EXECUTION
COUNTERPART
Exhibit 10.35
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of June 27, 2003, by and between
AIRCOMP L.L.C., a Delaware limited liability company ("BORROWER"), and WELLS
FARGO BANK TEXAS, NATIONAL ASSOCIATION ("BANK").
RECITALS
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Borrower has requested that Bank extend or continue credit to Borrower
as described below, and Bank has agreed to provide such credit to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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CREDIT TERMS
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SECTION 1.1. LINE OF CREDIT.
(a) LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including June 27, 2007, not to exceed at any time the aggregate
principal amount of One Million and No/00 Dollars ($1,000,000.00) ("LINE OF
CREDIT"), the proceeds of which shall be used to (i) refinance certain existing
indebtedness of Mountain Compressed Air, Inc., a Texas corporation ("MCA"), (ii)
provide working capital and for general corporate purposes of the Borrower, and
(iii) pay fees and expenses incurred in connection with the transactions
contemplated hereby. Borrower's obligation to repay advances under the Line of
Credit shall be evidenced by a promissory note substantially in the form of
EXHIBIT "A" attached hereto ("LINE OF CREDIT NOTE"), all terms of which are
incorporated herein by this reference.
(b) LIMITATION ON BORROWINGS. The aggregate amount of all outstanding
borrowings under the Line of Credit, to a maximum of the principal amount set
forth above, shall not at any time exceed the lesser of (i) $1,000,000.00 minus
the aggregate face amount of all outstanding Letters of Credit or (ii) the
Borrowing Base minus the aggregate face amount of all outstanding Letters of
Credit. All borrowings under the Line of Credit shall be in an amount of at
least $10,000.00. There will be no minimum amount required on the borrowings
under the Line of Credit if borrowed through Bank's credit sweep products.
(c) BASE BORROWINGS. Outstanding borrowings under the Line of Credit,
to a maximum of the principal amount set forth above, shall not at any time
exceed an aggregate of eighty percent (80%) of Borrower's Eligible Accounts
Receivable (the "BORROWING BASE"). All of the foregoing shall be determined by
Bank upon receipt and review of all collateral reports required hereunder and
such other documents and collateral information as Bank may from time to time
require. Borrower acknowledges that said Borrowing Base was established by Bank
with the understanding that, among other items, the aggregate of all returns,
rebates, discounts, credits and allowances for the immediately preceding three
(3) months at all times shall be less than five percent (5%) of Borrower's gross
sales for said period. If such dilution of Borrower's accounts for the
immediately preceding three (3) months at any time exceeds five percent (5%) of
Borrower's gross sales for said period, or if there at any time exists any other
matters, events, conditions or contingencies which Bank reasonably believes may
affect payment of any portion of Borrower's accounts, Bank, in its sole
discretion, may reduce the foregoing advance rate against Eligible Accounts
Receivable to a percentage appropriate to reflect such additional dilution
and/or establish additional reserves against Borrower's Eligible Accounts
Receivable.
As used herein, "Eligible Accounts Receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is more than sixty (60) days past due or
ninety (90) days from the invoice date;
(ii) that portion of any account for which there exists any
right of setoff, defense or discount (except regular discounts allowed
in the ordinary course of business to promote prompt payment) or for
which any defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state
or municipal government or of the United States government or any
political subdivision thereof (except accounts which represent
obligations of the United States government and for which the
assignment provisions of the Federal Assignment of Claims Act, as
amended or recodified from time to time, have been complied with to
Bank's satisfaction);
(iv) any account which represents an obligation of an account
debtor located in a foreign country, except to the extent any such
account, in Bank's determination, is supported by a letter of credit or
insured under a policy of foreign credit insurance, in each case in
form, substance and issued by a party acceptable to Bank;
(v) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of Borrower
including, without limitation, Business Venture Owners;
(vi) that portion of any account, which represents interim or
progress billings or retention rights on the part of the account
debtor;
(vii) any account which represents an obligation of any
account debtor when twenty percent (20%) or more of Borrower's accounts
from such account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor
which represents the amount by which Borrower's total accounts from
said account debtor exceeds twenty-five percent (25%) of Borrower's
total accounts; provided, however, such percentage may be increased if
(i) Bank, in Bank's sole discretion, approves of such increase and (ii)
Borrower insures against such increase with insurance in amounts
acceptable to Bank, in Bank's sole discretion;
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(ix) accounts with credit balances which have aged more than
ninety (90) days;
(x) any account in which services have not been rendered or
goods have not been shipped; or
(xi) any account deemed ineligible by Bank when Bank, in its
sole discretion, deems the creditworthiness or financial condition of
the account debtor, or the industry in which the account debtor is
engaged, to be unsatisfactory.
(d) LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to issue or cause
an affiliate to issue standby letters of credit for the account of Borrower
(each, a "LETTER OF CREDIT" and collectively, "LETTERS OF CREDIT"); provided
however, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Two Hundred Thousand and No/00 Dollars
($200,000.00). The form and substance of each Letter of Credit shall be subject
to approval by Bank, in its sole discretion. Each Letter of Credit shall be
issued for a term not to exceed three hundred sixty-five (365) days, nor an
expiration date subsequent to the maturity date of the Line of Credit unless
such Letter of Credit is collateralized with liquid assets acceptable to Bank in
Bank's sole discretion. The undrawn amount of all Letters of Credit shall be
reserved under the Line of Credit and shall not be available for borrowings
thereunder. Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit agreements, applications and any related
documents required by Bank in connection with the issuance thereof. Each drawing
paid under a Letter of Credit shall be deemed an advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however, that
if advances under the Line of Credit are not available, for any reason, at the
time any drawing is paid, then Borrower shall immediately pay to Bank the full
amount drawn, together with interest thereon from the date such drawing is paid
to the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit. In such event Borrower agrees
that Bank, in its sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing. If Borrower does not pay to Bank
the sums due for such drawings, the unpaid amount thereof shall bear interest
equal to the Base Rate (as defined in the Line of Credit Note) plus three
percent (3%) for each day from and including the date such drawing was paid by
Bank to the date of repayment by Borrower.
(e) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. Borrower may prepay principal on the Line of Credit without penalty on
one (1) business day's advance notice. Prepayments on the Line of Credit shall
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be in a principal amount of $10,000.00. There will be no minimum amount required
on prepayments of the Line of Credit paid through Bank's credit sweep product.
If at any time the outstanding aggregate unpaid principal amount of the Line of
Credit Note plus the sum of the issued and outstanding Letters of Credit exceeds
the Borrowing Base, the Borrower shall (i) immediately prepay the Line of Credit
loans in an aggregate principal amount equal to the excess, together with
interest on the principal amount paid accrued to the date of such prepayment and
(ii) if a Borrowing Base deficiency remains after prepaying all of the Line of
Credit loans because of the issued and outstanding Letters of Credit, the
Borrower shall pay to the Bank an amount equal to such Borrowing Base deficiency
to be held as cash collateral as provided in Section 1.1(f). The parties
understand and agree that all payments due and payable to the Bank under the
Line of Credit Note including all fees of Bank, will be auto-debited from
Borrower's checking account number 4945074375 held at Bank.
(f) CASH COLLATERAL ACCOUNT. Borrower shall maintain with Bank, and
Borrower hereby grants to Bank a security interest in, a non-interest bearing
deposit account over which Borrower shall have no control ("CASH COLLATERAL
ACCOUNT") and into which, upon an Event of Default, the proceeds of all
Borrower's accounts and other rights to payment in which Bank has a security
interest shall be deposited immediately upon an Event of Default, and if
requested by Bank, the Borrower shall deposit in the Cash Collateral Account an
amount in cash equal to the aggregate undrawn amount of all outstanding Letters
of Credit. Bank shall, and Borrower hereby authorizes Bank to, apply all such
proceeds immediately upon their receipt by Bank to repayment of all obligations
of the Borrower relating to the aggregate amount of the undrawn Letters of
Credit. Borrower's Cash Collateral Account number held at Bank is 4945080273.
SECTION 1.2. TERM LOAN.
(a) TERM LOAN. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make a loan to Borrower in the principal amount of Eight
Million and No/100 Dollars ($8,000,000.00) ("TERM LOAN"), the proceeds of which
shall be used to (i) refinance certain existing indebtedness of MCA, (ii)
provide working capital for general corporate purposes of the Borrower, and
(iii) pay fees and expenses incurred in connection with the transactions
contemplated hereby. Borrower's obligation to repay the Term Loan shall be
evidenced by a promissory note substantially in the form of EXHIBIT "B" attached
hereto ("TERM NOTE"), all terms of which are incorporated herein by this
reference. The initial advance of the Term Loan shall not exceed the lesser of
(i) sixty percent (60%) of the orderly liquidation value or (ii) eighty percent
(80%) of the forced liquidation value of Borrower's equipment.
(b) REPAYMENT. Principal and interest on the Term Loan shall be repaid
in accordance with the provisions of the Term Note.
(c) PREPAYMENT. If the Term Loan bears interest at the Base Rate (as
defined in the Term Note), then Borrower may prepay the Term Loan without
penalty on one (1) business days' advance notice. Such prepayments of the Term
Loan shall be in the principal amount of $100,000.00. If the Term Loan bears
interest at LIBOR (as defined in the Term Note), then Borrower may prepay the
Term Loan without penalty (except as provided in the Term Note) on three (3)
business days' advance notice. All prepayments will include interest accrued to
the prepayment date and all other fees and expenses due. All prepayments will be
applied in the inverse order of payment due on the Term Loan.
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SECTION 1.3. DELAYED DRAW TERM LOAN.
(a) DELAYED DRAW. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including December 27, 2004, not to exceed the aggregate principal amount
of One Million and No/100 Dollars ($1,000,000.00) ("DELAYED DRAW TERM LOAN"),
the proceeds of which shall be used to finance the purchase of capital equipment
and planned upgrade of currently owned equipment, and which shall be converted
on December 27, 2004, to a term loan, as described more fully below and in the
Delayed Draw Term Note. Advances on the Delayed Draw Term Loan are not to exceed
one hundred percent (100%) of invoices on the purchases of miscellaneous parts
and labor. Borrower's obligation to repay advances under the Delayed Draw Term
Loan shall be evidenced by a promissory note substantially in the form of
EXHIBIT "C" attached hereto ("DELAYED DRAW TERM NOTE"), all terms of which are
incorporated herein by this reference.
(b) LIMITATION ON BORROWINGS. Notwithstanding any of the other
provisions of this Agreement, the aggregate amount of all outstanding borrowings
under the Delayed Draw Term Loan shall not at any time exceed a maximum
principal amount of One Million and No/100 Dollars ($1,000,000.00). If the
Delayed Draw Term Loan bears interest at the Base Rate (as defined in the
Delayed Draw Term Note), then borrowings under the Delayed Draw Term Loan shall
be in amounts of at least $10,000.00. If the Delayed Draw Term Loan bears
interest at LIBOR (as defined in the Delayed Draw Term Note), then borrowings
under the Delayed Draw Term Loan shall be in amounts in multiples of at least
$100,000.00.
(c) BORROWING AND REPAYMENT. Borrower may from time to time during the
period in which Bank will make advances under the Delayed Draw Term Loan borrow
and partially or wholly repay (subject to prepayment provisions contained herein
and in the Delayed Draw Term Note) its outstanding borrowings, provided that
amounts repaid may not be reborrowed, subject to all the limitations, terms and
conditions contained herein; provided however, that the total outstanding
borrowings under the Delayed Draw Term Loan shall not at any time exceed the
maximum principal amount available thereunder, as set forth above. All unpaid
interest on the Delayed Draw Term Note as of December 31, 2004 shall be paid on
such date. Thereafter, principal and interest on the outstanding principal
balance of the Delayed Draw Term Note shall be due and payable in ten (10)
installments of principal plus interest each, the first nine (9) of which shall
be in a principal amount equal to five percent (5%) of the outstanding principal
balance on the Delayed Draw Term Note at the end of the business day on December
31, 2004, plus interest each, with the first such installment being due and
payable on March 31, 2005, the next eight (8) such installments being paid on
the last day of each June, September, December and March thereafter, and the
tenth (10th) and final installment, if not sooner paid, shall be due and payable
on June 27, 2007, in an amount equal to the entire balance of principal and
accrued and unpaid interest then due and owing on the Delayed Draw Term Note.
Notwithstanding the foregoing, Borrower shall make annual pre-payments of the
outstanding principal balance of this Note equal to fifty percent (50%) of Free
Cash Flow (as such is defined in Section 5.7 hereof), commencing August 27,
2004, and such pre-payments shall be applied in inverse order of maturities,
first to prepayment of the Term Note, then to this Note, and then to any
outstanding balance under the Line of Credit Note, as applicable.
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(d) PREPAYMENT. If the Delayed Draw Term Loan bears interest at the
Base Rate (as defined in the Delayed Draw Term Note), then Borrower may prepay
the Delayed Draw Term Loan without penalty on one (1) business day's advance
notice. Such prepayments of the Delayed Draw Term Loan will be at least
$100,000.00. If the Delayed Draw Term Loan bears interest at LIBOR (as defined
in the Delayed Draw Term Note), then Borrower may prepay the Delayed Draw Term
Loan without penalty (except as provided in the Delayed Draw Term Note) on three
(3) business days' notice. Such prepayments of the Delayed Draw Term Loan will
be at least $100,000.00. All prepayments will include interest accrued to the
prepayment date and all other fees and expenses due. All prepayments will be
applied in the inverse order of payments due on the Delayed Draw Term Loan.
SECTION 1.3B WELLS FARGO COMMERCIAL MASTERCARD CUSTOMER AGREEMENT
The Wells Fargo Bank, National Association hereby agrees to provide
credit to Borrower, not to exceed Fifty Thousand and No/100 Dollars $50,000.00,
pursuant to the terms of the Wells Fargo Commercial MasterCard Customer
Agreement dated as of June 27, 2003 (the "WELLS FARGO COMMERCIAL MASTERCARD
Agreement"), a copy of which is attached hereto as EXHIBIT "E".
SECTION 1.4. INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Line of Credit
shall bear interest at a rate of interest set forth in the Line of Credit Note.
The outstanding principal balance from the Term Loan shall bear interest at the
rate of interest set forth in the Term Note. The outstanding principal balance
of the Delayed Draw Term Note shall bear interest at the rate of interest set
forth in the Delayed Draw Term Note.
(b) COMPUTATION AND PAYMENT. Interest shall be computed on the basis of
a 360-day year, actual days elapsed, unless such calculation would result in a
usurious rate, in which case interest shall be computed on the basis of a
365/366-day year, as the case may be, actual days elapsed. Interest shall be
payable at the times and place set forth in each promissory note or other
instrument or document required hereby.
(c) UNUSED COMMITMENT FEES. Borrower shall pay to Bank a fee equal to
three-eighths of one percent (.375%) per annum (computed on the basis of a
360-day year, actual days elapsed) on the average daily unused amount of the
Delayed Draw Term Note, which fee shall be calculated on a quarterly basis by
Bank and shall be due and payable by Borrower quarterly in arrears within ten
(10) days after each billing is sent by Bank and at December 31, 2004. The
Borrower shall pay to Bank a fee equal to one-half of one percent (.50%) per
annum (computed on the basis of the 360-day year, actual days elapsed) on the
average daily unused amount of the Line of Credit Note, which fee shall be
calculated on a quarterly basis by Bank and shall be due and payable by Borrower
quarterly in arrears within ten (10) days after each billing is sent by Bank and
at maturity of the Line of Credit Note.
(d) UPFRONT FEES. Borrower shall pay to Bank an Upfront Fee equal to
Twenty Thousand and No/100 Dollars ($20,000.00) with respect to the Line of
Credit which fee shall be due and payable by Borrower on the earlier to occur of
(i) June 30, 2003 or (ii) the date hereof, regardless of whether the Line of
Credit, the Term Loan and/or any Delayed Draw Term Loan closes. Borrower shall
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pay to Bank an Upfront Fee equal to Eighty Thousand and No/100 Dollars
($80,000.00) with respect to the Term Loan which fee shall be due and payable by
Borrower on the earlier to occur of (i) June 30, 2003 or (ii) the date hereof,
regardless of whether the Line of Credit, the Term Loan, and/or any Delayed Draw
Term Loan closes. The Borrower shall pay to Bank an Upfront Fee equal to Ten
Thousand and No/100 Dollars ($10,000.00) with respect to the Delayed Draw Term
Loan which fee shall be due and payable by Borrower on the earlier to occur of
(i) June 30, 2003, or (ii) the date hereof, regardless of whether the Line of
Credit, the Term Loan, and/or any Delayed Draw Term Loan closes. The parties
hereto agree and understand that the Upfront Fees described herein are
non-refundable.
(e) LETTER OF CREDIT FEES. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to the Base Rate margin (as defined in
the Line of Credit Note) at the time of issuance thereof multiplied by the face
amount thereof, subject to a minimum issuance fee of $750.00 per Letter of
Credit, each such fee being payable at issuance and on each anniversary date
thereafter and (ii) fees upon the payment or negotiation of each drawing under
any Letter of Credit and fees upon the occurrence of any other activity with
respect to any Letter of Credit (including without limitation, the transfer,
payment, negotiation, amendment or cancellation of any Letter of Credit)
determined in accordance with Bank's standard fees and charges then in effect
for such activity, including, without limitation, amendment fees of $175.00 per
amendment, and courier fees of $25.00 each.
SECTION 1.5. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all principal, interest and fees due under each credit subject hereto by
charging Borrower's deposit account number 4945074375 with Bank or any other
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.6. COLLATERAL.
As security for all indebtedness of Borrower to Bank and its affiliates
subject hereto, Borrower hereby grants to Bank security interests of first
priority in all Borrower's assets in all Borrower's obligations hereunder and
all other Loan Documents executed herewith, including the Wells Fargo Commercial
MasterCard Customer Agreement ("Card Agreement"), as Card Agreement may be
amended, modified, restated, extended, increased, and/or rearranged from time to
time (collectively the "INDEBTEDNESS"). Borrower and Bank acknowledge and agree
that the above sentence does not give Borrower the right to extend or increase
its obligations to Bank beyond the ones created on even date herewith without
MILLC's and MCA's written approval. As additional security for the Indebtedness
of Borrower to Bank hereunder, Borrower shall cause MCA and M-I L.L.C., a
Delaware limited liability company ("MILLC"), to grant to Bank security
interests of first priority in all of MCA's and MILLC's respective outstanding
limited liability company interests of the Borrower. Borrower shall also cause
MCA and MILLC (collectively referred to herein as the "BUSINESS VENTURES
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OWNERS") to evidence any loans made by the Business Venture Owners as of the
date hereof, which constitute inter-company debt, by requiring the parties to
such loans to execute a promissory note in form and substance satisfactory to
Bank and to collaterally assign to and deliver possession of such promissory
notes to Bank. It is agreed and understood that the grant to Bank of security
interests in said promissory notes shall be at all times a first priority
security interest therein.
All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds of trust and other documents as
Bank shall reasonably require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.
SECTION 1.7. GUARANTIES. All indebtedness of Borrower to Bank hereunder
shall be guaranteed unconditionally, independently, and in addition to the
guaranty described in Subsection (iii) hereof by (i) MCA in an amount equal to
its pro-rata ownership interest in Borrower at the time of closing; (ii) MILLC
in an amount equal to its pro-rata ownership interest in Borrower at the time of
Closing; and jointly and severally by (iii) Munawar and Jayne Hidayatallah,
jointly and severally, in a principal amount not to exceed Two Million and
No/100 Dollars ($2,000,000.00).
SECTION 1.8. SUBORDINATION OF DEBT. All obligations of Borrower to the
Business Venture Owners shall be subordinated in right of repayment to all
obligations of Borrower to Bank, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to Bank.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a limited liability company,
duly organized and existing and in good standing under the laws of the State of
Delaware, and is qualified or licensed to do business (and is in good standing
as a foreign corporation, if applicable) in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify or
to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, security agreement, pledge agreement, guaranty
agreement, the Wells Fargo Commercial MasterCard Commercial MasterCard
Agreement, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "LOAN
DOCUMENTS") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
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SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Business Venture Agreement of
Borrower, or result in any breach of or default under any contract, obligation,
indenture or other instrument to which Borrower is a party or by which Borrower
may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated June 27, 2003, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. Other than that certain Subordination
Agreement dated as of even date herewith, between Borrower, Bank and the
Business Venture Owners (the "SUBORDINATE AGREEMENT"), there is no agreement,
indenture, contract or instrument to which Borrower is a party or by which
Borrower may be bound that requires the subordination in right of payment of any
of Borrower's obligations subject to this Agreement to any other obligation of
Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
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SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. The Borrower has no real
property.
SECTION 2.13. NO CONSENT. The Borrower's execution, delivery and
performance of each of the Loan Documents, including this Agreement, to which
the Borrower is a party do not require the consent or approval of any other
person or entity which have not been obtained including, without limitation, any
regulatory authority or governmental body of the United States of America or any
state thereof or any political subdivision of United States of America or any
state thereof.
SECTION 2.14. QUALIFIED COMMERCIAL LOAN. This Loan is a Qualified
Commercial Loan as defined in Chapter 306 in the Texas Finance Code. This Loan
is not secured by real property and is not to be used for the purpose of
financing a business licensed by the Motor Vehicle Board of the Texas Department
of Transportation under Section 4.01(a), Texas Vehicle Commission (Article
4413(36), Vernon's Statute). Borrower has been advised by the Bank to seek the
advice of an attorney and an accountant in connection with this Qualified
Commercial Loan and Borrower has had the opportunity to seek the advice of an
attorney and an accountant of Borrower's choice in connection with this
Qualified Commercial Loan.
ARTICLE III
-----------
CONDITIONS
----------
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
10
(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, each of the documents described on EXHIBIT "D" attached
hereto.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank on the assets, liabilities, financial condition,
business, operations or affairs of the Borrower or any guarantor, individually
or taken as a whole, different from those reflected in the latest financial
statements delivered to the Bank or from the facts represented or warranted in
any Loan Document, or (ii) the ability of the Borrower or any guarantor
hereunder to carry out its business as of the Closing Date or as proposed as of
the Closing Date to be conducted or meet their obligations under the Loan
Documents on a timely basis.
(d) INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance covering all real
property collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific hazards
affecting any such real property as may be required by governmental regulation
or Bank; and all containing provisions that such policies cannot be canceled
without thirty (30) days' prior notice to Bank.
SECTION 3.2. CONDITIONS OF EACH BORROWING. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:
(a) COMPLIANCE. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
11
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time and with two (2)
business days' notice, to inspect, audit and examine such books and records, to
make copies of the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail satisfactory to Bank:
(a) not later than ninety (90) days after and as of the end of each
fiscal year, an audited financial statement of Borrower and MCA, on a
consolidated basis, prepared by a recognized independent accounting firm
acceptable to Bank, to include consolidated balance sheets and consolidated
statements of income, retained earnings and cash flow, in accordance with
generally accepted accounting principles, together with an unqualified opinion
and such firm's covenant compliance calculations certified by a senior financial
officer;
(b) not later than one hundred and twenty days (120) days after and as
of the end of each fiscal year, audited consolidating financing statement of M-I
Group, ("M-I GROUP" is defined as M-I L.L.C., M-I Holdings B.V., M-I Drilling
Fluids Canada, Inc., M-I Holdings (BVI Ltd., and M-I Drilling Fluids de Mexico,
S.A. de C.V.), prepared by a recognized independent accounting firm acceptable
to Bank, to include consolidating balance sheets and consolidating statements of
income, retained earnings and cash flow, in accordance with generally accepted
accounting principles;
(c) not later than one hundred and twenty days (120) days after and as
of the end of each fiscal year, unaudited consolidated financing statement of
MILLC, prepared by MILLC, to include consolidated balance sheets and
consolidated statements of income, retained earnings and cash flow, in
accordance with generally accepted accounting principles unaudited financing
statement for MILLC consolidated;
(d) no later than thirty (30) days after the end of each calendar
month, unaudited consolidated financial statements of Borrower, prepared by
Borrower, to include consolidated balance sheets and consolidated statements of
income, retained earnings and cash flow, in accordance with generally accepted
accounting principles;
(e) no later than thirty (30) days after the end of each calendar
month, collateral reports describing in reasonable detail the then location of
all collateral;
(f) no later than sixty (60) days after and as of the end of each
fiscal year of Borrower prepared management reports to include forecasts of
Borrower's consolidated balance sheets and consolidated statements of income,
retained earnings and cash flow, in accordance with generally accepted
accounting principles;
12
(g) not later than twenty-five (25) days after and as of the end of
each calendar month, a Borrowing Base certificate, attached hereto as SCHEDULE
I, listing ineligible accounts receivable, an aged listing of accounts
receivable and accounts payable, and a reconciliation of accounts, and not later
than twenty-five (25) days after and as of each calendar month, a list of the
names and addresses of all Borrower's account debtors;
(h) not later than ninety (90) days after each calendar year, the
financial statements of Munawar Hidayatallah and Jayne Hidayatallah, signed and
certified to the Bank on Bank's form and such individuals' income tax returns
for such years; provided, however, if either Munawar Hidayatallah and/or Jayne
Hidayatallah file for an extension on their income tax returns, then such party
filing for such extension shall (i) contemporaneously deliver to Bank a copy of
the preliminary income tax return which such party delivers to the Internal
Revenue Service for such years and (ii) contemporaneously deliver to Bank the
final tax return it delivers to the Internal Revenue Service for such years.
(i) contemporaneously with each annual and monthly financial statement
of Borrower required hereby, a certificate of the senior financial officer and
chief executive officer of Borrower that said financial statements are accurate
and that there exists no Event of Default nor any condition, act or event which
with the giving of notice or the passage of time or both would constitute an
Event of Default; and
(j) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request Schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
13
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$25,000.00 in the aggregate.
SECTION 4.9. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $100,000.00
ARTICLE V
---------
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in
fixed assets in any fiscal year in excess of an aggregate of $1,250,000.00.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
and (b) any other liabilities of Borrower existing as of, and disclosed to Bank
on SCHEDULE 5.3 attached hereto; provided, however, Borrower may incur
additional indebtedness to the extent that (i) the aggregate additional
indebtedness is less than $100,000.00 or (ii) the additional indebtedness is
unsecured, and (iii) the additional indebtedness is expressly subordinated to
Bank, (iv) the proposed terms and conditions of incurring such additional
indebtedness is satisfactory to Bank in Bank's sole discretion, and (v) Borrower
is able to demonstrate pro forma compliance with all covenants set forth herein.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
14
SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances
to or investments in any person or entity, except any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.7. DISTRIBUTIONS. Declare or pay any distributions to its
members or the Business Venture Owners either in cash or any other property, nor
redeem, retire, repurchase or otherwise acquire any membership interest in
Borrower; provided, however, the Borrower may distribute funds or repay
inter-company loans so long as (a) Total Funded Debt to EBITDA is less than 1.5
to 1.0, (b) the Fixed Charge Coverage Ratio is greater than 2.0 to 1.0, after
having taken into effect such distribution, (c) such payments or distributions
do not exceed fifty percent (50%) of Free Cash Flow and (d) no Event of Default
has occurred nor would occur as a result of making such payments. Free Cash Flow
is defined as trailing twelve (12) months EBITDA less the sum of (i) interest
payments, (ii) scheduled quarterly principal repayments of the Term Loan and
Delayed Draw Loan, (iii) taxes, (iv) the Change in Adjusted Working Capital, and
(v) capital expenditures other than those financed under the Delayed Draw Term
Note for the same measurement period. Change in Adjusted Working Capital is
defined as the Adjusted Working Capital of the most recent reporting period and
less the adjusted working capital of the previous year-end. Adjusted Working
capital is defined as (i) current assets (according to generally accepted
accounting principles) less (ii) cash and marketable securities less current
liabilities according to generally accepted accounting principles less (iii)
interest-bearing debt or obligations that are classified as current liabilities.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except any of the foregoing in favor of
Bank or which is existing as of, and disclosed to Bank in writing prior to, the
date hereof.
SECTION 5.9. LIMITATIONS ON LEASES. Create, incur, assume or permit to
exist any obligation for the payment of rent or hire or property of any kind
whatsoever under leases or lease agreements including, without limitation,
operating leases which will cause the aggregate amount of all payments made by
Borrower pursuant to all such leases or lease agreements to exceed $100,000.00
in any fiscal year.
SECTION 5.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any affiliate of Borrower unless such
transactions are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than Borrower would obtain in a
comparable arm's length transaction with a person not an affiliate.
15
SECTION 5.11. SALES AND LEASEBACKS. Except as contemplated by the
Business Venture Agreement dated as of June 27, 2003, between the Business
Venture Owners and Allis-Chalmers Corporation, a Delaware corporation (the
"BUSINESS VENTURE AGREEMENT"), enter into any arrangement, directly or
indirectly with any person whereby Borrower shall sale or transfer any of its
property, whether now or hereafter acquired, and whereby Borrower shall then or
thereafter make release as lessee such property or any part thereof or other
property which Borrower intends to use for substantially the same purpose or
purposes that the property is sold or transferred.
SECTION 5.12. LIENS. Create, incur, assume or suffer to exist any lien
upon any of its assets or revenues whether now owned or hereafter acquired,
other than (a) liens pursuant to any Loan Document, (b) liens existing on the
date hereof and listed on SCHEDULE 5.12 and any renewals or extensions thereof,
PROVIDED that the property covered thereby is not increased in any renewal or
extension of the obligations secured or benefited thereby if permitted by
SECTION 5.3, (c) liens for taxes not yet due or which are being contested in
good faith and by appropriate proceedings diligently conducted, if adequate
reserves with respect thereto are maintained on the books of the applicable
person or entity in accordance with generally accepted accounting principles,
(d) carriers', warehouseman's, mechanics', materialman's, repairman's or other
like liens arising in the ordinary course of business in respect of obligations
which are not overdue for a period of more than six (6) days or which are being
contested in good faith and by appropriate proceedings diligently conducted, as
adequate reserves with respect thereto are maintained on the books of the
Borrower, (e) easements, rights-of-way, restrictions, landlord's liens and other
similar encumbrances affecting real property which, in the aggregate, are not
material in amounts and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of Borrower; (f) purchase money liens not to exceed
$100,000.00 in the aggregate; and (g) liens to secure the additional
indebtedness of Borrower permitted pursuant to Section 5.3 hereof in an amount
not to exceed $100,000.00 in the aggregate.
SECTION 5.13. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein.
(a) Tangible Net Worth not at any time less than eighty-five percent
(85%) of Tangible Net Worth as of the date hereof plus seventy-five percent
(75%) of cumulative net income after the date hereof, excluding any fiscal
quarters in which net income is a negative, plus one hundred percent (100%) of
equity offerings after the date hereof, with "Tangible Net Worth" defined herein
as the aggregate of total members' equity plus subordinated debt less any
intangible assets.
(b) Fixed Charge Coverage Ratio not less than 1.1 to 1.0 for the twelve
(12) month period ending on the last day of each fiscal quarter, beginning with
fiscal quarter ending September 30, 2003 through and including the fiscal
quarter ending June 30, 2004, and 1.2 to 1.0 thereafter, with EBITDA defined
herein as net income plus cash interest charges, plus cash taxes, plus
depreciation, amortization and non-cash charges on a trailing twelve (12) month
basis and with "Fixed Charge Coverage Ratio" defined herein as (i) EBITDA less
capital expenditures (other than those funded through the Delayed Draw Term
Loan) through the proceeds additional equity interests divided by (ii) the
16
aggregate of total interest charges (excluding any applicable paid-in-kind
("PIK") charges), scheduled principal payments, (including payments on
inter-company notes, loans or debt), equipment lease payments (operating or
capital), cash distributions paid, and cash taxes paid for the same period.
Through the June 30, 2004 compliance date, EBITDA and the expenses set forth
herein will be annualized.
(c) Total Funded Debt to EBITDA Ratio not more than 4.5 to 1.0 through
and including December 31, 2003; 3.5 to 1.0 through and including June 30, 2004;
3.0 to 1.0 through and including December 31, 2005; and 2.5 to 1.0 thereafter,
with "Total Funded Debt to EBITDA Ratio" defined as Total Funded Debt divided by
twelve (12) trailing months EBITDA. "TOTAL FUNDED DEBT" is defined herein as all
interest-bearing obligations of Borrower with a secured or unsecured, senior or
subordinated period. Through the June 30, 2004 compliance date EBITDA will be
annualized to calculate the Total Funded Debt to EBITDA Ratio.
SECTION 5.14. SUBORDINATED DEBT. Borrower shall not pay any principal
or interest on the subordinated debt described in the Subordination Agreement
except as expressly permitted therein.
ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents and such failure
continues for a period of ten (10) days after the earlier of (i) notice thereof
being given by the Bank to the Borrower and the guarantors or (ii) such default
otherwise becoming known to the Borrower or the guarantors.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower, any
guarantor, or any other party under this Agreement or any other Loan Document
shall prove to be incorrect, false or misleading in any material respect when
furnished or made.
(c) Any default by Borrower or any guarantor in the performance of or
compliance with any obligation, agreement or other provision contained herein or
in any other Loan Document provided, however, that with respect to Sections 4.2,
4.3, 4.6 and 4.7 hereof, such default must continue unremedied for a period of
thirty (30) days after the earlier of (i) notice thereof being given by the Bank
to the Borrower and the guarantors or (ii) such default otherwise becoming known
to the Borrower or the guarantors.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) including, without limitation, the Wells Fargo
Commercial MasterCard Agreement pursuant to which Borrower or any guarantor
hereunder has incurred any debt or other liability to any person or entity,
including Bank and its affiliates; provided, however, with respect to MILLC, any
payment default in excess of $20,000,000.00 under the terms of any contract or
any instrument (other than any of the Loan Documents) pursuant to which MILLC
has incurred any debt or other liability to any person or entity, including
Bank, shall be an Event of Default hereunder.
17
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder. Notwithstanding the foregoing,
there shall be an Event of Default upon the filing of notices of judgment lien,
the recording of abstracts of judgment, or the entries of judgment against
Borrower or any guarantor hereunder if the aggregate amount of all such
judgments exceeds $50,000.00 and such judgments are not released within sixty
(60) days of the filing, recording or entry of such judgment.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("BANKRUPTCY CODE"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder, or Borrower or any such guarantor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower or any Guarantor of its obligations under
any of the Loan Documents.
(h) The death or incapacity of any guarantor hereunder. The dissolution
or liquidation of Borrower or any guarantor hereunder; or Borrower or any such
guarantor, or any of their directors, stockholders or members, shall take action
seeking to effect the dissolution or liquidation of Borrower or such guarantor.
(i) Any change in ownership of Borrower or MCA or a change in the
ownership of MILLC which would result in neither Smith International Inc., nor
Schlumberger, Ltd., owning fifty-one percent (51%) or more of MILLC during the
term of this Agreement.
(j) The sale, transfer, hypothecation, assignment or encumbrance,
whether voluntary, involuntary or by operation of law, without Bank's prior
written consent, of all or any part of or interest in any real property
collateral required hereby.
(k) An event which is a material adverse change (as such term is used
in Section 3.1(c) hereof) shall have occurred and is continuing.
18
(l) The determination by any court that any provision of any Loan
Document is invalid.
(m) (i) ERISA event occurs with respect to a pension plan or
multiemployer plan which has resulted or could reasonably be expected to result
in liability of the Borrower under Title IV of ERISA to the pension plan,
multiemployer plan or the PBGC in an aggregate amount in excess of $50,000.00,
or (ii) the Borrower or an ERISA affiliate fails to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a multiemployer
plan in an aggregate amount in excess of $100,000.00.
(n) Borrower shall fail to deliver to Bank within sixty (60) days of
the date hereof any and all Agreements and Acknowledgments of Security
Interests, Waivers of Landlords or Mortgagees, and Assignment and Assumption
Agreements by such parties as Bank may require, and in form and substance
acceptable to Bank, in Bank's sole discretion.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all principal and accrued and unpaid interest outstanding under each of the Loan
Documents, any term thereof to the contrary notwithstanding, shall at Bank's
option and without notice become immediately due and payable without
presentment, demand, or any notices of any kind, including without limitation
notice of nonperformance, notice of protest, protest, notice of dishonor, notice
of intention to accelerate or notice of acceleration, all of which are hereby
expressly waived by each Borrower; (b) the obligation, if any, of Bank to extend
any further credit under any of the Loan Documents shall immediately cease and
terminate; and (c) Bank shall have all rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including without
limitation the right to resort to any or all security for any credit subject
hereto and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and remedies of Bank may be
exercised at any time by Bank and from time to time after the occurrence of an
Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
19
BORROWER: AIRCOMP L.L.C.
7660 Woodway, Suite 200
Houston, Texas 77063
BANK: WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION
1000 Louisiana, Third Floor
Houston, Texas 77002
GUARANTORS: M-I L.L.C.
5950 North Course Drive
Houston, Texas 77072
MOUNTAIN COMPRESSED AIR, INC.
7660 Woodway, Suite 200
Houston, Texas 77063
MUNAWAR HIDAYATALLAH
338 Entrada Drive
Santa Monica, CA 90402
JAYNE HIDAYATALLAH
338 Entrada Drive
Santa Monica, CA 90402
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel to the extent
permissible), expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Bank's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights
and/or the collection of any amounts which become due to Bank under any of the
Loan Documents, (c) the prosecution or defense of any action in any way related
to any of the Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity, and (d) up to
20
two (2) and no more than four (4) collateral audits performed by Bank per fiscal
year with respect to the collateral or any other matter relating to the loans
provided for in this Agreement and/or Borrower's compliance with the terms and
the provisions of this Agreement; provided, however, Borrower's out-of-pocket
costs and expense under this subsection (d) is estimated at $850.00 per
eight-hour day per collateral audit.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder.
SECTION 7.5. AMENDMENT. This Agreement may be amended or modified only
in writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
SECTION 7.11. SAVINGS CLAUSE. It is the intention of the parties to
comply strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "MAXIMUM RATE"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
21
received in connection with any Loan Documents, or in any communication by Bank
or any other person to Borrower or any other person, or in the event that all or
part of the principal or interest hereof or thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved or received on the amount of principal actually outstanding from time
to time under the Loan Documents shall exceed the Maximum Rate, then in such
event it is agreed that: (a) the provisions of this paragraph shall govern and
control; (b) neither Borrower nor any other person or entity now or hereafter
liable for the payment of any Loan Documents shall be obligated to pay the
amount of such interest to the extent it is in excess of the Maximum Rate; (c)
any such excess interest which is or has been received by Bank, notwithstanding
this paragraph, shall be credited against the then unpaid principal balance
hereof or thereof, or if any of the Loan Documents has been or would be paid in
full by such credit, refunded to Borrower; and (d) the provisions of each of the
Loan Documents, and any other communication to Borrower, shall immediately be
deemed reformed and such excess interest reduced, without the necessity of
executing any other document, to the Maximum Rate. The right to accelerate the
maturity of the Loan Documents does not include the right to accelerate, collect
or charge unearned interest, but only such interest that has otherwise accrued
as of the date of acceleration. Without limiting the foregoing, all calculations
of the rate of interest contracted for, charged, taken, reserved or received in
connection with any of the Loan Documents which are made for the purpose of
determining whether such rate exceeds the Maximum Rate shall be made to the
extent permitted by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of such Loan Documents, including
all prior and subsequent renewals and extensions hereof or thereof, all interest
at any time contracted for, charged, taken, reserved or received by Bank. The
terms of this paragraph shall be deemed to be incorporated into each of the
other Loan Documents.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
SECTION 7.12. RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (a) Borrower hereby authorizes Bank, at any
time and from time to time, without notice, which is hereby expressly waived by
each Borrower, and whether or not Bank shall have declared any credit subject
hereto to be due and payable in accordance with the terms hereof, to set off
against, and to appropriate and apply to the payment of, Borrower's obligations
and liabilities under the Loan Documents (whether matured or unmatured, fixed or
contingent, liquidated or unliquidated), any and all amounts owing by Bank to
Borrower (whether payable in U.S. dollars or any other currency, whether matured
or unmatured, and in the case of deposits, whether general or special (except
trust and escrow accounts), time or demand and however evidenced), and (b)
pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as Bank, in its sole discretion, may elect. Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank and with any other financial institution to secure the payment of all
obligations and liabilities of Borrower to Bank under the Loan Documents.
22
SECTION 7.13. BUSINESS PURPOSE. Borrower represents and warrants that
each credit subject hereto is for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal, family
or household use.
SECTION 7.14. ARBITRATION.
(a) ARBITRATION. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in Texas selected by the American Arbitration Association ("AAA"); (ii)
be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
(c) NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Texas with a minimum of ten years experience
23
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide (by
documents only or with a hearing at the arbitrator's discretion) any pre-hearing
motions which are similar to motions to dismiss for failure to state a claim or
motions for summary adjudication. The arbitrator shall resolve all disputes in
accordance with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(e) DISCOVERY. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
SECTION 7.15. ASSIGNMENTS AND PARTICIPATIONS.
24
(a) Borrower may not assign its rights or obligations hereunder or
under the Notes or any Letters of Credit without the prior consent of Bank.
Should Borrower attempt to assign its rights hereunder, Bank's obligations
hereunder will immediately cease and Bank shall be entitled to all commitment
fees, up-front fees, documentation fees, appraisal fees, audit fees, and due
diligence fees referred to herein.
(b) Bank may, upon the written consent of Borrower and MILLC, which
consent shall not unreasonably be withheld, if no Event of Default has occurred
and is continuing, assign to one or more assignees all or a portion of its
rights and obligations under this Agreement. Neither Borrower's nor MILLC's
consent will be required if the assignment is to an affiliate of Bank or to any
lender other than lenders who are in the oil and gas business or competitors of
the Business Venture Owners or the Borrower. Any such assignment will become
effective upon the execution and delivery to Bank of an Assignment Agreement
(the "Assignment") and the consent of Borrower and Guarantor, if required.
Promptly after receipt of an executed Assignment, Bank shall send to Borrower a
copy of such executed Assignment. Upon receipt of such executed Assignment,
Borrower, will, at its own expense, execute and deliver new notes to the
assignor and/or assignee, as appropriate, in accordance with their respective
interests as they appear. Upon the effectiveness of any assignment pursuant to
this Section, the assignee will have all the rights and interests of Bank under
this Agreement and the other Loan Documents. The assignor shall be relieved of
its obligations hereunder to the extent of such assignment.
(c) Bank may transfer, grant or assign participations in all or any
part of Bank's interests hereunder pursuant to this Section to any person,
PROVIDED that: (i) Bank shall remain "Bank" for all purposes of this Agreement;
and (ii) no participant under any such participation shall have rights to
approve any amendment to or waiver of any of the Loan Documents except to the
extent such amendment or waiver would (x) forgive any principal owing on any
obligations or extend the final maturity of the commitments or loans, (y) reduce
the interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of the
commitments or loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the obligations or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of the
commitments or loans or Letters of Credit in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the Loan Documents (the
participant's rights against Bank in respect of such participation to be those
set forth in the agreement with Bank creating such participation), and all
amounts payable by Borrower hereunder shall be determined as if Bank had not
sold such participation, PROVIDED that such participant shall be entitled to be
indemnified under Section 7.16 hereof.
(d) Bank may furnish any information concerning Borrower in the
possession of Bank from time to time to assignees and participants (including
prospective assignees and participants).
SECTION 7.16. INDEMNIFICATION. Borrower agrees:
(a) to indemnify Bank, each assignee or participant hereunder, each of
their affiliates and each of their officers, directors, employees,
representatives, agents, attorneys, accountants and experts ("INDEMNIFIED
PARTIES") from, hold each of them harmless against and promptly upon demand pay
or reimburse each of them for, the Indemnity Matters (hereafter defined) which
may be incurred by or asserted against or involve any of them (whether or not
25
any of them is designated a party thereto) as a result of, arising out of or in
any way related to (i) any actual or proposed use by Borrower of the proceeds of
any of the Loans or Letters of Credit, (ii) the execution, delivery and
performance of the Loan Documents, (iii) the operations of the business of
Borrower, (iv) the failure of Borrower to comply with the terms of any Loan
Document or this Agreement, or with any applicable law, (v) any inaccuracy of
any representation or any breach of any warranty of Borrower or any Guarantor
set forth in any of the Loan Documents, (vi) the issuance, execution and
delivery or transfer of or payment or failure to pay under any Letter of Credit,
or (vii) the payment of a drawing under any Letter of Credit notwithstanding the
non-compliance, non-delivery or other improper presentation of the manually
executed draft(s) and certification(s), (viii) any assertion that any
Indemnified Party was not entitled to receive the proceeds received pursuant to
the Loan Documents or (ix) any other aspect of the Loan Documents, including,
without limitation, the reasonable fees and disbursements of counsel and all
other expenses incurred in connection with investigating, defending or preparing
to defend any such action, suit, proceeding (including any investigations,
litigation or inquiries) or claim and including all Indemnity Matters arising by
reason of the ordinary negligence of any Indemnified Party, but excluding all
Indemnity Matters arising solely by reason of claims between the Bank or any
assignee or participant, or any such party's shareholders against Bank or any
assignee or participant or by reason of the gross negligence or willful
misconduct on the part of the Indemnified Party. "Indemnity Matters" shall mean
any and all actions, suits, proceedings (including any investigations,
litigation or inquiries), claims, demands and causes of action made or
threatened against a person and, in connection therewith, all losses,
liabilities, damages (including, without limitation, consequential damages) or
reasonable costs and expenses of any kind or nature whatsoever incurred by such
person whether caused by the sole or concurrent negligence of such person
seeking indemnification.
SECTION 7.17. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
BANK IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
SECTION 7.18. CONFIDENTIALITY. In the event that the Borrower or
Business Venture Owner, or any affiliate thereof, provides to the Bank
Information (as defined below). The Bank shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that it utilizes in maintaining its own confidential information. For the
purposes of this Section, "INFORMATION" means all information (including
information from Borrower's books and records) received from the Borrower or any
affiliate thereof relating to the Borrower or any affiliate thereof or its
business, other than any such information that is available to the Bank on a
nonconfidential basis prior to disclosure by such person or entity. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Bank breaching its obligation of confidence to the Borrower
or any affiliate thereof, (iii) are previously known by the Bank from some
source other than the Borrower or any affiliate thereof, (iv) are hereafter
26
developed by the Bank without using the Information, (v) are hereafter obtained
by or available to the Bank from a third party who owes no obligation of
confidence to the Borrower with respect to such information or through any other
means other than through disclosure by the Borrower or any affiliate thereof,
(vi) are disclosed with the Borrower's consent, (vii) must be disclosed either
pursuant to any governmental requirement or to any person or entity regulating
the activities of the Bank, or (viii) as may be required by law or regulation or
order of any governmental authority in any judicial, arbitration or governmental
proceeding. Further, the Bank may disclose any such Information to consultants,
any independent certified public accountants, any legal counsel employed by such
person or entity in connection with this Agreement or any Loan Document,
including without limitation, the enforcement or exercise of all rights and
remedies thereunder, or any assignee or participant (including prospective
assignees and participants) in the loans evidenced by the Notes; PROVIDED,
HOWEVER, that the Bank shall receive a confidentiality agreement from the person
or entity to whom such Information is disclosed such that said person or entity
shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Bank hereunder. The Borrower waives any and
all other rights it may have to confidentiality as against the Bank arising by
contract, agreement, statute or law except as expressly stated in this Section.
Notwithstanding anything herein to the contrary, confidential information shall
not include, and the Bank (and each employee, representative or other agent of
the Bank) may disclose to any and all persons or entities, without limitation of
any kind, the "tax treatment" and "tax structure" (in each case, within the
meaning of Treasury Regulation Section 1.6011-4) of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are or have been provided to the Bank relating to such tax
treatment or tax structure; PROVIDED that with respect to any document or
similar item that in either case contains information concerning such tax
treatment or tax structure of the transactions contemplated hereby as well as
other information, this sentence shall only apply to such portions of the
document or similar item that relate to such tax treatment or tax structure.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AIRCOMP L.L.C. WELLS FARGO BANK TEXAS,
NATIONAL ASSOCIATION
By: /S/ TERRY KEANE By: /S/ ALAN SMITH
----------------------------- ------------------------------
Terry Keane Alan Smith
President Vice President
27
EXHIBIT "A"
-----------
Form of Line of Credit Note
$1,000,000.00 Houston, Texas
June 27, 2003
FOR VALUE RECEIVED, the undersigned AIRCOMP L.L.C., a Delaware limited
liability company ("Borrower") promises to pay to the order of WELLS FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, Third
Floor, Houston, Texas, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
INTEREST:
(a) INTEREST. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
on the last day of each March, June, September and December, commencing on
September 30, 2003.
(c) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
Exhibit "A"-1
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. Borrower shall make annual pre-payments of the outstanding
principal balance of this Note equal to fifty percent (50%) of Free Cash Flow
(as such term is defined in Section 5.7 of the Credit Agreement), commencing
August 27, 2004, and such pre-payments shall be applied in inverse order of
maturities, first to prepayment of the Term Note (as defined in the Credit
Agreement) then to the Delayed Draw Term Note (as defined in the Credit
Agreement), and then to any outstanding balance under this Note, as applicable.
The outstanding principal balance of this Note shall be due and payable in full
on June 27, 2007.
(b) ADVANCES. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
(i) Terry Keane, (ii) Scott Gildea, or (iii) George Roffe, any one acting alone,
who are authorized to request advances and direct the disposition of any
advances until written notice of the revocation of such authority is received by
the holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any deposit account of any Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of each Borrower regardless of the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by any Borrower.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of even date herewith, as amended from time to time (the "Credit Agreement").
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(d) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Exhibit "A"-2
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(e) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(f) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS IN
THESE IN INCONVENIENT FORM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO
BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR
OR WITH RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANYOTHER
JURISDICTION. THE ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
(g) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
Exhibit "A"-3
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(h) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
(i) BUSINESS PURPOSE. Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment, agricultural
or other similar purpose and not primarily for a personal, family or household
use.
(j) CERTAIN TRI-PARTY ACCOUNTS. Borrower and Bank agree that Chapter
346 of the Texas Finance Code (which regulates certain revolving credit accounts
and revolving triparty accounts) shall not apply to any revolving loan accounts
created under this Note or maintained in connection herewith.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
Exhibit "A"-4
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "A"-5
ADDENDUM TO LINE OF CREDIT NOTE
(BASE RATE PRICING ADJUSTMENTS)
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by AIRCOMP L.L.C., a Delaware limited liability company
("Borrower") and payable to WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION
("Bank"), or order, dated as of June 27, 2003, in the principal amount of One
Million and No/100 Dollars ($1,000,000.00) (the "Note").
The following provisions are hereby incorporated into the Note to
reflect the interest rate adjustments agreed to by Bank and Borrower:
INTEREST RATE ADJUSTMENTS:
(a) Definitions. As used herein, the following terms shall have the
meanings set forth after each, and any other term defined herein:
"Base Rate" shall mean the higher of (a) Prime Rate per annum in effect
on that day, and (b) the Federal Fund Rate in effect on that day as
announced by the Federal Reserve Bank of New York, plus 0.5% per annum.
"Business Day" shall mean any day except a Saturday, Sunday, or any
other day on which commercial banks in Texas are authorized or required
to close by law.
"Prime Rate" shall mean at any time the rate of interest most recently
announced within the Bank at its principal office in San Francisco as
its Prime Rate, with the understanding that the Bank's Prime Rate is
one of its base rates and serves as the basis upon which effective
rates of interest are calculated for those loans making reference
thereto; and is evidenced by the recording thereof after its
announcement in such internal publication or publications as the Bank
may designate.
(b) INITIAL INTEREST RATES. The initial interest rates applicable to
this Note shall be the rates set forth in the "Interest" paragraph herein.
(c) INTEREST RATE ADJUSTMENTS. In addition to any interest rate
adjustments resulting from changes in the Prime Rate, Bank shall adjust the Base
Rate margin used to determine the rates of interest applicable to this Note on a
quarterly basis, commencing with the calendar quarter ending September 30, 2003,
if required to reflect a change in Borrower's ratio of Total Funded Debt to
EBITDA (as defined in the Credit Agreement referenced herein), in accordance
with the following grid:
Exhibit "A"-6
APPLICABLE
TOTAL FUNDED DEBT BASE RATE
to EBITDA MARGIN
--------- ------
less than 2.0 to 1.0 1.50%
greater than or equal to 2.0 to 1.0
but less than 2.5 to 1.0 1.75%
greater than or equal to 2.5 to 1.0
but less than 3.0 to 1.0 2.00%
greater than or equal to 3.0 to 1.0 2.25%
Each such adjustment shall be effective on the first Business Day of the
calendar quarter following the quarter during which Bank receives and reviews
Borrower's most current calendar quarter-end financial statements in accordance
with any requirements established by Bank for the preparation and delivery
thereof.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "A"-7
EXHIBIT "B"
Form of Term Note
$8,000,000.00 Houston, Texas
June 27, 2003
FOR VALUE RECEIVED, the undersigned AIRCOMP L.L.C., a Delaware limited
liability company ("Borrower") promises to pay to the order of WELLS FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, Third
Floor, Houston, Texas, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of Eight Million and No/100 Dollars
($8,000,000.00), with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Base Rate" means the higher of (i) Prime Rate per annum in effect
on that day, and (ii) Federal Fund Rate in effect on that day as announced by
the Federal Reserve Bank of New York, plus 0.5% per annum.
(b) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(c) "Credit Agreement" means that certain Credit Agreement between Bank
and Borrower of even date herewith.
(d) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one, two, three or six months, as designated by Borrower, during
which all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than One Hundred Thousand and
No/100 Dollars ($100,000.00); and provided further, that no Fixed Rate Term
shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(e) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/16 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
----------------------------------------------
100% - LIBOR Reserve Percentage
Exhibit "B"-1
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
(f) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
(g) "Total Funded Debt" shall have the meaning ascribed to it in the
Credit Agreement.
INTEREST:
(a) Interest. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Base Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Base Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
Exhibit "B"-2
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Base Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.
(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWINGS:
(a) Borrower may from time to time from the date of this Note up to and
including June 27, 2007, borrow and partially or wholly repay its outstanding
borrowings, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that amounts repaid may not be reborrowed; and provided further, that
the total borrowings under this Note shall not exceed the principal amount
stated above. The unpaid principal balance of this obligation at any time shall
be the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder.
(b) All Base Rate borrowings shall be in amounts of at least Ten
Thousand and No/100 Dollars ($10,000.00). All LIBOR borrowings shall be in
amounts of at least Five Hundred Thousand and No/100 Dollars ($500,000.00) and
in multiples of One Hundred Thousand and No/100 Dollars ($100,000.00)
thereafter.
Exhibit "B"-3
(c) The amount and date of each Base Rate borrowing shall be designated
by an authorized representative of the Borrower requesting such borrowing in
form and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least one (1) Business Day
prior to the date of such loan, which date shall be a Business Day. Each Base
Rate loan shall be made at the office of the Bank and shall be funded prior to
2:00 p.m. Houston time, on the day so requested and immediately available fund
in the amount so requested.
(d) The amount and date of each LIBOR borrowing shall be designated by
an authorized representative of the Borrower requesting such borrowing in form
and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least three (3) Business Days
prior to the date of such loan, which date shall be a Business Day. Each LIBOR
loan shall be made at the office of the Bank and shall be funded prior to 2:00
p.m. Houston time, on the day so requested and immediately available fund in the
amount so requested.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. Principal shall be payable on the last day of each
March, June, September and December in installments of Two Hundred Eighty-Five
Thousand Seven Hundred Fourteen and 28/100 Dollars ($285,714.28) each,
commencing on September 30, 2003, and continuing up to and including March 31,
2007, with a final installment consisting of all remaining unpaid principal due
and payable in full on June 27, 2007. Notwithstanding the foregoing, Borrower
shall make annual pre-payments of the outstanding principal balance of this Note
equal to fifty percent (50%) of Free Cash Flow (as such term is defined in
Section 5.7 of the Credit Agreement), commencing August 27, 2004, and such
pre-payments shall be applied in inverse order of maturities, first to this
Note, then to the Delayed Draw Term Loan (as defined in the Credit Agreement),
and then to any outstanding balance under the Line of Credit Note (as defined in
the Credit Agreement), as applicable.
(b) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Base Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
(c) Prepayment.
BASE RATE. Borrower may prepay this Note provided that all terms in the
Credit Agreement and herein are complied with (including the payment of any
prepayment penalties required in the Credit Agreement). As provided herein,
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to the Base Rate at any time and in the minimum amount of
One Hundred Thousand and No/100 Dollars ($100,000.00); PROVIDED HOWEVER, if the
outstanding principal balance is such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
hereof.
Exhibit "B"-4
LIBOR. Borrower may prepay this Note provided that all terms in the
Credit Agreement and herein are complied with (including the payment of any
prepayment penalties required in the Credit Agreement). As provided herein,
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to LIBOR at any time and in the minimum amount of One
Hundred Thousand and No/100 Dollars ($100,000.00); PROVIDED, HOWEVER, that if
the outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued
each month on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) SUBTRACT from the amount determined in (i) above the
amount of interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the
date of prepayment for new loans made for such term and in a principal amount
equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater
than zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
In addition, if Borrower makes an optional or required prepayment of a LIBOR
loan before the end of the related interest period, or fails to borrow, convert,
or extend a LIBOR loan after giving notice thereof, of if a LIBOR loan is
converted to Base Rate Loan as a result of certain changes and circumstances,
Borrower will reimburse Bank for any related funding losses and losses of
anticipated earnings.
All prepayments of principal on this Note, whether such prepayment is in
relation to a Base Rate option or a LIBOR option shall be applied first to
reduce the balloon payment due upon maturity hereof, if applicable, and second
to reduce the most remote of the principal installment or installments then
unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of even date herewith, as amended from time to time (the "Credit Agreement").
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
Exhibit "B"-5
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
Exhibit "B"-6
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
Exhibit "B"-7
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
(f) BUSINESS PURPOSE. Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment, agricultural
or other similar purpose and not primarily for a personal, family or household
use.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "B"-8
ADDENDUM TO TERM NOTE
(BASE RATE/LIBOR PRICING ADJUSTMENTS)
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by AIRCOMP L.L.C., a Delaware limited liability company
("Borrower") and payable to WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION
("Bank"), or order, dated as of even date herewith, in the principal amount of
Eight Million and No/100 Dollars ($8,000,000.00) (the "Note").
The following provisions are hereby incorporated into the Note to
reflect the interest rate adjustments agreed to by Bank and Borrower:
INTEREST RATE ADJUSTMENTS:
(a) INITIAL INTEREST RATES. The initial interest rates applicable to
this Note shall be the rates set forth in the "Interest" paragraph herein.
(b) INTEREST RATE ADJUSTMENTS. In addition to any interest rate
adjustments resulting from changes in the Base Rate, Bank shall adjust the Base
Rate and LIBOR margins used to determine the rates of interest applicable to
this Note on a quarterly basis, commencing with the calendar quarter ending
September 30, 2003, if required to reflect a change in Borrower's ratio of Total
Funded Debt to EBITDA (as defined in the Credit Agreement referenced herein), in
accordance with the following grid:
APPLICABLE APPLICABLE
TOTAL FUNDED DEBT TO EBITDA BASE RATE MARGIN LIBOR MARGIN
--------------------------- ---------------- ------------
less than 2.0 to 1.0 .25% 2.00%
greater than or equal to 2.0 to 1.0
but less than 2.5 to 1.0 .50% 2.25%
greater than or equal to 2.5 to 1.0
but less than 3.0 to 1.0 .75% 2.50%
greater than or equal to 3.0 to 1.0 1.0% 2.75%
Each such adjustment shall be effective on the first Business Day of the
calendar quarter following the quarter during which Bank receives and reviews
Borrower's most current calendar quarter-end financial statements in accordance
with any requirements established by Bank for the preparation and delivery
thereof.
(c) With respect to LIBOR loans, each interest payment shall be payable
on the last day of each Fixed Rate Term (as defined in the Credit Agreement)
elected by the Borrower and upon maturity of the Note; provided, however, in the
event Borrower elects a six-month Fixed Rate Term, then such installments of
interest shall be due and payable on the last day of the third month of such
Fixed Rate Term.
Exhibit "B"-9
(d) With respect to Base Rate loans, each interest payment shall be
payable on the last day of each March, June, September and December commencing
on September 30, 2003, through and including maturity of this Note.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "B"-10
EXHIBIT "C"
-----------
Form of Delayed Draw Term Note
$1,000,000.00 Houston, Texas
June 27, 2003
FOR VALUE RECEIVED, the undersigned AIRCOMP L.L.C., a Delaware limited
liability company ("Borrower") promises to pay to the order of WELLS FARGO BANK
TEXAS, NATIONAL ASSOCIATION ("Bank") at its office at 1000 Louisiana, Third
Floor, Houston, Texas, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of One Million and No/100 Dollars
($1,000,000.00), with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Base Rate" shall mean the higher of (a) Prime Rate per annum in
effect on that day, and (b) the Federal Fund Rate in effect on that day as
announced by the Federal Reserve Bank of New York, plus 0.5% per annum.
(b) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Texas are authorized or required by law to
close.
(c) "Credit Agreement" means that certain Credit Agreement between Bank
and Borrower of even date herewith.
(d) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one, two, three or six months, as designated by Borrower, during
which all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than One Hundred Thousand And
No/100 Dollars ($100,000.00); and provided further, that no Fixed Rate Term
shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(e) "LIBOR" means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/16 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
----------------------------------------------
100% - LIBOR Reserve Percentage
Exhibit "C"-1
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
(f) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
(g) "Total Funded Debt" shall have the meaning ascribed to it in the
Credit Agreement.
INTEREST:
(a) INTEREST. The Borrower agrees to pay interest at the Bank's address
listed above on the unpaid principal note hereof and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at the rates and on the dates set forth on the Addendum attached hereto
and incorporated herein for all purposes.
(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Base Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Base Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At the time this
Note is disbursed or Borrower wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone (or such other electronic method as
Bank may permit) so long as, with respect to each LIBOR selection, (A) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
Exhibit "C"-2
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's sole option
but without obligation to do so, accepts Borrower's notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time this Note
is disbursed or at the end of any Fixed Rate Term, Borrower shall be deemed to
have made a Base Rate interest selection for this Note or the principal amount
to which such Fixed Rate Term applied.
(c) TAXES AND REGULATORY COSTS. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed, unless such calculation would
result in a usurious rate, in which case interest shall be computed on the basis
of a 365/366-day year, as the case may be, actual days elapsed) equal to four
percent (4%) above the rate of interest from time to time applicable to this
Note, but in no event at a rate greater than the Maximum Rate.
BORROWINGS:
(a) Borrower may from time to time from the date of this Note up to and
including December 27, 2004, borrow and partially or wholly repay its
outstanding borrowings, subject to all of the limitations, terms and conditions
of this Note and of any document executed in connection with or governing this
Note; provided however, that amounts repaid may not be reborrowed; and provided
further, that the total borrowings under this Note shall not exceed the
principal amount stated above. The unpaid principal balance of this obligation
at any time shall be the total amounts advanced hereunder by the holder hereof
less the amount of principal payments made hereon by or for any Borrower, which
balance may be endorsed hereon from time to time by the holder.
(b) All Base Rate and LIBOR borrowings shall be in amounts of at least
Ten Thousand and No/100 Dollars ($10,000.00).
Exhibit "C"-3
(c) The amount and date of each Base Rate borrowing shall be designated
by an authorized representative of the Borrower requesting such borrowing in
form and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least one (1) Business Day
prior to the date of such loan, which date shall be a Business Day. Each Base
Rate loan shall be made at the office of the Bank and shall be funded prior to
2:00 p.m. Houston time, on the day so requested and immediately available fund
in the amount so requested.
(d) The amount and date of each LIBOR borrowing shall be designated by
an authorized representative of the Borrower requesting such borrowing in form
and substance satisfactory to Bank, at Bank's sole discretion, and such
borrowing request shall be received by the Bank at least three (3) Business Days
prior to the date of such loan, which date shall be a Business Day. Each LIBOR
loan shall be made at the office of the Bank and shall be funded prior to 2:00
p.m. Houston time, on the day so requested and immediately available fund in the
amount so requested.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. The Delayed Draw Term Note shall be repaid pursuant to
Section 1.3(c) of the Credit Agreement.
(b) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Base Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
(c) Prepayment.
BASE RATE. Borrower may prepay this Note provided that all terms in the
Credit Agreement and herein are complied with (including the payment of any
prepayment penalties required in the Credit Agreement). As provided herein,
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to the Base Rate at any time and in the minimum amount of
One Hundred Thousand and No/100 Dollars ($100,000.00); PROVIDED HOWEVER, if the
outstanding principal balance is such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
hereof.
LIBOR. Borrower may prepay this Note provided that all terms in the
Credit Agreement and herein are complied with (including the payment of any
prepayment penalties required in the Credit Agreement). As provided herein,
Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to LIBOR at any time and in the minimum amount of One
Hundred Thousand and No/100 Dollars ($100,000.00) and in One Hundred Thousand
and No/100 Dollars ($100,000.00) multiples thereafter); PROVIDED, HOWEVER, that
if the outstanding principal balance of such portion of this Note is less than
said amount, the minimum prepayment amount shall be the entire outstanding
Exhibit "C"-4
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto, Borrower shall pay to Bank immediately upon demand a fee which is the
sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:
(i) DETERMINE the amount of interest which would have accrued
each month on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) SUBTRACT from the amount determined in (i) above the
amount of interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the
date of prepayment for new loans made for such term and in a principal amount
equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater
than zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.
In addition, if Borrower makes an optional or required prepayment of a LIBOR
loan before the end of the related interest period, or fails to borrow, convert,
or extend a LIBOR loan after giving notice thereof, of if a LIBOR loan is
converted to Base Rate Loan as a result of certain changes and circumstances,
Borrower will reimburse Bank for any related funding losses and losses of
anticipated earnings.
All prepayments of principal on this Note, whether such prepayment is in
relation to a Base Rate option or a LIBOR option shall be applied first to
reduce the balloon payment due upon maturity hereof, if applicable, and second
to reduce the most remote of the principal installment or installments then
unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of even date herewith, as amended from time to time (the "Credit Agreement").
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
accrued and unpaid interest outstanding hereunder to be immediately due and
payable without presentment, demand, or any notices of any kind, including
without limitation notice of nonperformance, notice of protest, protest, notice
Exhibit "C"-5
of dishonor, notice of intention to accelerate or notice of acceleration, all of
which are expressly waived by each Borrower, and the obligation, if any, of the
holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel to the extent permissible), expended or
incurred by the holder in connection with the enforcement of the holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THIS NOTE IS PERFORMABLE IN
HARRIS COUNTY, TEXAS. ANY ACTION OR PROCEEDING UNDER OR IN CONNECTION WITH THIS
NOTE AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. BORROWER AND EACH THIRD PARTY OBLIGOR
HEREBY IRREVOCABLY (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ANY THIRD PARTY OBLIGOR OR WITH
RESPECT TO ANY COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER
JURISDICTION. ANY ACTION OR PROCEEDING BY THE BORROWER OR ANY THIRD PARTY
OBLIGOR AGAINST LENDER SHALL BE BROUGHT ONLY IN A COURT LOCATED IN HARRIS
COUNTY, TEXAS.
(d) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, or in any contract, instrument or document
evidencing or securing the payment hereof or otherwise relating hereto (each, a
"Related Document"), in no event shall this Note or any Related Document require
the payment or permit the payment, taking, reserving, receiving, collection or
charging of any sums constituting interest under applicable laws that exceed the
maximum amount permitted by such laws, as the same may be amended or modified
from time to time (the "Maximum Rate"). If any such excess interest is called
for, contracted for, charged, taken, reserved or received in connection with
this Note or any Related Document, or in any communication by Bank or any other
person to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
Exhibit "C"-6
any other person or entity now or hereafter liable for the payment of this Note
or any Related Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Bank, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance hereof or thereof, or if this
Note or any Related Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Related
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Related Document does not include the right to accelerate,
collect or charge unearned interest, but only such interest that has otherwise
accrued as of the date of acceleration. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved or
received in connection with this Note and any Related Document which are made
for the purpose of determining whether such rate exceeds the Maximum Rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of this Note or such
Related Document, including all prior and subsequent renewals and extensions
hereof or thereof, all interest at any time contracted for, charged, taken,
reserved or received by Bank. The terms of this paragraph shall be deemed to be
incorporated into each Related Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Bank hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Bank's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(e) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (i) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower's obligations and liabilities under this Note
(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank and with any other financial
institution to secure the payment of all obligations and liabilities of Borrower
to Bank under this Note.
(f) BUSINESS PURPOSE. Borrower represents and warrants that all loans
evidenced by this Note are for a business, commercial, investment, agricultural
or other similar purpose and not primarily for a personal, family or household
use.
Exhibit "C"-7
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "C"-8
ADDENDUM TO DELAYED DRAW TERM NOTE
(BASE RATE/LIBOR PRICING ADJUSTMENTS)
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by AIR COMP, L.L.C., a Delaware limited liability company
("Borrower") and payable to WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION
("Bank"), or order, dated as of even date herewith, in the principal amount of
One Million and No/100 Dollars ($1,000,000.00) (the "Note").
The following provisions are hereby incorporated into the Note to
reflect the interest rate adjustments agreed to by Bank and Borrower:
INTEREST RATE ADJUSTMENTS:
(a) Initial Interest Rates. The initial interest rates applicable to
this Note shall be the rates set forth in the "Interest" paragraph herein.
(b) Interest Rate Adjustments. In addition to any interest rate
adjustments resulting from changes in the Base Rate, Bank shall adjust the Base
Rate and LIBOR margins used to determine the rates of interest applicable to
this Note on a quarterly basis, commencing with the calendar quarter ending
September 30, 2003, if required to reflect a change in Borrower's ratio of Total
Funded Debt to EBITDA (as defined in the Credit Agreement referenced herein, in
accordance with the following grid:
APPLICABLE APPLICABLE
TOTAL FUNDED DEBT BASE RATE LIBOR
TO EBITDA MARGIN MARGIN
--------- ------ ------
less than 2.0 to 1.0 .25% 2.00%
greater than or equal to 2.0 to 1.0
but less than 2.5 to 1.0 .50% 2.25%
greater than or equal to 2.5 to 1.0
but less than 3.0 to 1.0 .75% 2.50%
greater than or equal to 3.0 to 1.0 1.00% 2.75%
Each such adjustment shall be effective on the first Business Day of the
calendar quarter following the quarter during which Bank receives and reviews
Borrower's most current quarter-end financial statements in accordance with any
requirements established by Bank for the preparation and delivery thereof.
(c) With respect to LIBOR loans, each interest payment shall be payable
on the last day of each Fixed Rate Term (as defined in the Credit Agreement)
elected by the Borrower and upon maturity of the Note; provided, however, in the
event Borrower elects a six-month Fixed Rate Term, then such installments of
interest shall be due and payable on the last day of the third month of such
Fixed Rate Term.
Exhibit "C"-9
(d) With respect to Base Rate loans, each interest payment shall be
payable on the last day of each March, June, September and December commencing
on September 30, 2003, through and including maturity of this Note.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.
AIRCOMP L.L.C.
By: /s/ Terry Keane
Name: Terry Keane
Title: President
Exhibit "C"-10