a period of twenty (20) days
after notice thereof is given by Lender; or
(ii) If Borrower shall fail to observe or
perform any covenant or agreement made by Borrower in
any of the Loan Documents to which Borrower is a party,
and such failure shall continue for a period of thirty
(30) days after notice thereof is given by Lender.
(d) Breach of Representation and Warranty. Any
representation or warranty made by Borrower in or pursuant
to any of the Loan Documents to which Borrower is a party or
in any instrument or document furnished in compliance with
the Loan Documents shall prove to be false or misleading in
any material respect on the date as of which made, except to
the extent that such breach of representation or warranty
could reasonably be expected to have a material adverse
effect on the business, operations, Property, assets,
liabilities, conditions (financial or otherwise) or
prospects of Borrower and the Subsidiaries, taken as a
whole.
(e) Bankruptcy, Etc.
(i) If following the Closing Date, Borrower
shall (1) generally not be paying its debts as they
become due, (2) file, or consent by answer or otherwise
to the filing against it, of a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy or insolvency under the laws of any
jurisdiction, (3) make an assignment for the benefit of
its creditors, (4) consent to the appointment of a
custodian, receiver, trustee or other officer with
similar powers for itself or for any substantial part
of its Property, (5) be adjudicated insolvent or
(6) take corporate action for the purpose of any of the
foregoing.
(ii) If any Governmental Body of competent
jurisdiction shall enter an order appointing, without
consent of Borrower, a custodian, receiver, trustee or
other officer with similar powers with respect to
Borrower or with respect to any substantial part of the
Property belonging to Borrower, or if an order for
relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up
or liquidation of Borrower, or if any petition for any
such relief shall be filed against Borrower, and such
petition shall not be dismissed within thirty (30)
days.
(f) Judgments. If there shall exist final
judgments against Borrower which shall have been outstanding
for any period of thirty (30) days or more from the date of
the entry thereof and shall not have been discharged in full
or stayed pending appeal.
(g) Pledge or Encumbrance. If any of the
Property of Borrower shall be transferred, assigned, pledge
or encumbered in any respect except as expressly permitted
by the Loan Documents.
Section XI.2 Acceleration of the Obligations. Upon
the occurrence and during the continuance of any Event of
Default, Lender, at any time at its option, may declare all of
the Obligations due and payable, whereupon, the Obligations
immediately shall mature and become due and payable, all without
presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or any other notice, all of which hereby
are waived.
Section XI.3 Remedies on Default. If any of the
Obligations have been accelerated pursuant to Section 11.2,
Lender, at its option, may:
(a) Enforcement of Security Interests. Enforce
the rights and remedies under the Security Instruments in
accordance with their respective terms.
(b) Other Remedies. Enforce any of the rights or
remedies granted to Lender under any other Loan Document and
any other rights or remedies accorded to Lender at equity or
law, by virtue of statute or otherwise.
Section XI.4 Application of Funds. Any funds
received by Lender pursuant to the exercise of any rights
accorded to Lender pursuant to, or by the operation of any of the
terms of, any of, the Loan Documents after the acceleration of
the Obligations, including, without limitation, proceeds from the
sale of Collateral, shall be applied by the Lender first, to the
payment of the Obligations, in such order and manner as Lender
shall elect, and the balance, if any, shall be distributed to
Borrower.
Section XI.5 Reinstatement Following Event of
Default. To the extent that, following the occurrence of an
Event of Default, whether or not the Obligations have been
accelerated by Lender, Borrower cures and/or Lender waives all
Events of Default such that no Event of Default is in effect at
such time, then the acceleration of the Obligations shall be
reversed and all rights and obligations of Lender and Borrower
under this Agreement and all of the Loan Documents shall be
reinstated as of the time immediately preceding the occurrence of
the original Event of Default.
Section XI.6 Nonrecourse as to Borrower .
Notwithstanding anything to the contrary contained herein, Lender
agrees that the sole recourse of Lender against Borrower for the
payment or performance of the Obligations shall be to the
Collateral, and no other property or assets of Borrower shall be
subject to levy, execution, or other enforcement procedure for
the payment or performance of the Obligations; provided, however,
that the foregoing provisions shall not (a) constitute a release,
reduction, discharge, or waiver of any of the Obligations, (b)
limit the right of Lender to name Borrower as a party defendant
in any action or suit for judicial foreclosure and sale under
this Agreement, so long as no judgment in the nature of a
deficiency judgment shall be enforced again Borrower, except to
the extent of the Collateral, or (c) in any way be construed to
release, reduce, discharge, terminate, limit, or otherwise affect
or impair the Security Interests created under this Agreement or
any of the other Loan Documents. Notwithstanding the foregoing,
Borrower shall be fully liable to Lender for damages suffered by
Lender as a result of (x) the intentional or willful fraud or
misrepresentation by or on behalf of Borrower in connection with
the performance of its obligations under this Agreement and (y)
the intentional misapplication of any proceeds of the Collateral,
including, without limitation, the retention or application of
dividends, distributions, or interest in violation of Section
10.5 hereof. Lennder covenants not to sue Borrower with respect
to this Loan Agreement or any provisions hereof except as
provided in this Section 11.6.
Section XI.7 Nonrecourse as to Parent.
Notwithstanding anything to the contrary contained herein, Lender
agrees that: (a) Parent has appeared as a party to this Agreement
solely for the purpose of acknowledging the provisions of Article
XIV of this Agreement, (b) Lender shall have no recourse to
Parent for the payment or performance of any of the Obligations
identified herein, excluding any of Parent's obligations pursuant
to Article XIV and (c) Lender shall not sue Parent with respect
to this Loan Agreement or any provisions hereof, except for a
breach of Parent's obligations pursuant to Article XIV.
Section XI.8 Subordination. Lender acknowledges that
the lenders to certain of the Joint Ventures may require
guarantees or other similar commitments on the part of the
Borrower or the Subsidiaries and/or Liens upon certain assets of
the Borrower or the Subsidiaries, including the Borrower's direct
or indirect interest in the Joint Venture. Lender acknowledges
that such lenders may require that such guarantees and Liens be
senior to the Obligations and the Security Interests.
Section XI.9 Termination and Release. At any time
after the aggregate of all Advances hereunder exceeds $7,500,000,
Borrower may notify Lender in writing of its desire to terminate
Lender's commitment to make further Advances hereunder, at which
time such commitment will automatically terminate. Upon the
satisfaction of all Obligations hereunder and the termination of
Lender's commitment to make Advances, Lender, upon written
request for Borrower, shall release all Security Interests in the
Collateral.
Section XI.10 Restrictive Legends. The Note and the
certificates representing the Parent Common Stock into which the
Note is convertible shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND THUS MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND QUALIFIED FOR OFFERING AND
SALE UNDER APPROPRIATE STATE BLUE SKY OR SECURITIES
LAWS, OR UNLESS THE HOLDER HAS DELIVERED TO THE COMPANY
AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED.
Article XII
GENERAL PROVISIONS
Section XII.1 Role of Lender. Any term or condition
of any of the Loan Documents to the contrary notwithstanding,
Lender shall not have, and by Lender's execution and acceptance
of this Loan Agreement hereby expressly disclaims, any
obligation, liability or responsibility for the management,
conduct or operation of the business and affairs of Borrower or
any of the Collateral. Furthermore, Borrower acknowledges and
agrees that in no event shall Lender be deemed a mortgagee in
possession with regard to any of the Collateral by virtue of the
exercise of Lender's rights and remedies under this Loan
Agreement. Lender shall not have, has not assumed and, by
Lender's execution and acceptance of this Loan Agreement, hereby
expressly disclaims any liability or responsibility for the
payment or performance of any indebtedness or obligations of
Borrower or any owner of the Collateral, and no term or condition
of any of the Loan Documents shall be construed otherwise.
Borrower hereby expressly acknowledges that no term or condition
of any of the Loan Documents shall be construed so as to render
the relationship between Borrower and Lender other than that of
borrower, pledgor and lender. Borrower shall at all times
represent that the relationship between Borrower and Lender is
solely that of borrower and lender. Borrower hereby indemnifies
and agrees to hold Lender harmless from and against any cost,
expense or liability incurred or suffered by Lender as a result
of any assertion or claim of any obligation or responsibility of
Lender for the management, operation or conduct of the business
and affairs of Borrower or as a result of any assertion or claim
of any liability or responsibility of Lender for the payment or
performance of any indebtedness or obligation of Borrower.
Section XII.2 Defense of Actions. Lender may (but
shall not be obligated to) commence, appear in, or defend any
action or proceeding purporting to affect the Loan, the
Collateral, or the respective rights and obligations of Lender,
Borrower pursuant to the Loan Documents. Lender may (but shall
not be obligated to) pay all necessary expenses, including
reasonable attorneys' fees and expenses, incurred in connection
with such proceedings or actions, for which Borrower agree to
reimburse Lender upon demand and which amount shall be a part of
the Obligations.
Section XII.3 Indemnification; Subrogation. If Lender
is made a party to any litigation concerning the Note, any of the
other Loan Documents, any of the Collateral or any interest
therein, or the occupancy or use of any of the Collateral by
Borrower, then Borrower shall indemnify, defend and hold Lender
harmless from all liability by reason of said litigation
including reasonable attorneys' fees and expenses incurred by
Lender as a result of any such litigation, whether or not any
such litigation is prosecuted to judgment. Lender may employ an
attorney or attorneys to protect its rights hereunder, and in the
event of such employment following any breach by Borrower
hereunder, Borrower shall pay Lender reasonable attorneys' fees
and expenses incurred by Lender, whether or not an action is
actually commenced against Borrower by reason of its breach.
Section XII.4 Waiver of Offset. All sums payable
pursuant to the Loan Documents shall be paid without notice,
demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and
the obligations and liabilities under the Loan Documents shall in
no way be released, discharged or otherwise affected (except as
expressly provided therein) by reason of: (i) any damage to or
destruction of or any condemnation or similar taking of the
Collateral, or any part thereof; (ii) any restriction or
prevention of or interference by any third party with any use of
the Collateral or any part thereof; (iii) any title defect or
encumbrance or any eviction from the Collateral any part thereof
by superior title or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to Lender, or any action taken
with respect to the Obligations or the liens, mortgages, security
interests or assignments securing the Obligations by any trustee
or receiver of Lender, or by any court, in any such proceeding;
(v) any claim which Borrower has or might have against Lender; or
(vi) any default or failure on the part of Lender to perform or
comply with any of the terms hereof or of any other Loan
Document.
Section XII.5 Sole Benefit. This Loan Agreement is
intended solely for the benefit of the parties hereto, and no
tenants, shareholders, warrantholders, employees, vendors,
contractors, mechanic's lien claimants, purchasers or any other
third parties shall have any rights under this Loan Agreement,
nor be entitled to insist upon performance of the obligations
arising hereunder.
Section XII.6 Conflicts and Construction. The parties
acknowledge and agree that (a) each party and its counsel have
reviewed and revised this Loan Agreement and the other Loan
Documents and negotiated the terms and provisions thereof, and
this Loan Agreement and the other Loan Documents shall be
construed without the aid of any canon or rule of law requiring
interpretation against the party drafting or causing the drafting
of an agreement or portions of an agreement in question,
(b) Borrower have not received from Lender, and Lender has not
received from Borrower, any accounting, tax, legal, financial or
other advice, and (c) each party has relied solely upon the
advice of its own accounting, tax, legal, financial and other
advisors. The benefits, rights and remedies of Lender and the
security contained in or provided for in the Loan Documents are
cumulative; provided, however, that to the extent of any
conflict, inconsistency or ambiguity, if any, between the terms
and provisions of this Loan Agreement and the other Loan
Documents, the terms and provisions of this Loan Agreement shall
control unless the applicable provisions of the other Loan
Documents increase the rights of Lender, in which event, to the
maximum extent permitted by applicable law, the terms and
provisions of the other Loan Documents shall control.
Article XIII
EXPENSES AND INDEMNITIES
Section XIII.1 Attorney's Fees and Other Expenses.
Borrower agrees to pay to Lender on demand all reasonable fees
and expenses or other cost or expenses incurred by Lender in
connection with the enforcement or collection against Borrower of
any provision of any of the Loan Documents, whether or not suit
is instituted, including, but not limited to, such costs or
expenses arising from the enforcement or collection against
Borrower of any provision of any of the Loan Documents in any
state or Federal bankruptcy or reorganization proceeding.
Section XIII.2 Indemnity. Subject to the provisions of
Section 11.6 hereof, Borrower hereby agrees to indemnify and save
Lender harmless of and from the following, except to the extent
that any of the actions described below are found by a court of
competent jurisdiction in a final decision which no longer is
subject to appeal to be the result of the gross negligence or
willful or wanton misconduct of Lender:
(a) Brokerage Fees. The fees, if any, of brokers
and finders retained by Borrower or any Subsidiary.
(b) Securities Violations. Any loss, cost,
liability, damage or expense (including attorneys' fees and
expenses) incurred by Lender in investigating, preparing
for, defending against, or providing evidence, producing
documents or taking other action in respect of any commenced
or threatened litigation, administrative proceeding or
investigation under any Federal securities law or any other
securities law of any jurisdiction, or any regulation, or at
common law or otherwise, relating, either directly or
indirectly, to the transactions contemplated by the Loan
Documents.
(c) Operation of Collateral; Joint Venturers.
Any loss, cost, liability, damage or expense (including
attorneys' fees and expenses) incurred in connection with
the ownership, operation or maintenance of the Collateral,
the construction of Lender and Borrower as having the
relationship of joint venturers, or partners or the
determination that any of Lender or Borrower has acted as
agent for the others.
(d) Representations. Any loss, cost, liability,
damage or expense (including attorneys' fees and expenses)
suffered and/or incurred at any time by Lender as a result
of or in connection with any failure of the representations
and warranties made by Borrower in the Loan Documents to be
true and correct.
Article XIV
CONVERSION RIGHTS; EXIT FEE
Section XIV.1 Conversion.
(a) Obligation to Convert Debt. Lender may, in
its sole and absolute discretion, elect to convert all
outstanding Obligations, or any portion thereof, from debt
into Parent Common Stock. Parent and Lender each agree, in
the event Lender notifies Parent of its election to effect a
conversion in accordance with Section 2.4 and this Article
XIV (a "Conversion"), to take all corporate actions
necessary to cause such a Conversion subject to the
Conversion Limitations set forth in Section 14.2.
(b) Conversion Price. In connection with any
Conversion, Lender will receive the number of shares of
Parent Common Stock derived in accordance with the following
formula:
Shares of Parent Common Stock = Obligations being
converted in accordance with Section 2.4, divided
by the Stock Price, subject to the Conversion
Limitations set forth in Section 14.2.
Any Obligations of Borrower that are converted to Parent
Common Stock by Lender pursuant to Section 2.4 and this
Article XIV shall immediately be deemed to have been
satisfied and extinguished and shall thereafter cease to
accrue interest.
Section XIV.2 Conversion Limitations. If at the time
of any Conversion the number of shares of Parent Common Stock to
be issued upon such Conversion, when added to the number of
shares of Parent Common Stock issued in any prior Conversion
would exceed Nineteen and Nine-Tenths Percent (19.9%) of the
aggregate number of shares of Parent Common Stock issued and
outstanding as of the Effective Date (the "19.9% Threshold"), the
number of shares of Parent Common Stock in excess of the 19.9%
Threshold shall not be issued. Instead, Parent shall pay to
Lender cash in an amount equal to the average of the Market Value
on the ten (10) trading days immediately prior to the date of
Conversion multiplied by 0.95 for each share of Parent Common
Stock in excess of the 19.9% Threshold.
Section XIV.3 Guaranteed Yield. No later than thirty
(30) days after the Final Payment Date, Borrower shall calculate
the Guaranteed Yield and the Payment Amount and pay to Lender the
amount by which the Guaranteed Yield exceeds the Payment Amount,
if any. Borrower shall deliver to Lender Borrower's
calculations, and Lender shall have the right to challenge any
such calculations.
Section XIV.4 Subordination. The obligation of Parent
to make any cash payment in connection with a conversion of the
Obligations pursuant to Section 2.4 and Article XIV (the "Payment
Obligations") shall be fully subordinated to Parent's Senior Debt
in accordance with the provisions of this Section 14.4. Parent
may not make any payments on account of the Payment Obligations
if there shall have occurred and be continuing a default in the
payment of principal of (or premium, if any) or interest on any
Specified Senior Debt, the payment of commitment or facility
fees, letter of credit fees or agency fees under any Specified
Senior Debt, or payments with respect to letter of credit
reimbursement arrangements with one or more lenders under the
credit or other agreement evidencing any Specified Senior Debt
when due (a "Senior Payment Default"). Following the occurrence
of an event of default (other than a Senior Payment Default)
under any Specified Senior Debt permitting the holders of such
Specified Senior Debt (or a trustee or agent on behalf thereof)
to accelerate the maturity thereof, or the occurrence of an event
which with the passage of time or the giving of notice, or both,
could become such an event of default (a "Senior Nonmonetary
Default") and, in each case, following the giving of notice
thereof to Parent in accordance with the terms governing the
relevant Specified Senior Debt (a "Blockage Notice"), Parent may
not make any payments on account of the Payment Obligations for a
period (a "Blockage Period") commencing on the date Parent
receives the Blockage Notice, and ending on the earliest of (i)
179 days after such date, (ii) the date, if any, on which such
Senior Nonmonetary Default is waived or otherwise cured and (iii)
the date, if any, on which such Blockage Period shall have been
terminated by written notice to Parent from the holders of the
relevant Specified Senior Debt (or a trustee or agent on behalf
thereof).
Upon any payment or distribution of assets of any kind
or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of Parent, whether voluntary or
involuntary, or upon bankruptcy, insolvency, receivership or
other proceedings, then and in such event, all principal, premium
(if any) and interest and all other amounts due or to become due
upon all Parent's Senior Debt shall first be paid in full before
the holders of the Payment Obligations shall be entitled to
receive or retain any assets so paid or distributed in respect of
the Payment Obligations (for principal, premium (if any),
interest or otherwise); and, upon any such dissolution or winding
up or liquidation or reorganization, any payment or distribution
of assets of any kind or character, whether in cash, property or
securities, that the holders of the Payment Obligations would be
entitled to, except as otherwise provided herein, shall be paid
by Parent or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or
distributions, or by the holders of the Payment Obligations if
received by them, directly and ratably to the holders of Parent's
Senior Debt, to the extent necessary to pay in full all Parent's
Senior Debt, after giving effect to any concurrent payment or
distribution to or for the holders of Parent's Senior Debt,
before any payment or distribution is made to the holders of the
Payment Obligations.
Each holder of Payment Obligations hereby irrevocably
authorizes and empowers (without imposing any obligation on) the
holders of Parent's Senior Debt (or any trustee or agent on
behalf thereof), under the circumstances set forth in the
immediately preceding paragraph, to demand, sue for, collect and
receive every such payment or distribution described therein and
give acquittance therefor, to file claims and proofs of claims in
any statutory or nonstatutory proceeding, to vote such Parent's
Senior Debt holder's ratable share of the full amount of the
Payment Obligations in its sole discretion in connection with any
resolution, arrangement, plan of reorganization, compromise,
settlement or extension and to take all such other action
(including, without limitation, the right to participate in any
composition of creditors and the right to vote such Parent's
Senior Debt holders' ratable share of the Payment Obligations at
creditors' meetings for the election of trustees, acceptances of
plans and otherwise), in the name of the holder of the Payment
Obligations, as such Parent's Senior Debt holder or its
representative may deem necessary or desirable for the
enforcement of these subordination provisions.
If any payment or distribution of assets of any kind or
character, whether in cash, property or securities, shall be
collected or received by any holder of the Payment Obligations
and such holder shall not be permitted under the terms of this
instrument to receive or retain such payment or distribution,
such holder shall forthwith turn over the same to Parent's Senior
Debt holders for their ratable benefit in the form received
(except for the endorsement or the assignment of such holder when
necessary) and, until so turned over, the same shall be held in
trust by such holder as the property and for the ratable benefit
of the Parent's Senior Debt holders.
Nothing contained in this Section 14.4, shall affect
any security interest which Lender may have in any subsidiary of
Parent.
Section XIV.5 Adjustment of Parent Common Stock and
Stock Price.
(a) In case Parent shall (i) pay a dividend or
make a distribution solely in shares of Parent Common Stock,
(ii) subdivide its outstanding shares of Parent Common Stock
into a greater number of shares of Parent Common Stock or
(iii) combine its outstanding shares of Parent Common Stock
into a smaller number of shares of Parent Common Stock, then
concurrently with the effectiveness of each such event, the
Stock Price in effect immediately prior thereto shall be
adjusted by multiplying the Stock Price in effect
immediately prior to such adjustment by a fraction of which
the numerator shall be the number of shares of Parent Common
Stock outstanding immediately prior to such adjustment and
the denominator shall be the number of shares of Parent
Common Stock outstanding immediately following such
adjustment. Such adjustment to the Stock Price shall be
made each time any such action described in this Section
14.5(a) shall occur.
(b) In case Parent issues rights or warrants to
all holders of Parent Common Stock entitling them to
subscribe for or purchase shares of Parent Common Stock at a
price per share less than Market Value the Business Day
immediately prior to the record date therefor, or in case
Parent shall issue to all holders of Parent Common Stock
other securities convertible into or exchangeable for Parent
Common Stock for a consideration per share of Parent Common
Stock deliverable upon conversion or exchange thereof less
than the Market Value on the Business Day immediately prior
to the record date therefor, the Stock Price in effect
immediately prior thereto shall be adjusted as provided
below so that the Stock Price therefor shall be equal to the
price determined by multiplying (A) the Stock Price in
effect immediately prior to such issuance by (B) a fraction
of which the denominator shall be the sum of (1) the number
of shares of Parent Common Stock outstanding on the date of
issuance of the convertible or exchangeable securities,
rights or warrants and (2) the number of additional shares
of Parent Common Stock offered for subscription or purchase,
or issuable upon such conversion or exchange, and of which
the numerator shall be the sum of (1) the number of shares
of Parent Common Stock outstanding on the date of issuance
of such convertible or exchangeable securities, rights or
warrants and (2) the number of additional shares of Parent
Common Stock which the aggregate offering price of the
number of shares of Parent Common Stock so offered would
purchase at the Market Value on the Business Day immediately
prior to the record date therefor. Such adjustment shall be
made whenever such convertible or exchangeable securities,
rights or warrants are issued, and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such securities. However,
upon the expiration of any right or warrant to purchase
Parent Common Stock, the issuance of which resulted in an
adjustment in the Stock Price pursuant to this Section
14.5(b), if any such right or warrant shall expire and not
have been exercised, the Stock Price shall be recomputed
immediately upon such expiration and effective immediately
upon such expiration shall be increased to the price it
would have been (but reflecting any other adjustments to the
Stock Price made pursuant to the provisions of this Section
14.5(b) after the issuance of such rights or warrants) had
the adjustment of the Stock Price made upon the issuance of
such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of
Parent Common Stock actually purchased upon the exercise of
any rights or warrants. No further adjustment to the Stock
Price shall be made upon exercise of any right, warrant,
convertible security or exchangeable security if any
adjustment shall have been made upon issuance of such
security.
Article XV
MISCELLANEOUS
Section XV.1 Notices. All notices and communications
under this Agreement shall be in writing and shall be
(i) delivered in person, (ii) sent by telecopy or telegraph, or
(iii) mailed, postage prepaid, either by registered or certified
mail, return receipt requested, or (iv) delivered by nationally
recognized overnight express carrier, addressed in each case as
follows:
If to Borrower: Stratus Ventures I Borrower L.L.C.
98 San Jacinto Blvd., Suite 2200
Austin, Texas 78701
Attn: William H. Armstrong, III
Telecopy: (512) 478-6340
with a copy to: John G. Amato
Freeport-McMoRan Inc.
1615 Poydras
New Orleans, Louisiana 70112
Telecopy: (504) 582-3513
If to Lender: Oly Lender Stratus, L.P.
c/o Olympus Real Estate Corporation
200 Crescent Court, Suite 1650
Dallas, Texas 75201
Attn: Hal R. Hall
Telecopy Number: (214) 740-7340
with a copy to: Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attn: Robert C. Feldman
Telecopy Number: (214) 746-7777
or to such other address or telecopy number, as to any of the
parties hereto, as such party shall designate in a written notice
to the other parties hereto. All notices sent pursuant to the
terms of this Section 15.1 shall be deemed received (i) if sent
by telecopy or telegraph, on the day sent if a Business Day, or
if such day is not a Business Day, then on the next Business Day,
(ii) if sent by overnight, express carrier, on the next Business
Day immediately following the day sent, or (iii) if sent by
registered or certified mail, on the third Business Day following
the day sent.
Section XV.2 Survival of Indemnity. The obligations
of Borrower to indemnify Lender with respect to the expenses,
damages, losses, costs and liabilities described in Section 13.2
shall survive the repayment of all amounts due under the Loan
Documents, the cancellation of the Note and the release and/or
cancellation of any and all of the Loan Documents, or the
foreclosure of any Liens on the Collateral.
Section XV.3 Further Assurances. From time to time,
Borrower shall execute and deliver to Lender such additional
documents as Lender may require to carry out the purposes of the
Loan Documents and to protect Lender's rights thereunder.
Section XV.4 Severability. In the event that any
provision of this Loan Agreement is deemed to be invalid by
reason of the operation of any law, this Loan Agreement shall be
construed as not containing such provision and the invalidity of
such provision shall not affect the validity of any other
provisions hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and
effect.
Section XV.5 Waiver. No delay on the part of Lender
in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, and no single or partial exercise of
any right, power or privilege hereunder shall preclude other or
further exercise thereof, or be deemed to establish a custom or
course of dealing or performance among the parties hereto, or
preclude the exercise of any other right, power or privilege.
Any failure of Lender to insist upon strict compliance with any
of the terms or conditions of this Loan Agreement or any of the
other Loan Documents shall not be deemed a waiver of the same or
any other term or condition of this Loan Agreement or the other
Loan Documents, and Lender may at any time thereafter insist upon
compliance with any and all such terms and conditions. No delay
or omission in the exercise of any right or remedy of Lender as a
result of a default by Borrower under this Loan Agreement or any
of the other Loan Documents shall be deemed a waiver of any such
right or remedy as a result of the same default or subsequent
defaults, nor shall any single or partial exercise thereof
preclude any other further exercise thereof or the exercise of
any other right or be deemed to establish a custom or course of
dealing or performance among the parties hereto, or preclude the
exercise of any other right, power or privilege. Any waiver of
rights and remedies of Lender or duties and obligations of
Borrower under this Loan Agreement or any of the other Loan
Documents shall be effective only if made in writing and duly
executed and delivered by Lender. No notice or demand given in
any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such
notice or demand.
Section XV.6 Entire Agreement; Modification. This
Loan Agreement and the other Loan Documents constitute the entire
agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements with respect to such
subject matter, written or oral. No modification or waiver of
any provision of any of the Loan Documents, or consent to any
departure by Borrower therefrom, shall be effective unless the
same shall be in writing, and then such waiver or consent shall
be effective only in the specific instance and for the purpose
for which given. No notice to or demand on Borrower in any case
shall entitle Borrower to any other or further notice or demand
in the same, similar or other circumstances.
Section XV.7 Captions. The headings in this Loan
Agreement are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof.
Section XV.8 Counterparts. This Loan Agreement may
be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.
Section XV.9 Successors and Assigns. This Loan
Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the
parties hereto.
Section XV.10 Remedies Cumulative. All rights and
remedies of Lender pursuant to this Loan Agreement, any other
Loan Documents or otherwise, shall be cumulative and non-
exclusive, and may be exercised singularly or concurrently.
Lender shall not be required to prosecute collection, enforcement
or other remedies against Borrower before proceeding against
Borrower, or to enforce or resort to any security, liens,
collateral or other rights of Borrower before proceeding against
any security, liens, collateral or other rights of any other
Obligor. One or more successive actions may be brought against
Borrower, either in the same action or in separate actions, as
often as Lender deems advisable, until all of the Obligations are
paid and performed in full.
Section XV.11 Time is of the Essence. Time is of the
essence of this Loan Agreement and the other Loan Documents.
Section XV.12 Survival of Representations and
Warranties. The representations and warranties contained in this
Loan Agreement and the other Loan Documents shall survive
termination, cancellation, expiration and completion of this Loan
Agreement and shall survive any transfer or assignment hereof.
Section XV.13 Arbitration.
(a) Borrower and Lender specifically agree that any
controversy, claim, or dispute arising out of this Agreement or
any of the other Loan Documents, or any alleged breach thereof,
shall be resolved exclusively by arbitration. Any arbitration
shall take place in Houston, Texas and be administered by the
Houston, Texas office of the American Arbitration Association
(the "AAA") in accordance with its Commercial Arbitration Rules
in effect at the time the arbitration is initiated (collectively,
the "Rules").
(b) As soon as a demand for arbitration shall be made
by either party, the AAA shall proceed to provide a list of
arbitrators from the Commercial Panel from which the parties
shall select a panel of three neutral arbitrators in accordance
with the Rules and normal procedures of the Houston, Texas office
of the AAA. If necessary, the AAA shall select some or all of
the arbitrators when it is authorized to do so under the Rules.
(c) The arbitration panel shall render a full,
complete, conclusive, and binding resolution of the dispute. The
arbitration award shall assess all reasonable attorneys' fees and
costs, including the costs of the arbitration and the
arbitrators' compensation, against the losing party. Judgment on
the award may be entered in any court having jurisdiction
thereof.
Section XV.14 APPLICABLE LAW. THE LOAN DOCUMENTS SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS AND
DECISIONS OF THE STATE OF TEXAS.
Section XV.15 VENUE. BORROWER HEREBY AGREES THAT ANY
STATE OR FEDERAL COURT LOCATED IN HARRIS COUNTY, TEXAS SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
LENDER AND BORROWER PERTAINING DIRECTLY OR INDIRECTLY TO ANY OF
THE LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. BORROWER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN
ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN,
AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE
SENT PURSUANT TO SECTION 15.1. BORROWER WAIVES ANY CLAIM THAT A
STATE OR FEDERAL COURT LOCATED IN HARRIS COUNTY, TEXAS IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE.
SHOULD BORROWER, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER
TO ANY SUMMONS, COMPLAINT, OR PROCESS OR PAPERS SO SERVED WITHIN
THE TIME PRESCRIBED BY LAW AFTER THE MAILING THEREOF, BORROWER
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN
SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE
OF FORUM FOR BORROWER SET FORTH IN THIS SECTION 15.15 SHALL NOT
BE DEEMED TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING BY LENDER OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section XV.16 WAIVER OF RIGHT TO JURY TRIAL. LENDER
AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER ANY OF THE LOAN DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON DIFFICULT
AND COMPLEX ISSUES, AND THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
Section XV.17 No Obligation to Renew. Borrower
acknowledges and agrees that the Loan is intended to be a six (6)
year loan only and that Lender has no obligation whatsoever,
express or implied, to extend the term of the Loan beyond the
Maturity Date. Borrower further agrees that in no event shall
any such obligation ever arise except in the event that Lender,
in Lender's sole discretion, shall elect to execute and deliver
to Borrower a written extension agreement (if any), which shall
be on such terms and conditions as may be required by Lender, in
Lender's sole discretion.
Section XV.18 STATUTE OF FRAUDS. THIS LOAN AGREEMENT
AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES PRIOR TO OR SUBSTANTIALLY CONTEMPORANEOUSLY HEREWITH
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS
THAT FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section XV.19 Debt Incurrence Limitation of Parent.
Parent covenants and agrees that until all of the Obligations are
paid and performed in full, Parent will not incur any Debt if,
immediately following the incurrence of such Debt and the
acquisition of any assets in connection therewith, the Coverage
Ratio would be less than 1.35 to 1.0.
This Loan Agreement has been executed and delivered by each
of the parties hereto by a duly authorized officer of each such
party on the date first set forth above.
BORROWER:
STRATUS VENTURES I BORROWER L.L.C.,
a Delaware limited liability company
By: Stratus Properties Inc.,
a Delaware corporation,
its sole member
By:/s/William H. Armstrong III
---------------------------
William H. Armstrong, III
President
PARENT:
STRATUS PROPERTIES INC.,
a Delaware corporation
By: /s/ William H. Armstrong III
----------------------------
William H. Armstrong, III
President
LENDER:
OLY LENDER STRATUS, L.P.,
a Texas limited partnership
By: Oly Fund II GP Investments, L.P.,
a Texas limited partnership,
its general partner
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By:/s/ Hal R. Hall
---------------
Hal R. Hall
Vice President
EXHIBIT 1
Borrower Capital Stock
All stock of Stratus Ventures I Borrower, L.L.C. is
held by Stratus Properties Inc., a Delaware
corporation, its sole member.
Table of Contents
page
Article I
DEFINITIONS AND DETERMINATIONS
1.1 Definitions......................................... 1
1.2 Lender's Discretion................................. 13
1.3 Approval in Writing................................. 13
Article II
LOAN AND TERMS OF PAYMENT
2.1 Loan................................................ 13
2.2 Interest............................................ 13
2.3 Prepayments; Payments............................... 14
2.4 Conversion into Parent Common Stock................. 15
2.5 Payments After Event of Default..................... 15
2.6 Method of Payment; Good Funds; Net Payments......... 15
2.7 Maximum Interest.................................... 15
Article III
CONDITIONS FOR CLOSING AND FUNDING OF LOAN
AND INITIAL ADVANCE
3.1 Representations and Warranties...................... 17
3.2 Delivery of Documents............................... 17
3.3 Security Interests.................................. 18
3.4 Performance; No Default............................. 18
3.5 Approval of Loan Documents and Security Interests... 18
3.6 Additional Items.................................... 18
Article IV
CONDITIONS FOR FUTURE FUNDING COMMITMENTS
4.1 Representations Bringdown........................... 20
4.2 No Default; Compliance With Terms................... 20
4.3 Delivery of Documents............................... 20
4.4 Additional Items.................................... 20
Article V
CONDITIONS FOR OTHER ADVANCES
5.1 Representations Bringdown........................... 21
5.2 No Default; Compliance With Terms................... 21
Article VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
6.1 Organization and Good Standing...................... 21
6.2 Authorization of Agreement; Binding Obligation...... 21
6.3 Required Consents................................... 22
6.4 Financial Statements................................ 22
6.5 Absence of Undisclosed Liabilities.................. 22
6.6 Books of Account.................................... 22
6.7 Title to Property; Liens............................ 23
6.8 Condition of Assets................................. 23
6.9 Insurance........................................... 23
6.10 Conduct of the Business............................. 23
6.11 Litigation.......................................... 23
6.12 Compliance With Law; Permits........................ 24
6.13 Taxes............................................... 24
6.14 Conflicting Agreements.............................. 25
6.15 Patents, Trademarks, Franchises, Etc................ 25
6.16 Full Disclosure..................................... 25
6.17 Employee Matters.................................... 25
6.18 Other Indebtedness.................................. 26
6.19 Possession of Franchises, Licenses, Etc............. 26
6.20 Use of Proceeds..................................... 26
Article VII
REPRESENTATIONS AND WARRANTIES OF PARENT
7.1 Organization; Powers................................ 26
7.2 Authorization....................................... 26
7.3 Governmental Approvals.............................. 27
7.4 Enforceability...................................... 27
7.5 Financial Statements................................ 27
7.6 Litigation; Compliance with Laws; etc............... 27
7.7 Title, etc.......................................... 28
7.8 Federal Reserve Regulations; Use of Proceeds........ 28
7.9 Taxes............................................... 28
7.10 Employee Benefit Plans.............................. 29
7.11 Investment Company Act.............................. 29
7.12 Public Utility Holding Company Act.................. 29
7.13 Environmental Matters............................... 29
7.14 No Material Misstatements........................... 30
Article VIII
REPRESENTATIONS AND WARRANTIES OF LENDER
8.1 Investment Intent, etc.............................. 30
8.2 Sophistication; Financial Strength, etc............. 30
8.3 Restrictions on Transfer............................ 30
Article IX
AFFIRMATIVE COVENANTS
9.1 Legal Existence..................................... 31
9.2 Inspection; Audit................................... 31
9.3 Financial Statements and Other Information.......... 31
(a) Financial Statements........................... 31
(b) Audit Reports.................................. 32
(c) Notice of Defaults............................. 32
(d) Notice of Suits, Adverse Events................ 32
(e) Other Information.............................. 33
9.4 Insurance........................................... 33
9.5 Maintenance of Patents and Licenses................. 33
9.6 Payment of Taxes.................................... 33
9.7 Advances............................................ 33
Article X
NEGATIVE COVENANTS
10.1 Borrowing........................................... 33
10.2 Liens............................................... 34
10.3 Merger and Acquisition.............................. 34
10.4 Contingent Liabilities.............................. 34
10.5 Dividends and Other Distributions................... 34
10.6 Scope of Borrower's Business........................ 34
10.7 Payments on Certain Indebtedness.................... 35
10.8 Amendment of Certificate of Incorporation, etc...... 35
10.9 Issuance, Conversion and Sale of Stock.............. 35
10.10 Transactions with Affiliates........................35
Article XI
DEFAULT AND REMEDIES
11.1 Events of Default................................... 35
(a) Default in Payment............................. 35
(b) Pledge......................................... 35
(c) Breach of Covenants............................ 36
(d) Breach of Representation and Warranty.......... 36
(e) Bankruptcy, Etc................................ 36
(f) Judgments...................................... 37
(g) Pledge or Encumbrance.......................... 37
11.2 Acceleration of the Obligations..................... 37
11.3 Remedies on Default................................. 37
(a) Enforcement of Security Interests.............. 37
(b) Other Remedies................................. 37
11.4 Application of Funds................................ 37
11.5 Reinstatement Following Event of Default............ 37
11.6 Nonrecourse as to Borrower.......................... 37
11.7 Nonrecourse as to Parent............................ 38
11.8 Subordination....................................... 38
11.9 Termination and Release............................. 38
11.10 Restrictive Legends................................ 38
Article XII
GENERAL PROVISIONS
12.1 Role of Lender...................................... 39
12.2 Defense of Actions.................................. 39
12.3 Indemnification; Subrogation........................ 39
12.4 Waiver of Offset.................................... 40
12.5 Sole Benefit........................................ 40
12.6 Conflicts and Construction.......................... 40
Article XIII
EXPENSES AND INDEMNITIES
13.1 Attorney's Fees and Other Expenses.................. 41
13.2 Indemnity........................................... 41
(a) Brokerage Fees................................. 41
(b) Securities Violations.......................... 41
(c) Operation of Collateral; Joint Venturers....... 41
(d) Representations................................ 41
Article XIV
CONVERSION RIGHTS; EXIT FEE
14.1 Conversion.......................................... 42
(a) Obligation to Convert Debt..................... 42
(b) Conversion Price............................... 42
14.2 Conversion Limitations.............................. 42
14.3 Guaranteed Yield.................................... 42
14.4 Subordination....................................... 42
14.5 Adjustment of Parent Common Stock and Stock Price... 44
Article XV
MISCELLANEOUS
15.1 Notices............................................. 45
15.2 Survival of Indemnity............................... 46
15.3 Further Assurances.................................. 46
15.4 Severability........................................ 46
15.5 Waiver.............................................. 46
15.6 Entire Agreement; Modification...................... 47
15.7 Captions............................................ 47
15.8 Counterparts........................................ 47
15.9 Successors and Assigns.............................. 47
15.10 Remedies Cumulative................................ 47
15.11 Time is of the Essence............................. 47
15.12 Survival of Representations and Warranties......... 48
15.13 Arbitration........................................ 48
15.14 APPLICABLE LAW..................................... 48
15.15 VENUE.............................................. 48
15.16 WAIVER OF RIGHT TO JURY TRIAL...................... 49
15.17 No Obligation to Renew............................. 49
15.18 STATUTE OF FRAUDS.................................. 49
15.19 Debt Incurrence Limitation of Parent............... 49
LOAN AGREEMENT
by and among
STRATUS VENTURES I BORROWER L.L.C.
as borrower,
OLY LENDER STRATUS, L.P.
as lender,
and
STRATUS PROPERTIES INC.
as parent
Dated as of May 22, 1998